Episode 193: Costco, Kathmandu Deep Dive, Albo Makes Petrol Crisis Worse, RBA's Credit Card Surcharge Disgrace, Waymo Love and Victorian Government Gets Something Right
The guys discuss Costco, deep dive into KMD Brands, the Australian government's disastrous fuel excise cut, the RBA loses the plot (again), and Adam agrees with a Victorian government decision.
The Contrarians catchup
Adir finally visited a Costco in Western Sydney over Easter. The verdict: deeply underwhelming. “I was so excited to go there and the way I left was feeling I’ll never go back again. Not angry, just disappointed. The experience was much more Campbell’s Cash and Carry than the treasure hunt people promised me.”
The Costco share price, however, is a different story. It has tripled since pre-COVID. Adir: “Maybe I should have bought the shares instead of the 2kg peanut butter.” Adam’s take: “It’s trading on a 50 times PE. That’s insane. Walmart’s the same. You’re basically getting a 2% bond.”
Tech stock comparison of the week: Costco, Walmart, Apple and Microsoft have all roughly tripled since pre-COVID. Meta is on a 19 PE, lower than all of them and growing faster. Adam: “Meta to me is the most interesting of all of them.”
The AFR has now published what Adir considers its third antisemitic cartoon, this one featuring Trump riding a missile and yelling “Torah, Torah, Torah.” Adir: “Can you imagine if someone created a cartoon today and someone was yelling ‘Quran, Quran, Quran’? They’d put security around that building. I publicly defended this cartoonist the first time. I can’t keep doing that.”
The big tech reality check: Microsoft’s Copilot “doesn’t even work with its own Excel and Word, it’s a joke,” while Anthropic and Claude are “killing it at the enterprise level and building a real brand and price premium.”
Albanese’s fuel excise cut: economics 101 fail
As Australia faces a jet fuel supply crunch caused by the Iran conflict, Anthony Albanese announced a 50% cut to the fuel excise. Adam argued it is the single worst response possible, stimulating demand in a supply-constrained environment is the economic equivalent of fanning a bushfire. Meanwhile, every other affected country is doing the opposite: South Korea is telling residents to take faster showers, Thailand is banning air conditioning at work, the Philippines has civil servants taking the stairs.
Adam: “The market was doing its job pretty well. Traffic on the roads was much slower than I’d noticed historically. As soon as the excise was cut, traffic reverted straight back to normal. This is the exact opposite of what every other government is doing.”
Adir: “Are there not enough problems to be solved in the world that we have to manufacture solutions for a problem nobody had? Nobody is going to have cheaper prices as a result of this. It’s just all different forms of vote-buying. That’s my issue with it.”
The RBA bans card surcharges and makes everything worse
The RBA announced it will end merchant surcharging on debit and credit cards in six months, estimating it will save consumers $1.6B a year. Adam and Adir are in furious agreement: this is a disaster. Banks will respond by raising credit card fees, cutting interest rates on deposits, slashing frequent flyer rewards, and removing card insurance. The $660M annual hit to bank interchange revenue will be passed straight back to consumers, just less visibly.
Adam: “Jim Chalmers is really confirming himself as one of the worst treasurers in modern history. He ironically worked for Paul Keating, probably the best treasurer we’ve ever had. What a contrast. Keating was a man of steel who did what was right regardless of short-term opinion. Chalmers is the exact opposite.”
Adir: “This is a solution for a problem nobody had. We went through enormous pain to bring card surcharges in. Now we’re ripping them out. The banks are not going to absorb $660M in reduced income - nor should they. I cannot believe how dumb this whole thing is.”
KMD Brands deep dive
KMD Brands (owner of Kathmandu and Rip Curl) was forced into an emergency capital raise last week at a 70% discount to its last traded price, valuing the entire business at just NZ$62M (around A$50M). Its respected chairman David Kirk resigned shortly after. The raise comes despite KMD posting 7.3% sales growth to NZ$505M for the half. California-based Stokehouse has reportedly offered more than $110M for Rip Curl alone, roughly double the entire company’s market cap.
Adam: “Even if you give Kathmandu a zero valuation, which I think is harsh for a $400M sales business that’s nearly broken even, you’ve still got a Rip Curl business making $15-20M in EBITDA annually. And the whole thing is worth $60M. Something here doesn’t make sense.”
Adir: “The biggest negative is it had to do an emergency capital raising in the worst possible market. But what’s most amazing is this is a billion-dollar sales business with 55% gross margins, and it’s trading at basically zero. The bet you’re making is: can they stop burning cash before they have to do another raising?”
Adam: “This feels like a $20B sitting on the floor waiting to be picked up. It’s just a really hard business model - stores, inventory, expensive staff. You really need scale and brand to make it work. And Rip Curl still has that brand. Kathmandu needs to find it again.”
Five other stories worth following:
Stardust Solutions, an Israel-US startup, raised $60M for solar geoengineering, proposing aerosol spraying to mimic volcanic cooling. Critics warn of unknown risks, prior experiments were halted, and Mexico has already banned the controversial practice outright.
Archive of Our Own has exited beta after 17 years, with 10M users and 17M works. The fan fiction platform says the shift is largely cosmetic, with continued feature development and community-led iteration ongoing.
NeeDoh, a squeezable cube toy launched in 2017, has surged in popularity via TikTok and Instagram, especially among tweens. Demand jumped 10x, prompting its parent company Schylling to pause orders while struggling to keep up.
Investment in women’s sports has surged, growing 227% annually since 2022, driven by record fan demand. Revenues could hit $2.5B by 2030, though the category still represents under 2% of the US sports market.
The Masters tees off this week in Augusta, with Scottie Scheffler the favourite to win. Secondary market tickets for all four rounds exceed $26,000, highlighting the tournament’s prestige and continued strong demand among golf fans.