Albertson’s Carries Baggage

Summary

Motley Fool Money: Albertson’s Carries Baggage
Release Date: June 18, 2025
Hosts: Mary Long, Ricky Mulvey, Mary Long

---

Introduction

In the June 18, 2025 episode of Motley Fool Money, hosts Mary Long and David Meyer delve into a range of pressing business topics, from Federal Reserve policies and cryptocurrency regulations to Amazon's advancements in artificial intelligence (AI) and the strategic turnaround efforts at Albertsons under new leadership. This comprehensive summary captures the key discussions, insights, and conclusions drawn during the episode.

---

1. Headlines Overview

Before diving into the main topics, Mary Long outlines several significant headlines shaping the business landscape:

• Federal Reserve Meeting:
  The Federal Reserve is set to meet later in the day amid signs that inflation is slowing and the labor market remains robust. These indicators typically suggest a potential rate cut, but uncertainty looms due to geopolitical tensions and economic variables.

• The Genius Act Passed by Senate:
  The Genius Act, concerning stablecoins, has been passed by the Senate and awaits approval from the House and the President. The act aims to regulate stablecoin issuers by mandating full reserves and establishing a federal framework, especially as major retailers like Amazon and Walmart explore stablecoin-based payment systems.

• Potential Ban on Direct-to-Consumer Pharmaceutical Advertising:
  Reports indicate that the White House is contemplating policies to prohibit pharmaceutical companies from advertising directly to consumers, potentially creating an $11 billion gap in the advertising sector. The United States, alongside New Zealand, stands as one of the few countries permitting such pharmaceutical advertising.

Notable Quote:
Mary Long (00:25): “Economic data suggests that inflation is receding, that the labor market is relatively solid. So typically that would indicate that the central bank is more likely to back off and lower rates.”

---

2. Federal Reserve Meeting and Monetary Policy

Mary Long and David Meyer engage in a detailed discussion about the upcoming Federal Reserve meeting.

Mary Long raises the juxtaposition between declining inflation and a strong labor market, which traditionally signal a potential rate reduction. However, factors such as the ongoing Israel-Iran tensions, rising oil prices, and the unpredictable impact of tariffs create a complex environment for Federal Reserve Chairman Jerome Powell's decision-making process.

Notable Quote:
David Meyer (02:35): “Most of those things that we've talked about could actually push inflation higher. So I understand the idea behind cutting rates, but cutting rates now would actually be a catalyst for even more inflation.”

Key Insights:

• Inflation and Labor Market: The signs point towards cooling inflation and a robust labor market, typically favorable for rate cuts.

• Geopolitical and Economic Uncertainties: Tensions in the Middle East, especially between Israel and Iran, are contributing to potential increases in oil prices, further complicating inflationary pressures. Additionally, the fluctuating impact of tariffs adds another layer of uncertainty.

• David Meyer's Perspective: Meyer emphasizes that despite the seemingly favorable indicators for a rate cut, the broader uncertainties may lead Powell to maintain current rates to prevent exacerbating inflation. He suggests that any premature rate cuts could trigger negative reactions in the bond market, ultimately resulting in higher rates.

Notable Quote:
Mary Long (03:30): “So with that in mind, let's switch places. If you're not Jerome Powell anymore but you're back to being yourself, Senior analyst David Meyer, do you plan to make any changes to your portfolio based on Powell's decision today, whatever it may be?”

David Meyer (03:44): “Nope, not today. And the reason is because I don't think rates are going to change.”

---

3. Amazon’s AI Strategy and Workforce Implications

The conversation shifts focus to Amazon CEO Andy Jassy's recent letter to employees titled "Some Thoughts on Generative AI," which has sparked both interest and concern among Amazon staff.

Mary Long summarizes the letter, highlighting Jassy's emphasis on Amazon's AI advancements and, notably, his cautionary remarks about AI potentially replacing employees in the future.

Notable Quote:
Mary Long (06:18): “The big point of it, or at least what caught the attention of Amazon employees, was Jassy's note about employment. He warned that the technology, AI technology is likely to replace employees in future years.”

David Meyer elaborates on the broader impact of AI on the workforce and investment considerations:

• AI Infrastructure via AWS: Amazon’s primary AI initiative remains its robust offering through Amazon Web Services (AWS), catering to the growing demand for AI infrastructure among businesses.

• AI in Advertising: Leveraging Amazon’s vast data on product sales, AI is enhancing advertising strategies, potentially increasing ad prices and benefiting shareholders.

