Brew Markets Daily — August 21, 2025

Episode: What is Walmart's Hidden Gem & ESPN Builds on New Streaming Service

Host: Ann Berry
Podcast: Brew Markets, Morning Brew
Date: August 21, 2025

Overview

This episode dives deep into Walmart’s quarterly earnings—specifically spotlighting the fast-growing, highly profitable Walmart Connect ad business. The conversation swings to the evolving landscape of sports media with ESPN’s new streaming service and Fox’s response, then unpacks the latest private equity deal in the software sector with Dayforce’s buyout. The crew also analyzes the ongoing struggles of fast-casual restaurant chains and their attempts at tech-driven recovery, such as Chipotle's foray into drone delivery. The episode closes with a quick market wrap and a look ahead to the Federal Reserve’s Jackson Hole symposium.

Key Topics & Discussion Points

1. Walmart’s Hidden Gem: The Rise of Walmart Connect

(Starts ~00:40)

• Walmart’s Quarterly Earnings:

  • Revenue surpassed expectations, particularly among high-income shoppers, but the company missed on earnings; stock dropped 5%.
  • Current challenges include insurance/legal charges and tariffs.

• Spotlight on Walmart Connect:

  • Walmart’s internal retail media business, helping brands to place digital ads across its platforms.
  • 31% revenue growth this quarter; $3B revenue last year; target of $6B “in line of sight.”
  • High profitability: Operating margins estimated at ~80%.
  • Strategic Value: Advertising revenue acts as a buffer against import tariffs and margin pressure.
  • Doug McMillan, Walmart CEO (02:05):

    “From a business model point of view, the fact that we have businesses like advertising and membership growing obviously help with flexibility as it relates to when we decide to absorb part of a tariff cost increase.”

  • If Walmart Connect hits $6B, it could be about 10% of total company EBITDA (a significant profit driver for a division that was small just five years ago).

• Market Impact:

  • Walmart’s stock drag weighed on the entire S&P 500 for the day.

2. The Streaming Sports Arms Race: ESPN vs Fox

(Starts 04:03)

• ESPN Launches Standalone Flagship Service:

  • First time all ESPN content is available without cable—$30/month price point.
  • Ann Berry (04:03):

    “For decades, ESPN was the engine of the cable bundle… in the age of cord cutting, those days are over.”

  • ESPN operating income has been negative recently, due in large part to soaring sports rights costs.
  • Example: $1.6B WWE streaming deal; TKO Group (WWE / UFC parent) shares up nearly 30% YTD.

• Sports as the Last Stand for Traditional TV:

  • John (05:18):

    “Of the top 100 telecasts of 2024, 85 were sporting events and related programming.”

  • Sports programming remains uniquely effective at driving live viewership.

• Fox Launches “Fox One”:

  • $20/month for Fox Sports, Fox News, NFL, World Series, much more.
  • Fox is still strong in linear TV, especially with older demographics (median age: 69 on Fox News).
  • Lachlan Murdoch, Fox Chairman (quoted at 06:21):

    “We do not want to lose traditional cable subscribers to Fox One.”

  • Strategy: Use sports streaming to capture younger viewers while retaining older cable audiences.

• Consumer Reaction:

  • Fragmentation—fans now must weigh multiple expensive subscriptions.
  • NFL, MLB, Olympics now spread across several direct-to-consumer platforms.
  • NBC Universal/Comcast in advanced talks for $600M, 3-year MLB streaming rights deal with Peacock/TV.

3. Software Sector Spotlight: The Dayforce (Ceridian) Private Equity Buyout

(Starts 07:27)

• Listener Question:

  • Why would private equity pay $12B for “a no-name company” (Dayforce)?

• Dayforce Overview:

  • Formerly Ceridian, global HR and payroll software platform; over $500M annual profit.
  • Competes with much larger players: ADP (10x bigger), Workday (6x bigger).
  • Recurring, subscription revenue model with high margins—very attractive to private equity.

