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- [00:01]
Announcer
This episode is brought to you by Voco Hotels by ihg, where you should prepare to be charmed. From Chicago to Myrtle beach to Saranac Lake, each Voco in the US has its own local flavor and unique detail. Our hosts welcome you with little extras and you'll find rooms for catching up on me time and full service bars and restaurants that are perfect for us time. Come on in and live the Voco life and book your next day at vocohotels.com vocohotels.com shares and StubHub get scalped.
- [00:34]
Ann Berry
Sally Beauty pursues a makeover and will Virgin Galactic stay grounded? Our take on earnings plus the CEO of Wal Mart announced he's stepping down is the 12 year veteran CEO just getting out while he's on top? For Friday, November 14th, it's blue markets Daily and I'm Ann Berry. More market details to come. But first, Walmart, one of my favorite stock stories. Now four years ago I wrote a piece titled A tech stock by any other name is Walmart to shine the light on Investments that CEO Doug McMillan was making to innovate in E commerce, to have its own fit fintech startup called One and to realize the retail giant's potential as a media network using Walmart's first party data to help advertisers reach millions of potential customers. An endeavor, by the way, that's blossomed into a whole business unit called Walmart Connect, which has more than $4 billion in revenue. And Walmart's been getting a lot right in its core merchandising, growing market share in the critical grocery segment and attracting more high income shoppers looking for value with high quality private label offerings as well as in store services. And Walmart's promise since 1962 of consistently low prices. Well, Walmart stock is up over 100% in the past five years. And when we look at its valuation, it soared to a total of about $880 $80 billion trading at around 20 times EBITDA. That's a measure of profit. It's also trading at a whopping four times price to earnings to growth ratio. And to put that in context, Nvidia trades at a PEG ratio. That's what it's called, of under one times. So the news today that Macmillan will be stepping down after 12 years as Walmart CEO has made investors nervous. And just my own point of view, not just because he's been such a direct change agent and he has been. It's because there's a question, or at least I have a question as to whether he's leaving Walmart behind at its peak. Now that valuation compared to Nvidia, the leading light in AI, being one data point, and Amazon's aggressive push now into perishable groceries being another. Amazon is now directly attacking that moat around Walmart's core business because groceries drive frequent visits by shoppers to Walmart stores and digital sites. Now, McMillan's departure wasn't widely expected. He's pretty young at just 59 years old, and there hadn't been much discourse about any near term succession, at least not in public. Now, not all of McMillan's bets have worked out. He oversaw the unsuccessful $3 billion acquisition of Jet.com, which is an upmarket Amazon rival. That just didn't pan out well post deal. Neither did the 310 million dollar acquisition of men's wear line Bonobos. But since he became CEO in February of 2014, annual revenue has grown from just under $500 billion to more than 680 billion. And as for the stock price, it's up 300%. While stepping up into the fray is John Furner, 51 years old and currently head of Walmart's US operations, a position he's held since just before the pandemic. He'll be taking over in February and Ferner joined Walmart in 1993 since holding leadership roles including in marketing for the China Oper operations, and is head of the massive Sam's Club, which is a 90 billion dollar part of Walmart now. The Wall Street Journal also reported today that Ferna's Walmart roots run deep. He grew up in Arkansas, that's Walmart's home state, and his father worked for the retailer for most of his adult life. It's like this company runs in his DNA. While he has a strong track record, clear cultural alignment that incoming CEO Furner, nevertheless Walmart stock is did head down today. It's coming in roughly flat, a sign that the existing CEO is going to be missed. Coming up, investors have been waiting years for Virgin Galactic's long promised new tourism space vehicle. What the company is saying about delivery but First Brew Markets daily is sponsored by public. Our producer John was telling us just this morning about some of the random jobs he's had.
- [04:44]
John Croteau
That's right. I drove a city bus, a snowplow, I managed a golf course. And each of those jobs left some money sitting in a different 401k. And those old accounts add up. I'm excited to roll them over into one place.
- [04:54]
Ann Berry
Well, for a limited time, public users can earn an uncapped 1% match on all IRA transfers and rollovers. You can also earn a 1% match on your annual IRA contributions. A 1% match. Plus with a self directed IRA on public, users can access thousands of stocks, ETFs and bonds to align their investing style with their retirement goals. Users can even trade options in their ira, a feature many brokerages don't offer. So get started at public.com brewmarkets that's.
- [05:20]
John Croteau
Public.Com BrewMarkets paid for by Public Investing Full disclosures in Podcast Description well, we.