• Human Capital Evaluation: Meyer stresses the importance of assessing how companies balance their investments in AI with their commitment to human capital. He advocates for companies that enhance human productivity rather than merely cutting jobs, viewing effective management of human resources as crucial for sustainable growth.

Notable Quote:
David Meyer (06:59): “I want to see companies making their human capital more productive, not just by cutting. That's the easy thing to do, right? I want to see them lead and bring the human capital to make it more productive.”

---

4. Measuring Success in AI Talent Acquisition

Mary Long probes deeper into how investors can assess a company's success in attracting and retaining AI talent, especially in a competitive landscape where firms like Meta are investing heavily to secure top AI talent.

David Meyer provides a nuanced perspective:

• Beyond Monetary Incentives: Simply offering high salaries or bonuses is not a definitive indicator of success in talent acquisition. Instead, the effectiveness lies in how well companies utilize their talent to drive innovation and growth.

• Financial and Managerial Insights: Investors should analyze financial statements and management commentary to evaluate the return on investment (ROIC) from AI initiatives. Meyer cites Sportradar (Ticker: SRAD) as an example, where strategic restructuring towards AI has already yielded improved growth and cash flow.

Notable Quote:
David Meyer (08:48): “What I want to see is companies getting the most out of their talent. So that's difficult to measure. I'm not an employee at any of these companies, so I don't have inside information to see how things are going. But I can use the financial statements and I can use management's commentary.”

---

5. Albertsons' Strategic Turnaround Under CEO Susan Morri

A significant portion of the episode is dedicated to the challenges and strategic plans surrounding Albertsons, led by newly appointed CEO Susan Morri.

Background:
Susan Morri, with decades of experience at Albertsons, ascended to the CEO role about a month prior. Her appointment comes at a tumultuous time for the company, following a failed merger attempt with Kroger and a substantial 26% decline in profits in the last fiscal year.

Notable Quote:
Mary Long (12:09): “Morris's plan involves some cost cutting. Is there anything else that you would like to see in order for her to successfully turn this company around?”

David Meyer analyzes the situation:

• Impact of the Blocked Kroger Merger: Meyer contends that the blocked merger is not the primary driver of Albertsons' current troubles. Instead, he attributes the challenges to day-to-day operational issues such as customer footfall, merchandise selection, cost management, and labor relations.

• Turnaround Strategy:

  • Cost-Cutting Measures: Morri aims to save approximately $1.5 billion over three years through cost reductions.
  • Data-Driven Operations: Meyer emphasizes the importance of leveraging data to understand consumer behavior, optimize merchandise, and adjust pricing and promotions to enhance profitability.

• Industry Challenges: The grocery sector operates on slim margins (1-3%), requiring high customer throughput and efficient operations. Additionally, evolving consumer purchasing behaviors, with the rise of services like Instacart, present further challenges.

Notable Quote:
David Meyer (12:18): “The bigger challenge would be do I have the right data about what merchandise I need to put in the stores? Are the customers that I'm attracting, are they going after, you know, are they buying the things that I have in the store?”

Future Prospects:

Meyer expresses cautious skepticism about Albertsons' ability to outperform the S&P 500 over the next five years, citing the inherent difficulties in the grocery industry. However, he acknowledges that with strategic data utilization and operational efficiency, there is potential for improvement.

Notable Quote:
David Meyer (13:35): “That's going to be difficult, but I think it's difficult for any grocer. Again, we're talking about companies that make on the order of 1 to 3% margins.”

---

6. Competitor Insight: Kroger

Briefly touching upon Albertsons, the hosts mention Kroger’s upcoming report. David Meyer shares a quick observation on Kroger's steady performance, noting:

• Stable Margins and Slow Growth: Kroger maintains consistent margins with modest growth, indicating resilience in the grocery sector.

• Consumer Health Indicator: Meyer's interest lies in Kroger's commentary on consumer health, as a healthy consumer base bodes well not only for Kroger but also signals positive economic conditions overall.

Notable Quote:
David Meyer (14:34): “What I want to know is, what do they say about the consumer? Because if they say the consumer is healthy, shopping with them and things like that, one, not only is that good for Kroger, but two, that should be a good sign for the rest of the economy.”

---

Conclusion

Mary Long wraps up the episode by reminding listeners to exercise caution and not to make investment decisions solely based on podcast discussions. She underscores that all personal finance content adheres to Motley Fool's editorial standards and is independent of advertiser influence.

Notable Quote:
Mary Long (15:06): “Don't buy or sell stocks based solely on what you hear.”

