September Retail, Big Banks, Consumer Tech Events

Podcast Summary

• Retail sales outpace inflation despite supply chain constraints: Consumers shop earlier and new payment methods contribute to a 14% increase in retail sales compared to a 5.4% rise in inflation

  Despite the highest inflation environment in the US in about 30 years and supply chain constraints affecting goods sales, retail sales in the US continue to outpace inflation with a 14% increase compared to a 5.4% increase in the consumer price index. This unexpected growth is due in part to consumers shopping earlier than usual due to supply chain concerns and the availability of new payment methods like buy now, pay later. The Macro discussion on Motley Fool Money also highlighted that retail sales rose 0.7% in September, a full percentage point higher than economists' expectations. This strong consumption data indicates that it will be interesting to see how early holiday shopping unfolds this year, as retailers encourage consumers to start shopping early due to supply chain constraints.

• Early Holiday Shopping Sales Surge Amid Supply Chain Issues: Despite a strong economy, ongoing supply chain issues and the impact of stimulus checks on consumer spending are major concerns for the sustainability of holiday sales growth.

  The early holiday shopping season has seen a surge in sales, but the sustainability of this trend depends on the resolution of ongoing supply chain issues. Goldman Sachs recently reduced its US GDP growth forecast for 2022 due to these concerns, along with macroeconomic uncertainties and policy decisions. However, banks like Bank of America reported strong earnings, with revenue up 12% and net interest income up 10%. Bank of America stood out with a record investment banking net income, a healthy boost in deposits, and continued success on the digital platform. JPMorgan Chase, the largest bank, also reported solid earnings, with Jamie Dimon expressing optimism about the economy despite temporary supply chain issues. Domino's third-quarter profits exceeded expectations, but US same-store sales were negative for the first time since 2011 due to labor shortages and decreased spending from stimulus checks. Overall, the economy remains strong, but the resolution of supply chain issues and the impact of stimulus checks on consumer spending are key factors to watch.

• Businesses Raising Wages to Attract Hourly Workers: Domino's Pizza tackles labor shortages by boosting wages and benefits, while Virgin Galactic delays commercial space service to focus on improvements, retaining customer interest.

  Businesses heavily reliant on hourly low-wage workers are facing tough staffing environments and are responding by increasing wages and benefits to attract workers. Domino's Pizza, specifically, has seen some constraints due to this issue but remains optimistic, with plans to lean into fall festivities and improve staffing in the coming months. Elsewhere, Virgin Galactic delayed its commercial space service to the end of 2022 to focus on vehicle improvements, but maintains customer interest with retained prepaid customers and reopened commercial prebooking for flights.

• Collaboration between Shopify, Microsoft, and Oracle benefits all parties: Partnership between Shopify, Microsoft, and Oracle streamlines business operations, invests in merchant businesses, expands cloud operations, eliminates complexity, and integrates solutions with big partners.

  Collaboration between companies can lead to significant benefits for all involved parties. In the case of Shopify, Microsoft, and Oracle, their partnership aims to help merchants streamline their business operations while allowing Shopify to invest further in its merchant businesses and Shopify, Microsoft, and Oracle to expand their cloud operations. This partnership is a win-win situation as it eliminates complexity, integrates solutions with big partners, and brings these companies to the forefront in a market historically dominated by AWS. Additionally, the enthusiasm generated by William Shatner's space flight experience could potentially attract more people to space tourism, benefiting both Virgin Galactic and Blue Origin. Despite the initial drop in interest for Virgin Galactic following Blue Origin's flight, the potential presence of William Shatner as a spokesperson could help change public perception and boost sign-ups. Overall, these collaborations and partnerships demonstrate the potential for growth and innovation when companies come together to tackle common challenges.

• Adapting to changing market conditions and testing new business models: Shopify's massive valuation and revenue justify investment due to market dominance potential, while LinkedIn's adaptation in China showcases importance of adapting and testing new models, with over 740 million members and 14 million job listings, highlighting strong use case and growth potential.

  Despite Shopify's massive valuation and revenue, the large and growing market opportunity it serves justifies the investment, as companies that dominate their spaces often lead to significant returns for shareholders, even if the market seems overvalued in the present. Microsoft's decision to shut down LinkedIn's social aspects in China and launch a job-focused version instead, despite it being their third largest market and significant revenue source, highlights the importance of adapting to changing market conditions and the potential benefits of testing new business models in different regions. Additionally, the scale and monetization capabilities of LinkedIn, with over 740 million members and 14 million job listings, underscore the platform's strong use case and potential for continued growth.

• Impact of social partnerships in business success: Collaborations with popular figures or brands can boost a business's marketing and sales, but not all investments are equally profitable.

  The power of social interaction and partnerships in business, particularly in the food industry, can significantly impact a company's success. This was highlighted in the discussion about Popeyes' collaboration with Megan Thee Stallion, which has the potential to be a successful marketing strategy similar to previous partnerships with musical acts. However, when it comes to investing, not all businesses or stocks are created equal. Google's Pixel phone, for instance, has a small market share compared to competitors like Apple and Samsung. Despite Google's numerous acquisitions, the Pixel phone remains a less interesting investment opportunity for some.

• Google's Pixel phone business underperforming: Google's Pixel phone business may not be worth continuing due to small market share compared to global sales, while some argue that less flashy, under-the-radar companies might innovate quietly and be a better alternative.

