John Croteau (4:48)

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Ann Barry (4:51)

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Full disclosure in podcast description.

Ann Barry (5:28)

We're going to talk about grocery now. And when speaking with shareholders last year, there was one CEO that we kept our eyes on, and that's Amazon CEO Andy Jassy. He said, quote, I think that the way people buy groceries is going to continue to evolve over time. I continue to be very, very bullish on our grocery business. So with that in mind, the word straight from the horse's mouth. It should have surprised nobody when Amazon recently announced their plan to build an enormous brick and mortar store outside of Chicago, taking the grocery battle right to Walmart's automatic sliding doors. Not to be outdone, the giant of Arkansas, Walmart is expanding its drone delivery service. More on that in a moment. So again, here you've got the online giant, the OG of E commerce, Amazon opening a physical store. And you've got the big box mainstay, Walmart expanding on delivery. This is how the tables are turned. John, give us some background on Amazon's new project.

John Croteau (6:30)

That's right, everyone's trying everything.

Ann Barry (6:32)

Everyone's trying it. Spaghetti time.

John Croteau (6:33)

Yeah, and Amazon recently submitted plans for that large format store in the Chicago suburb of Orland park that's on the south side. I looked it up and just to get some context on the size of this project, the retail store would be one story, 229,000 square feet and, and sit on 35 acres that Amazon is looking to develop. Walmart Supercenters typically average 179,000 square feet. So this Amazon store would be nearly a third bigger than the, the Walmart we're used to seeing. And it would also be located right next to a Costco.

Ann Barry (7:03)

That's amazing. So Amazon's actually really going straight, straight, not shot over the bowels at Costco as well. So it's clearly looking to attract grocery customers. The other thing here is the Amazon facility would include what it calls a limited warehouse component. And that's to support on site operations, but also to provide space so that its delivery drivers can pick up orders. So this is also effectively a distribution center or a fulfillment center, a strategy. By the way, John, when we were reading about this, I've thought about so many other conversations we've had around this. This is right out of Walmart's playbook. So just to set the stage here, grocery is absolutely critical to what Walmart does. Perishable Goods are the reason that you and I go back to a store over and over again. Right. And it's not just a one and done delivery every couple of weeks. And the way in which Walmar Walmart has sought to make sure that online orders for perishable goods could be gotten to the customer quickly is to actually fill those orders by having the stores in proximity to the customer do some of that fulfillment. And then even with non perishable products, we've seen the store as warehouse model, like with Nuuly Urban Outfitters clothes rental arm sort of morphing in this direction as well, like taking advantage of its store network so that you've got inventory and delivery being integrated pretty efficiently. So we opened up with Amazon evolving to meet growth grocery customers everywhere they are. And just to go back in history a little bit, Amazon has tried to do this in the past through acquisition. In 2017, Amazon acquired Whole Foods which now has over 500 locations.

John Croteau (8:36)

And we've seen an evolution there as well because last November we were talking about that Whole Foods was experimenting with a quote store within a store concept where consumers can buy Oreos, Doritos. I remember the articles were saying Kraft Macaroni and Cheese.

Ann Barry (8:51)

Yeah, processed food.

John Croteau (8:52)

Processed food that you typically weren't able to get at Whole Foods. And so Whole Foods through Amazon is expanding through all sorts of different grocery items.

Ann Barry (9:00)

Now it's interesting Amazon attending here to build a retail retail store that is in fact bigger than a Walmart. So let's just again take a step back and say, well what's Walmart? What has Walmart been doing? We've seen Walmart build some smaller stores. We have seen Walmart partner with the likes of Instacart to try and get delivery into urban areas so firmly encroaching on Amazon's geographical territory. And now we've got Amazon building big boxes even larger than the OG of big box retail itself. Wal Mart in return is taking the battle back to Amazon's own backyard. And that is to hardcore tech and to the skies. Now announcing is expanding its drone delivery program. It's just sort of extraordinary.