• Deal Rationale:

  • Dayforce trades at a lower sales multiple versus peers (under 6x sales vs. 7x for Workday); stock underperforming peers.
  • PE expects to take the company private, invest in AI/data capabilities, and improve margins/scale without short-term market pressures.
  • Ann Berry (08:14):

    “These businesses have subscription models… we love regular, predictable recurring revenue streams. And they've also got high margins, which all means good cash flow. And cash we often say is queen…”

  • Dayforce’s vast historical employment data could be valuable for future AI applications.
  • Likely end games: resell to a strategic rival (ADP, Workday), or re-IPO as a leaner company.

4. Fast Casual Slowdown & The Drone Delivery Gambit

(Starts 12:00)

• Industry Headwinds:

  • Chains like Chipotle, Kava, Sweetgreen seeing sales/stock declines: lunch price hikes outpacing groceries; consumers cut discretionary lunch spend.
  • Attempts to spark traffic: Sweetgreen slashes bowl prices ($13) and new loyalty program (backfires), Kava adds automated “make lines.”

• Notable Quote:

  • Ann Berry (13:10):

    “I actually really liked the ripple fries.” (Ripple fries, a customer favorite, are dropped by Sweetgreen.)

• Innovation or Gimmick? Chipotle's Drone Delivery:

  • Chipotle teams up with Zipline for Dallas-area drone delivery; younger consumers targeted.
  • Skepticism:
    John (14:02):

    “Is this drone play a way to just juice those numbers? You can't really evaluate store sales to store sales if young people are getting the burritos airlifted to them, it certainly makes it harder.”

  • Sweetgreen and Walmart also exploring drone delivery with Zipline/Wing.

5. Market Wrap & Macro Look-Ahead

(Starts 15:16)

• Daily Market Recap:

  • S&P 500 down fifth day straight (–0.41%), Nasdaq & Dow both down ~0.33%.
  • Major EU/US trade agreement could introduce 15% tariffs, including for pharmaceuticals.
  • Restaurant woes: Cracker Barrel tumbles 15% after an unpopular new logo.
  • Paramount Skydance (fresh media conglomerate) surges on meme stock buzz.

• What to Watch:

  • Earnings rolling in from Workday, Zoom, Intuit.
  • Ann Berry (15:58):

    “We’re also going to be eagerly awaiting news out of Jackson Hole tomorrow where Federal Reserve Chair Jay Powell will be giving his comments on the state of the economy.”

  • Anticipation high for clues on Fed's policy direction; rate cut expectations in focus.

Memorable Quotes & Moments

• Ann Berry on Walmart Connect:
  “Not bad for a service that was barely a footnote in all the investor materials five short years ago.” (02:17)
• Doug McMillan, Walmart CEO:
  “The fact that we have businesses like advertising and membership growing obviously help with flexibility as it relates to when we decide to absorb part of a tariff cost increase.” (02:05)
• On Streaming Sports:
  “Of the top 100 telecasts of 2024, 85 were sporting events and related programming.” (05:18)
• On Software Buyouts:
  “Cash we often say is queen, which means debt can be used to buy this company, which is important to private equity buyers.” (08:14)

Timeline of Discussion Segments

• 00:40 — Walmart earnings headline & ad business analysis
• 02:05 — Doug McMillan quote; margin math on Walmart Connect
• 04:03 — ESPN launches $30 streaming service; media economics of sports
• 05:18 — Sports dominating live TV (85/100 top broadcasts)
• 05:46 — Fox responds with $20 Fox One streaming service
• 07:27 — Listener mail: Dayforce private equity buyout explained
• 12:00 — Restaurant industry slump, tech/price moves
• 13:44 — Chipotle’s drone delivery via Zipline
• 15:16 — Market wrap, trade/tariff news, meme stocks
• 15:58 — What’s coming next: Fed’s Jackson Hole spotlight

Summary

This episode of Brew Markets delivers a power-packed update on how Walmart’s under-appreciated digital ad arm is becoming central to its profitability, offers sharp insight into a streaming-media sports arms race reshaping both fan habits and billion-dollar contracts, breaks down how private equity is exploiting short-term market thinking in software, and scrutinizes whether drones and digital perks can really rescue lunch-bowl chains. Weekly macroeconomic events and quick market scans round out the show, making it a brisk survey of the market’s latest crosscurrents—always with a dose of skepticism, context, and (occasionally) good humor.