Sweetgreen Files for an IPO

Sweetgreen Seen as a Growth Play

Sweetgreen, a popular salad chain, has filed for an initial public offering. The company had a valuation of $1.8 billion earlier this year when it raised a round of venture funding. In 2019, before the pandemic, Sweetgreen had revenue of more than $300 million.

The restaurant has a loyal following among busy office workers and those seeking a healthier alternative to fast food. Launching an IPO now as pandemic restrictions ease is seen as a growth play. Long before the pandemic, Sweetgreen invested in its mobile app to reduce long lines at its stores. That investment paid off when the pandemic set in. As demand for online ordering is expected to stay strong even as restrictions ease, Sweetgreen’s strong mobile ordering system gives it an advantage.

Sweetgreen’s Plans for Expansion

Sweetgreen has been seen as an IPO candidate for years and was even named as a potential SPAC target. It finally tapped Goldman Sachs (GS) to help with its IPO. Other investors in the company include D1 Capital, Lone Pine, Fidelity Investments, and T. Rowe Price (TROW)

The chain is likely to tout its growth potential when publicizing the IPO to investors. It only has 121 locations currently but sees an opportunity for major expansion. Sweetgreen is piloting a restaurant in Highlands Ranch, Colorado this winter, which will include its first drive-thru lanes. It is also expanding into the suburbs after spending its first 10 years focused on urban locations.

Years in the Making

Sweetgreen’s IPO, which it filed with the Securities and Exchange Commission, is expected to commence once the regulator finishes its review. Sweetgreen is among many startups seeking to enter the public markets either via an IPO, direct listing, or SPAC transaction.

Sweetgreen is also a favorite of venture capitalists looking for the next growth play. It has raised a total of $670 million in venture funding. As pandemic restrictions ease, many are betting that companies like Sweetgreen are well positioned to benefit. It will be interesting to see if investors agree when the salad chain operator makes its public debut.

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American Airlines’ Strategy Amidst Surging Demand

American Airlines to Cut About 1% of Flights

American Airlines (AAL) is scaling back the number of flights it offers, despite surging demand. This is to avoid logistical strains during what is expected to be a very busy summer for airlines. The air carrier was among the first to add flights to meet pent-up demand, but now it is trimming about 1% of its offerings, or 950 flights.

Adding more flights quickly makes it harder for airlines to solve problems when something goes wrong. Two summers ago, American Airlines was hit with bad weather and a labor dispute which caused significant logistical headaches for the company. Despite high demand for flights, American Airlines has decided it would rather offer fewer flights than deal with another summer of unhappy passengers and scheduling difficulties.

Avoiding Mistakes of the Past

Earlier this month there were several storms which caused delays and cancellations at some of the country’s largest airports. That played a role in American Airlines’ decision to reduce its flights so the airline will be more nimble if and when it needs to manage problems. Additionally, vendors who supply airlines with everything from food to wheelchair services are short-staffed as demand surges. American Airlines is concerned this could hamper operations and frustrate customers—another reason why it is scaling back its offerings.

A reduced number of flights also gives American Airline access to a larger pool of pilots when needed. Over the weekend the company was forced to cancel flights due in large part to a shortage of pilots, something it hopes to avoid in the future.

Still Flying High

Despite the reduction in flights, American Airlines is flying much more than its rivals, including United Airlines (UAL) and Delta Air Lines (DAL). Its planned flight schedule for July is 20% larger than the schedules of Delta and United. The flights being cut are in markets where there are several options to accommodate American Airlines customers.

With demand surging amid easing pandemic restrictions, the airline industry has been rapidly adding more flights. American Airlines’ decision to scale back the number of flights is an acknowledgment of the potential for logistical difficulties during a time of big changes for the industry. The decision may reduce sales in the short term, but American Airlines’ leadership believes it is the right choice in the long term from a customer-experience standpoint.

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Chip Shortages Drive Electronics Prices Higher

Inflation Spills Over Into Electronics

Global semiconductor shortages have caused price increases for everything from computers to cars. Soon smartphones and electronic devices may be added to the list. With demand surging and key materials for chipmaking in short supply, semiconductor companies are raising the prices they charge electronics manufactures. Those vendors are in turn starting to pass on the price increases to consumers.

This is already happening in the PC and printer market. Hewlett-Packard (HPE) recently increased prices of its PCs by 8% and printers by 20%, citing component shortages. Dell (DELL) said it adjusts its prices based on component-cost increases. If chipmakers continue to raise prices, consumers could face higher costs for other electronics.

Chip Making Material Shortages

Semiconductor companies say they have no choice but to pass on the increased cost for chip-making materials to their buyers. The price increases are across the board, touching everything from silicon wafers to resins and metals. Digi-Key Electronics (TK), a large electronics component distributor, raised prices on chip-related components 15%, with some up 40% or more.

Microcontrollers, which are sometimes called the brains for gadgets, appliances, and vehicles, are up 12% since the middle of last year while computer memory chip prices have climbed 34% since the start of 2020. NVIDIA (NVDA) graphic cards are selling on the secondary market for more than the list prices.

The Impact of Broader Inflation

Consumers may be paying more for a laptop or printer at the moment, but the price increases are not bad when compared to what is taking place in the broader economy. Inflation is rising as the economy grows again and pandemic supply-chain disruptions continue.

Prices for computers and electronics were up 2.5% year-over-year in May. Prices across the board were 5% higher, fueled by rising energy costs. Even vehicles have not been immune. Car makers have curbed production because of chip shortages, driving up the price of new vehicles at the same time as demand rises. Semiconductors are essential for a variety of devices people use in their daily lives. As the costs of producing chips increase, consumers can expect to pay more for their electronics.