John Croteau (9:42)

That's right. Just this week it said it's rolling out drone delivery at an additional 150 stores over the next year. And the goal of setting up service at more than 270 locations at the end of 2027. Walmart partners with a few drone delivery companies. We've talked about that, but this expans would be with Wing and that's a unit of Alphabet parent Google.

Ann Barry (10:02)

Can we just Do a bit of a sort of detour to talk about Wing for a second, because I feel as though we're talking about Google a lot these days, specifically about Apple partnering with Google to use Gemini to partner with Siri. That was a big headline this week. But in all of the talk about search, can Google defend its search model? In all of the talk about the battle for eyeballs in AI with the likes of OpenAI, it's really hard to remember all of the different things that Google's parent Alphabet does. It does so many. It's not only got Google, right? It's got YouTube, it's got Waymo, and it's easy to forget. It's also got Wing. And if you look back at how Wing started, it began in the labs of Google in 2012. Google's got several sort of labs and sort of hidden pockets of the company where these crazy smart engineers go and sort of tinker and come up with these amazing ideas. Google acts sort of being representative of that. Wing started life in the labs of Google in 2012 and became large enough to become an independent Alphabet business in 2018. So there again, if we talk about all the many things, the different business lines that Alphabet has, it has done a pretty good job actually, of incubating and creating some of those on its own terms as well.

John Croteau (11:11)

And reading about Wing today and thinking about the healthcare piece you did at the top of the show, they started their testing overseas by delivering healthcare needs to places that don't have access easily to remote. Yeah, exactly.

Ann Barry (11:25)

It's amazing the way that these things have come around. Well, talk about today, 2 million Walmart shoppers approximately have access to the drone service. These are in cities including Atlanta and Dallas, Fort Worth. And Wing estimates that access is going to expand many fold to 40 million customers as drone delivery becomes more mainstream in places like Los angeles, Houston, Cincinnati, St. Louis and Orlando. And just to set the stage here, from a regulatory perspective, there was a very meaningful move last year that was the Federal Aviation Administration allowing drones to be flown beyond what's called the pilot's line of sight. Remember this? We actually had an interview last year here on the show with the Archer CEO, Archer Aviation, and he talked about in house of bigger drones, that regulatory change was meaningful in terms of accelerating investment into looking at drone technologies. And here we're seeing how going outside the pilot's line of sight, literally what they're able to see physically, has allowed greater areas and greater regions that can be served by having drone deliveries safely.

John Croteau (12:33)

Yeah, and that's been Important to see the. The regulations catch up with where the technology is.

Ann Barry (12:37)

Yep.

John Croteau (12:38)

And so I. I spent some time on YouTube today looking at how these drones work. I wasn't sure the drone flies over someone's backyard. You just need space, is what they say, for the delivery. And then a cable comes down and delivers your package. It can be up to five pounds is what it said. So I'm sort of curious about it. I'd like to ask, listening to our show. Please write in to Brew Markets show. Morning, Broadcom. If you've had an experience with Walmart drone delivery, I'm fascinated. And just as I was thinking about this today, I got married recently and immediately my eyebrows started going white.

Ann Barry (13:12)

Why? Why? I did not understand when you said that. What does that mean?

John Croteau (13:16)

A stress indicator.

Ann Barry (13:17)

No. Come on. You're supposed to relax when you see.

John Croteau (13:19)

Your loved one planning the wedding.

Ann Barry (13:21)

Planning the wedding. How about that? Okay. Marriage is about to invoke that when you see your loved one, your heart, you're meant to relax. Your heart rate's meant to drop.

John Croteau (13:29)

Yes. So the planning was a little bit stressful. And this quote I read today stood out from Greg Cathy. He's senior vice president of digital fulfillment at Walmart. Drone delivery is especially helpful when customers need just one to a handful of items fast. And I was thinking last night, like, I need some eyebrow mascara for my white brows. And so maybe if I lived in the Dallas Fort Worth area, I could have a drone bring me one single tube.