- [05:26]
Ann Berry
Are still in the thick of earnings season actually some of the biggest names coming out next week and we're going to start looking at some of the folks that came out in the last 24 hours with their reports right now. Starting with StubHub, which made headlines for all sorts of actually quite confusing reasons today.
- [05:42]
John Croteau
Yes, that's right. They released earnings and the stock is down over 22% today, dipping below $13 a share this morning. And that's nearly half the IPO price, which is when it IPOed in September. And we'll come back to that market cap of $5 billion. Revenue of 468 million beat estimates, but losses per share of 427 or $1.40 worse than forecast. So that's some of the numbers. But you were talking about the headlines. Where's the context there?
- [06:11]
Ann Berry
So the stock down over 20% today. Let's stick with that number, which means something really dramatic must have happened, right, to shake up Star Pub shareholders. So this is one where I absolutely went down the rabbit hole. I totally nerded out and wanted to see exactly where the problem was coming from. And here's why. I at the surface level found it difficult to understand but finally got the memo. If you actually look at StubHub's results, John, if when we've got in front of us printouts old fashioned style of these third quarter results, here are the headlines. The company said it delivered gross merchandise sales of $2.4 billion up 11% year over year, that the IPO led to significant debt reduction, which is a good thing, that its adjusted EBITDA of $67 million was up 21. So right, those are pretty good headlines. And then you go into the earnings call and it talks about how it actually took some market share and felt pretty confident that it was gaining momentum in the marketplace. So you look at this and go, well what's the market's problem right now? There is that $1.3 billion impact which led to this per share loss right so that was hitting the headlines, right?
- [07:18]
John Croteau
They paid off some employees who were part of the ipo that they got paid out some of that money, got it.
- [07:23]
Ann Berry
So the actuality though is usually the market looks through that it was a non cash charge, it was a one off hit to the accounting results. So that's not that either. That's not what I thought it was. But you wouldn't think so because I woke up this morning and the headlines were, you know, 1.3 billion dollar net loss. The market is reacting by having the share price down. So again, I wasn't quite buying it. So I really wanted to dig in to see what the problem was. And I'm going to start with the earnings call. Right, this earnings call, John, was over 30 minutes long in which the CEO spoke for the first 17 minutes, barely drawing breath. And what he basically did was reiterate what we already knew from the very recent ipo, which is the history of the business. So let's start there. It's quite interesting.
- [08:08]
John Croteau
Right, so that's Eric Baker that you're talking about. And he founded the company back in 25 years ago as a ticket resale company and he sold it to eBay in 2007. He later created Viagogo, which is more of an international based company. Think soccer tickets. And then in 2019, Viagogo acquired StubHub from eBay. So that gave it back to Eric Baker that he's the founder and the controlling.
- [08:35]
Ann Berry
So when the, when the company went public, there was a lot of storytelling in the IPO presentation talking about how StubHub is out there. It's known for reselling tickets, right. But it was trying to really push into direct issuance. And so a lot of the conversation at the IPO was the ways in which Dubhub was doing that. That basically going to head to head with Ticketmaster, which is owned by Live Nation. And also there was a lot of conversation in the marketing materials about how this is really a tech business, right, Collecting tons and tons of data on its customers and how that data collection was going to turn into this flywheel for being able to customize and personalize products and services being sold to that user base. So a lot of that was sort of reiterated for the first 17 minutes of this call. Then he handed over the mic to Connie. He kept referring to Connie, his CFO, who then talked for about 15 minutes. And the reason that I'm pointing to this is in that 15 minute period there was again a lot of reiteration on things that we already Knew. So Connie James basically went on and talked about the push into direct issuance. We got a little bit more color. Talking about hiring a new chief business officer, talking about working with music festivals and the MLB to increase share in that space. So far so good. But here's the problem. Absolutely no guidance. This was the first quarter, the first call after that ipo and the company just stonewalled. The market just refused to talk about guidance for this quarter.
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John Croteau
But Anne, is that fair? They just IPO'd in September and then so it's just been several weeks after that. Are they supposed to have all the answers?