  Despite Google's significant success in the tech industry, particularly with their Android operating system, the company's Pixel phone business seems to be underperforming and may be worth reconsidering. With only a small market share compared to the global smartphone sales in 2019, the question arises as to whether Google should continue investing in this area or consider shutting it down. Some believe that with Alphabet's vast resources and ongoing projects, it might be one of the areas that doesn't need to be a winner. Meanwhile, the frequency of tech company events, such as Google's and Apple's, has become a topic of debate. While they offer marketing advantages, some argue that they have become self-aggrandizing and borderline narcissistic, and that under-the-radar companies that innovate quietly might be a better alternative. Ultimately, the future of these events and the companies behind them remains to be seen.

• Virtual vs In-person Product Announcements: Some prefer virtual events for excitement, others want fewer, special in-person ones. Walgreens may change tobacco sales policies, but significant revenue makes complete ban unlikely.

  While some people find value in virtual product announcements and enjoy the excitement they bring, others believe that the novelty wears off over time and that companies should focus on hosting fewer, more special in-person events for major product launches. Regarding Walgreens, the consensus was that the company is unlikely to completely stop selling tobacco products in the next 6 months due to their significant revenue from tobacco sales. However, there may be changes such as age restrictions or labeling to align more with their health and wellness focus. The decision on whether to buy, sell, or hold Walgreens stock was split, with some seeing potential negative impacts on the company's stock following CVS's tobacco ban, while others believed that the revenue generated from tobacco sales would outweigh any potential losses.

• Walgreens may phase out tobacco sales to become a modern healthcare company: Walgreens could face financial implications from phasing out tobacco sales, but consumers and investors support companies prioritizing health over profits from harmful products

  Walgreens, like CVS before it, is likely to phase out tobacco sales as part of its evolution into a more modern healthcare company. However, this decision comes with significant financial implications, as tobacco sales are a lucrative part of the business. The blueprint for this transition is already in place, as seen in CVS's experience. The stock took a hit when CVS announced its decision to stop selling tobacco products, and Walgreens may face a similar reaction. Despite the financial risk, there is a growing trend among consumers and investors to support companies that prioritize health and wellness over profits from harmful products. This could be a factor in Walgreens' decision-making process. The upcoming Halloween season is expected to see increased spending, with retail sales of candy already exceeding last year's figures. Overall, it will be interesting to see how Walgreens balances its role as a healthcare provider with its current business model and how it responds to the financial and societal pressures to eliminate tobacco sales.

• Halloween's Economic Impact: £90M Candy Sales, £35M from Candy Corn: Halloween generates £90M in candy sales, £35M from candy corn, and consumer spending on costumes and decorations is expected to be high, despite potential supply chain disruptions.

  Halloween is a significant time for candy sales, with £90,000,000 sold during the week and 10% of annual sales occurring before the holiday. The top-selling candy, surprisingly, is candy corn, which produces £35,000,000 annually and would circle the earth 4.5 times if laid end to end. Consumer spending for Halloween, including candy, costumes, and decorations, is expected to be robust, but supply chain disruptions may pose a challenge in meeting demand. For Halloween costumes, Maria suggested the idea of dressing up as a boat that blocked the Suez Canal, adding a fun and topical twist to the holiday. Overall, the economic impact of Halloween is substantial, and consumers' willingness to spend and creativity in celebrating the holiday continue to drive its popularity.

• Discussing Exciting Stocks for the Week: Marvell Technology (MRVL) and Zillow Group (ZG): Jason Moser is bullish on Marvell Technology (MRVL) due to its 5G market potential and acquisitions, while Maria Gallagher is intrigued by Zillow Group (ZG) and its iBuying business

  The hosts of Motley Fool Money, Chris Hill, Maria Gallagher, and Jason Moser, discussed various stocks on their radar for this week. Jason Moser expressed his excitement about Marvell Technology (MRVL), a company that is well-positioned to benefit from the growing 5G market. He believes the acquisition of Inphi and Innovium will provide additional networking solutions for cloud and edge data centers, making Marvell a pure play 5G investment. Moser also mentioned the company's transformation from a consumer-oriented business to an infrastructure-oriented one, which is starting to bear fruit. He thinks the stock is reasonably priced considering its growth in the cloud, 5G, and automotive markets. Maria Gallagher, on the other hand, is interested in Zillow Group (ZG) and its iBuying business. She plans to delve deeper into the dynamics of Zillow buying houses, flipping them, and understanding the associated risks and margins. Overall, both stocks present interesting opportunities for investors in their respective industries. As always, it's important to remember that the Motley Fool team may have formal recommendations for or against the stocks they discuss, so investors should do their own research before making any investment decisions.

• Monitoring Real Estate Values: People regularly check Zillow and add real estate companies to watch lists due to personal and investment interest.

  People often find themselves fascinated with real estate values, whether it's their own property or potential investments. During the discussion, Dan shared how he regularly checks Zillow to monitor the estimated value of his house, despite not being in the market for a new home. His mom even goes a step further by emailing Zillow estimates to convince her daughter to move closer. This trend of keeping tabs on real estate values was also seen in the investment portfolios discussed on the show, with Marvell and other companies being added to watch lists. Overall, it seems that real estate, whether personal or investment-related, continues to capture people's interest and attention.