Ann Barry (13:53)

It's.

John Croteau (13:54)

The concept is wild.

Ann Barry (13:54)

Or since you're here in Manhattan as your teammate, here's what I'm gonna do for you. I'm gonna do you a favor as a new location of Alta has opened up around the corner from our studio here in Manhattan. You've just given me an excuse to go in and I'm literally going to say to the store associate, could you please give me a single tube of eyebrow mascara for my producer John Croteau, whose eyebrows have started going white in the run up to his wedding.

John Croteau (14:16)

Thank you.

Ann Barry (14:16)

Your wife's listening to this, going, she did not bless this conversation. I can tell you that right now, shares in Walmart are up 30% over the last 12 months. Extraordina rerun for the retailer increasingly getting viewed as sort of a pseudo tech company. I think in many ways by the market shares in Amazon, up 11% over the last 12 months. But we've got to remember that's off the back of an extraordinary run in 2024. All these big tech names have just done incredibly well. And the question is, hanging out there for 2026, how much room is there still left for the likes of Amazon? I suspect one person's view that we're going to see more of these sorts of announcements of technological partnerships with people of scale like Walmart, as big tech companies continue to try and find ways to continue momentum in their earnings and their share prices. Well, let's take a quick break and when we come back, let's take a look at what moved the market today.

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Ann Barry (15:39)

It's 4pm on the East Coast. The market's closing. There is the closing bell. We don't have a ticker tape, so let's throw it over to our human ticket, our producer John.

John Croteau (15:48)

The major indices all finished down today. The S&P 500 was down 2.10 of a percent, the NASDAQ finished down a tenth of a percent and the Dow was down 8.10 of a percent. Some market headlines macro data set the stage for equities today with the BLS releasing December inflation data. Today's CPI report shows headline inflation holding steady at 2.7% annual rate. That matched November's pace with monthly gains of 0.3%. While the core CPI, which excludes food and energy, rose 0.2% monthly and 2.6% annually, slightly below expectations and suggesting easing price pressure.

Ann Barry (16:25)

It's really extraordinary. We're at the point we're having to pass through these fractions of a percent to really try and understand which direction this is going on. And breaking down the composition of CPI was particularly important because we saw real diversion in the ways in which different categories saw their prices move. So we did see significant monthly increases in the cost of shelter. So housing up 0.4% percent. Food was up significantly overall. So were airline fares. But we did see declines in the rates of inflation in gasoline and used cars. One little factoid in there, egg prices came down 8.2%. Now, we covered the egg company cow main last week. Ticker calm, most bizarre ticker for that company but nevertheless, there it is. That stock ticked down about 2% today, by the way. So there's a lot going on behind in the detail of these numbers behind the headlines that we're watching just given February is a Fed rate decision month.

John Croteau (17:20)

And absolutely President Trump posted on Truth Social today, quote, great low inflation numbers for the usa. That means that Jerome too late Powell should cut interest rates meaningfully while the.

Ann Barry (17:32)

Fed meets in a few weeks. Its first rate decision announcement for the year is due out on January 28th. It's unclear what action is going to be taken because first of all, again, that's a pretty mixed report, even though the headline was in line with expectations, which was a good thing, but inflation still above that 2% long term target rate. Some other macro today and it was a big day for macro news, at least when you look at the indicators, one of the most important of which is oil prices. Now one measure of that, which is Brent crude prices hit a seven week high. They were up 3%. As the market is factoring in, it seems continued volatility in global demand and supply dynamics. There's a huge political geopolitical influence here.

John Croteau (18:13)

Right. And what happens next in Venezuela has been much discussed over the past week, of course, in terms of its position holding 20% of the world's proven oil reserves.