- [10:07]
Ann Berry
I think they need to have more answers than they offered. So let me give you an example from this earning call. Here is an analyst, bless this analyst. Really trying to get some substantial information here. Again, lots of storytelling, 30 minute transcript or just example and narrative. And example of narrative. But this analyst says to the CEO, says Look Eric, during 2025 you've made some substantial investments in core resale, market share and also direct issuance. Can you just talk about the returns you're seeing on those two areas of spending and whether you expect those to continue in 2026? It's a perfectly fair question. And he just said, CEO basically just said, look, I appreciate the question, thank you. But as I said in our opening remarks, we're taking a long term approach that doesn't mean anything. We're not providing guidance and we will be talking about 2026 on our next call. Totally refused to answer the question. So another question comes up from another analyst. Bless this analyst too, saying just any color on the overall demand trends you're seeing through the quarter through October and November, that could just help us out as to how to think about fourth quarter going forward.
- [11:10]
John Croteau
Any color. Not a number, just color.
- [11:12]
Ann Berry
Exactly. Answer was no. Thank you for the question. No, we're not providing guidance at this time. I mean totally stonewalled. And here's the problem. This IPO was on the promise of investment in these technologies in gaining share. They did actually disclose that they were reducing their prices or their take rate in order to do that, which by the way is not a good trajectory when you're thinking about giving up price. So the market probably nervous about this. This is a long way of saying it's so important to get past the headlines. This is not about that 1.4 billion dollar non cash impact. This is about the fact the market is saying this was a really expensive ipo. Do you remember just these IPO numbers? If we go back and look at that IPO did about 30 times. 2024 EBITDA, Live Nation trading at 17 times. This was a massive premium. And the market saying, where is the data that supports it? And StubHub said, We're not going to say anything.
- [12:06]
John Croteau
And there was one other nugget from the earnings call that came up a couple times where they were saying, well, don't really judge these numbers because let's give them some context. And that's Taylor Swift.
- [12:16]
Ann Berry
Yeah.
- [12:16]
John Croteau
Where they were saying, okay, well we know that ticket sales are down this year, but you can't compare ticket sales to last year's Taylor Swift ERAS tour. At one point, Eric Baker saying, when you exclude the outsized impact of Taylor Swift's ERAS tour from the prior year period, our GMS grew 24% year over year. So if you exclude this major music tour, then our numbers look even better.
- [12:39]
Ann Berry
Well, you have to do that. I have sympathy for that. You have to, because when you do get these sort of one time bumps, you do need to try and normalize a little bit to get to go back to what they were saying, which is a focus on the long term. So I guess you got to do that. The other thing just to think about here is to look at what the competitor stock price reactions were in response to this to see if investors were spooked about the intersector more broadly. Well, Vivid Seats, ticker seat was down 7% today, although it's down 91% year to date. And we have seen a market sell off. So that felt like it was just bundled into the broader consternation. It's really Live Nation that we've got to keep an eye out. Yeah, keep an eye on.
- [13:13]
John Croteau
And Live Nation owns Ticketmaster, so sometimes we forget that that's who they own. And the other thing is that Live Nation owns the many of the venues and have artist contracts and so they're tough to compete with. But the Justice Department has opened up an investigation into Live Nation for monopolistic practices and that's set to be settled or looked to next year, 2026. And so I think all of these seat selling and resale companies are going to be waiting for that judgment.
- [13:39]
Ann Berry
So Live Nation, just as, just as an indication its share price today, in response to all of this, it finished down 0.5%. It was basically flat. Which tells me the market's not nervous about the outlook for live events and tickets generally. It's nervous about the lack of outlook from StubHub very, very specifically. This is a StubHub specific issue that was a lot. I find this fascinating. I was really cynical when StubHub IPO'd and talked about it on the show. So I remain cynical but curious to see what that 2026 outlook looks like when they finally disclose something on the next call. And now a word from our sponsor, Surf Air Mobility. Surf Air Mobility is focused on building a platform aimed at transforming air travel.
- [14:19]
John Croteau
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- [14:31]
Ann Berry
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- [14:39]
John Croteau
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- [14:48]
Ann Berry
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- [14:54]
John Croteau
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- [14:59]
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- [15:23]
John Croteau
BNC bank brilliantly boring since 1865.
- [15:27]
Ann Berry
Let's, let's go to something lighter. Let's talk about Sally Beauty. How's that stock doing after reporting earnings?
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John Croteau
Well, they are up 30% year to date and they were up about 5% today. Market cap of 1.35 billion. So things are looking generally positive for Sally Beauty.
- [15:43]
Ann Berry
Well, Sally Beauty is a really interesting one because the company is divided into two parts. You've got the retail side, which many of you may have walked into. I see them often when I walk around New York. It's got 3,000 stores, quite global actually. It's in 10 different countries. And then it's got the Beauty Systems Group, which is a network of outlets for direct sales also to licensed beauty professionals. That's a B2B part of the business. And those are branded under CosmoProf or Armstrong McCall. So it's a really interesting piece that has both consumer facing businesses and professional or business facing elements.
