Hello there.

Happy Wednesday! So, we can all agree that these GLP-1s gotta have some kinda negative side effects, right? No such thing as a free lunch…

Up Next:

…unless you skip lunch, I guess? Speaking of, you guys tried any of that Goldman Sourdough? Let’s dig in. 👇

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So here's a plot twist nobody saw coming: weight loss drugs are absolutely wrecking clothing stores' bottom lines. Like, not in a cute way.

When people lose weight on GLP-1 drugs like Ozempic and Zepbound, they can drop a whole clothing size every month. That's great for them (maybe side effects aren’t totally parsed yet), but it means they're ordering the same shirt in three different sizes, keeping the one that fits, and sending the rest back. Returns are one of the biggest profit-killers for stores because they have to pay for shipping, warehouse space, and workers to process everything. And sometimes those returned items are out of season, so stores have to sell them at a discount anyway.

The numbers are kinda wild. The share of clothes being exchanged for smaller sizes hit 14.6% last year, which is the highest it's been. Bigger sizes are getting hit the hardest because people are literally shrinking out of their mediums and larges faster than they can wear them.

Victoria's Secret is selling more small-sized stuff. Macy's is selling less plus-size clothing. Brides are waiting until the last possible second to buy wedding dresses because they don't know what size they'll be. It's chaos out there. Some stores are fighting back by doubling restocking fees or begging customers to actually check size charts before they click "buy." But with weight loss drugs getting cheaper and a pill version coming, this problem isn't going away anytime soon.

Remember when everyone said malls were dead and Amazon had won forever? Yeah, turns out that was wrong.

Institutional investors (think big pension funds and the companies that manage billions of dollars) are buying up shopping centers like it's 2017 again. Investment in retail real estate hit over $15 billion in the first quarter of this year, up 5% from last year. And the checks are getting bigger too. Deals over $100 million made up 26% of all retail investments recently, compared to just 13% back in 2023.

So what changed? Basically, everyone stopped building new stores for like a decade because they thought online shopping would take over everything. But that didn't really happen the way people expected. Now there aren't enough good shopping centers to go around, and the ones that exist are almost totally full. Vacancy rates are sitting at just 4.4%, which is super low.

When something is scarce and everyone wants it, prices go up, and returns get better. Retail is now offering way better returns than other types of commercial real estate, and the big money always chases the best returns eventually.

The catch is, more stores are still closing than opening, so if people suddenly stop spending money, those low vacancy numbers could climb fast. The smart investors are being super picky about which properties they buy. But for now, shopping centers are having their main character moment after years of everyone counting them out.

A lot can happen in a week!

Let’s take a quick look at who struck gold and who struck out since our last issue:

ASML Holding N.V. (ASML): +8.50%
Eli Lilly and Company (LLY): +6.17%
JPMorgan Chase & Co. (JPM): +3.82%
Walmart Inc. (WMT): +3.74%
Berkshire Hathaway Inc. (BRK.B): +3.16%

Microsoft Corporation (MSFT): -12.45%
NVIDIA Corporation (NVDA): -8.72%
Amazon.com, Inc. (AMZN): -6.03%
Apple Inc. (AAPL): -4.81%
Alphabet Inc. (GOOGL): -3.01%

That’s all for today. Write us and let us know your thoughts on the market, the newsletter, or the weather—we’d just love to hear from you.

Till next time,
— Brandon and Blake of Invested Inc.