Ann Barry (18:21)

And then today, President Trump canceled all meetings with Iranian officials and he stated in a post on Truth Social that quote, help is on its way to protesters. So just as a reminder, demonstrations have erupted across multiple cities in Iran since late December amid political unrest and a deepening economic crisis. And in the context of oil, Iran is a founder member of opec. It is a major oil producer and it holds the world's world's third largest oil reserves. Now I'm going to tease a preview here and actually sort of plead with you all on the following, which is please do not miss this Friday show. And here's why. So many people's eyes glaze, glaze over at the mention of content and stories about oil and gas and energy. And I get it. I understand why. It's an industry that's filled with jargon. It's sort of as totally old fashioned, it doesn't have the glitz and glamour of tech and frankly, most content and commentary on it out there is dry. However, however, I personally spent four years of my life investing in oil field services and found in my time in the industry you can find some big personalities and some big stories out there. And so I made it my mission to find the most engaging high energy articulate expert I know of in this industry to join us this Friday for a jargon, busted but very substantive breakdown on what exactly is going on in this critical, critical, vital market. We all need to be smart on this industry. And Alix Steel, she's the brilliant former energy reporter and TV anchor for Bloomberg. She's now working inside the energy industry. She is going to be here to get us through what the top stories are, explain why they're so important, explain how this industry works. So Friday, please do come back to join us for that conversation.

John Croteau (20:10)

Absolutely. I'm looking forward to it.

Ann Barry (20:12)

It's going to be great. It's going to be great.

John Croteau (20:13)

And before we go, let's take a look at the earnings this morning out of Delta Air Lines. The company reported adjusted revenue of $14.6 billion, which was up 1.2% year over year, but missed estimates. It was also outside of Delta's 2% guidance. Now this is interesting. Delta said that the missed guidance was due in part to the government shutdown where we saw flight cancellations due to a strained air traffic control system. So we'll keep an eye on that impact as other airlines report in the coming weeks.

Ann Barry (20:38)

And Delta CEO Ed Bas, despite that, was very upbeat about 2026. And he highlighted what we keep hearing as a recurring theme in this industry, that business travel and premium travel is back. He said, quote, in the coming year, effectively none of our growth in seats will be in the main cabin. Virtually all will be in the premium sector. I got to tell you, John, is board season is coming up and I serve on several corporate boards and two of them are actually out on the West Coast. And I went to go book my flight and I was looking at the price of flights from New York to San Francisco and sure enough, much more expensive than I've seen them in a while. Even trying to use miles to redeem to go for free. Very expensive on that point too. So I'm sort of seeing it real time actually in terms of the inventory that's out there.

John Croteau (21:24)

And also key to Premium Flyer is the co branded Delta American Express credit card. And Delta reported that the last year the partnership brought in $8.2 billion to Delta. That partnership.

Ann Barry (21:35)

Yeah, that's very meaningful. Well, hold that thought on credit cards, folks, because we deeply aware that a big story this week is the announcement that President Trump made that he wants to see a 10% cap on interest rates that credit cards charge. We're not ignoring it. We're taking our time. We're digging in. We're waiting to see how that unfolds and particularly in the context of this week's bank earnings. We saw JP Morgan announce earnings today. We've got two more big banks announcing tomorrow and we've got more again announcing on Thursday. And the end of that day is when we're going to come to you with a wrap up of what's been going on in the banking sector and we're going to bring a tie in to what we think could be happening with this credit card rate cap news. That's it, folks for today's Brew Markets Daily.

John Croteau (22:14)

And Brew Markets Daily is hosted by Anne Barry and produced by John Curto, Tarkab Delatif and Emily Milliron. Our technical director is Uchena Waugh. Brittany Dotaku is our audio engineer. And the president of Morning Brew Inc. Is Devin Emery.

Ann Barry (22:25)

Wake up tomorrow with the Morning Brew newsletter and tune in to Neil and Toby on Morning Brew Daily. We'll see you back here tomorrow, same time, same place. Sam.