- [16:19]
John Croteau
That's right and just one little thing. The only reason that I've heard of CosmoProf is when I lived in LA, there was a group of women I knew, and there was one license that they had that they would share and they would say, does anyone have the cosmetologist card so I can go shopping at CosmoProf for my own personal things? And so it was interesting to me to learn that it's all under Sally Beauty.
- [16:37]
Ann Berry
Yeah. And having that card means they can go and save real money. Right. Well, the quarterly results, net sales of 947 million doll dollars. This is a big business. We've got to remember that that's just for one quarter. It was up just over a percent year over year. It beat estimates, adjusted EBITDA was flat to very slightly down. Just what I would say. I spent a lot of time in the beauty space. I'm actually on two beauty company boards, and it's been a. It's been a really interesting ride for beauty retail. The big enchilada in this space is Ulta Beauty, which is going through a bit of a turnaround at the moment. We saw a new CEO come in, and it was one of these sort of things where as goes Ulta, so is going the beauty industry. It's really the much. You know, it's the elephant in the room. And Ulta had a bit of a rough ride last year. And so the market's been eagerly watching to see Ulta regroup. We've seen its stock price come back up, but it was an overall indication that consumers are really trying to feel their way through beauty. At the moment. They are looking at premium products. They're trying to get real efficacy, get bang for their buck. So to see Sally Beauty Beat estimates, I thought was a pretty positive sign, actually for the sector.
- [17:44]
John Croteau
And I just want to bring up what they focused on over and over again. On the call, which I'd never heard of, Licensed Colorist on Demand, or lcod. Are you familiar with this service?
- [17:53]
Ann Berry
Well, I am, but talk to me about it.
- [17:55]
John Croteau
Okay. Anyone can go online and have a free video color consultation for their hair with a person over video. And so, you know, I will tell you that when I saw my mom over the summer, I visited her. Yeah, she said, oh, Johnny, you're going gray. That was the first thing she said.
- [18:11]
Ann Berry
And so your mom can say it that to you? Sure, she's active to do that, but.
- [18:15]
John Croteau
I might need to see a licensed colorist on demand. So the service has been available for two years. They see about five or six thousand consultations a week. And on the call it was pointed out that they're seeing real conversion at Sally in this quarter and the color category was up 7%. So people are going on this free service and then taking their business to Sally.
- [18:35]
Ann Berry
So I have a whole thesis actually around this just to sort of deviate from script for a second from what I was thinking for a second. I've been watching this idea of consumers trying to do more beauty services for themselves at home. And here's the reason why. As we consumers have been feeling pressed by inflation, we've had to make choices about where we spend our money, experiences versus stuff, what we think is discretionary spending versus necessary. And one area that has been hit in the United States actually is, is spas. So the idea is instead of going to get your facial in a spa, perhaps you would forego an expensive treatment and instead try and f figure out great beauty products, facial products that you then use at home instead. This, to me, this licensed colorist on demand pickup reminded me of that because I do wonder whether folks, instead of going into a salon and getting their head on, which is an expensive treatment, are actually using this service with Sally Beauty, getting an expert to give them a perspective on the color and then actually trying to find the color in store themselves and going home to do it.
- [19:37]
John Croteau
Well, I'll tell you, that was highlighted on the call today.
- [19:40]
Ann Berry
And have you done it? Have you booked one of these? And are you going to color your hair?
- [19:43]
John Croteau
I haven't done it. But they said on the call today that they're not going to do as many buy and bolt promotions where they're just discounting, try to get people in for the holidays. They're doing quote, skip the salon and save. So you called it.
- [19:57]
Ann Berry
And trying to focus on expertise. Also refreshing stores. I will just say, Sally, beauty stores do need a bit of a refresh. I will say looking to do 50 refreshes next year. Well, finally let's head to space and take a look at Virgin Galactic Holdings. That's ticker X, S, P, C, E. Space.
- [20:17]
John Croteau
That's right. And I just wanted to catch back up on this one because this is one we heard in the news over the years. Virgin Galactic was founded in 2004 by Richard Branson, the famous billionaire. The idea was to create space tourism. And then over the years we heard the competition of the billionaires going to space. There was Jeff Bezos, Blue Origin, which had a flight recently. And the company which we're talking about, Virgin Galactic, went public in 2019, first commercial flight in. In 2023 they did seven of these flights. And then in 2024 they said we're mothballing it, we want to get a new space craft to put up. And so for the last couple years they've been working on this spacecraft and investors have been wondering, is it coming? Is it coming?
- [21:04]
Ann Berry
Yeah. And is it?
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John Croteau
Well, today on the earnings call they affirmed that it is coming in 2026, but people have been waiting. If you go on Reddit, you know, there's lots of conversation about this. People are in a space and in the company, they feel burned. They say, we've heard this before. We keep hearing that over the summer there were layoffs at the company and there's been some high profile engineers who have left which are making people feel a little more dubious. Here's one thing I found interesting on the call because they just have this one product that they're focusing on. We just need to get this spacecraft done.
- [21:40]
Ann Berry
Yeah, they have to get it right too. Yeah.
- [21:42]
John Croteau
And so it was 15 minutes of things like really technical descriptions of what they've gone over the past three months, we have seen the expected completion dates of our wing and feather sub assemblies shift modestly to the right. All these things very technical. And so the company is saying that it's going to happen and we'll just have to keep Our eyes open 2026 to see if they're going to deliver on this craft.
- [22:04]
Ann Berry
So let's just talk a little bit more about what that craft will look like because a nugget here, the Virgin Galactic flights have taken off like an airplane.
- [22:12]
John Croteau
Right.
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Ann Berry
It's sort of signature move. Blue origin flights in contrast are that sort of standard vertical launch that we really associate with, you know, space movies. So Virgin Galactic really trying to find a product here that perhaps feels natural to help get adoption to pick up. I gotta tell you, I love this stuff. I recently was tourist in my own home here in New York and I went to Intrepid, which is this mass of aircraft carrier. It's an old warship that is docked on the east side or sorry, on the west side of New York on the Hudson. And you go onto the ship and actually there are sitting there on the deck a whole bunch of different kinds of aircraft that you can go look at from history. Have you been.
- [22:51]
John Croteau
Yes, many years ago. And it's great, every time I go by there's a million tourists and they even have. You can camp out over there overnight sometimes.
- [23:01]
Ann Berry
It's really, it's really impressive. I think one day we will see a Virgin Galactic craft sitting on that deck with the lineup. Well, when we come back, folks, we're going to take a break now, but we'll come and look at market numbers for the day. There it is, the closing bell because it's 4pm on the east Coast. The markets are wrapping up now. We don't have a ticker tape, but we'll throw it over to our human ticker, our producer, John.
- [23:24]
John Croteau
That's right, The S&P 500 finished flat. The Dow was down 7.10 of a point and the Nasdaq finished up a tenth of a percent. Crypto continued its sell off today with Bitcoin down another 3.5%. That puts it down 20% from its all time high just last month. And a quick tariff update going into the weekend, it was announced today that the US And Switzerland have reached a trade deal. As part of the arrangement, tariffs on Swiss imports will be reduced from the current 39% to 15%. And the deal will also see swift companies relocating manufacturing to the US and the pharmaceutical and gold smelting sectors, among others.
- [24:00]
Ann Berry
You know, it's interesting, John, to see some of these tariff deals getting announced with some velocity at the moment. Some of the market commentary is the administration really trying to get its arms around bringing inflation down because as we know, they want to have another rate cut and that rate cut in December has coming and has come into question lately. Everyone thought it was a slam dunk. Not so sure yet given the disagreement amongst some of the fomc, that it is going to be that slam dunk that was expected. Well folks, it is Friday tgif. That's it for today's Blue Markets Daily.
- [24:29]
John Croteau
Brew Markets Daily is hosted by Ann Berry and produced by John Croteau, Tarek Abdelatif and Emily Milian. Our technical director is Lonnie Fiskas. The president of Morning Brew Inc. Is Devin Emery. We love to hear from you. If you have any feedback, a company you'd like us to cover or simply hair color advice, send an email or voice memo to brewmarketshoworningbrew.com and wake up.
- [24:49]
Ann Berry
On Monday with the Morning Brew newsletter and tune in to Neil and Toby on Morning Brew Daily. We'll see you back here on Monday. Have a fantastic weekend. Will be here afterwards. Same time, same place.
- [25:02]
John Croteau
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- [25:25]
Ann Berry
Payment of $45 for three month plan equivalent to $15 per month required new customer offer for first three months only. Speed slow hundred thirty five gigabytes of networks busy taxes and fees extra. See mintmobile.com.