David Meyer thanks Mary for the insightful discussion, and the episode concludes with a teaser for future shows.

---

Key Takeaways

• Federal Reserve's Rate Decision: Despite favorable economic indicators, geopolitical and economic uncertainties may lead the Fed to maintain current interest rates to avoid exacerbating inflation.

• Amazon's AI Initiatives: Amazon continues to lead in AI infrastructure through AWS and is enhancing its advertising capabilities with AI, positioning itself for shareholder value enhancement.

• Human Capital in AI Investments: Successful AI integration requires a balanced investment in both technical infrastructure and human capital, fostering productivity without merely reducing the workforce.

• Albertsons' Turnaround Strategy: Under CEO Susan Morri, Albertsons faces significant challenges but aims to stabilize through cost-cutting and data-driven operational improvements. Success in the highly competitive grocery sector remains uncertain.

• Industry Health Indicators: Companies like Kroger can provide insights into broader economic health through their performance and consumer engagement metrics.

---

This episode of Motley Fool Money offers a thorough analysis of current economic conditions, strategic corporate initiatives in AI, and the intricate challenges faced by traditional retailers like Albertsons. Whether navigating Federal Reserve policies or assessing the impact of AI on the workforce, the hosts provide valuable perspectives for long-term investors.

Transcript

[Mary Long]

Andy Jassy's got a warning for Amazon employees. You're listening to Motley Fool Money. I'm Mary Long, joined today by David Meyer. David, great to see you. Thanks for being here.

[David Meyer]

Great to see you too.

[Mary Long]

We're going to dive right in. But before we get to today's main stories, first we got to step back and highlight some of today's headlines. So, David, here's what's happening in the business world that caught my eye this morning. Perhaps first and foremost, the Fed meets later today after we record the show. Economic data suggests that inflation is receding, that the labor market is relatively solid. So typically that would indicate that the central bank is more likely to back up off and and and lower rates. But Powell seems unlikely to do that, even though he's facing continued pressure from President Trump to do so. We'll park on that in just a minute once we get to the rest of the headlines. Another thing that caught my eye, the Genius act passed to the Senate yesterday. If you're wondering what that is, it's about stablecoins. The bill still needs to pass the House and to be signed by the President before it were to become law. Largely what it seeks to do is regulate stablecoins. So it would require stablecoin issuers to hold reserves that fully back those stablecoins. It also prop federal framework for stablecoin issuance at a time when companies like Amazon and Walmart are allegedly moving toward stablecoin style payment options. Last but not least, we got more news from Congress. Bloomberg reported yesterday that the White House is considering policies that would ban pharmaceutical companies from directly advertising to patients. If this would go into effect, it would leave a nearly $11 billion hole in the advertising world. In 2024, pharma companies spent $10.8 billion on direct to consumer pharmaceutical ads. The US is an international anomaly in this space. It's one of the only countries that allows for D2C advertising of pharma products. The only other country that allows this is New Zealand. Okay, David, lots of time on the headlines, but let's park on the Fed meeting for a minute. I mentioned slowing inflation and a perhaps surprisingly solid labor market up top. Those indicators would typically suggest a rate cut. But you got a lot of other things going on in today. You've got continuing attacks and tensions between Israel and Iran. You got rising oil prices. You've got the unseen impact of tariffs. If you're Jerome Powell, what are you looking at to make your decision? That's going to come out later today.

[David Meyer]

All that uncertainty ahead and you touched on a lot of it. So yeah, if we go back to the tensions in Israel and Iran, which could push up oil prices, that is a major contributor to inflation. We don't know the impact of tariffs. Are they on again, off again, what's the rate, rates going up, the rates coming down? We just don't know. And so but most of those things that we've talked about could actually push inflation higher. So I understand the idea behind cutting rates, but cutting rates now would actually be a catalyst for in even more inflation. And I actually think if they cut rates anytime soon, the bond market is going to sell off and what that's going to mean is higher rates. It's not going to go as they intend. So I don't see if I'm Jerome Powell, I'm looking at it, the uncertainty, I'm not changing rates right now.

[Mary Long]

So with that in mind, let's switch places. If you're not Jerome Powell anymore but you're back to being yourself, Senior analyst David Meyer, do you plan to make any changes to your portfolio based on Powell's decision today, whatever it may be?

[David Meyer]

Nope, not today. And the reason is because I don't think rates are going to change. But more importantly, nothing is being done to change my process right now. So me and other fools, we look for great companies, strong advantages that have large market opportunities ahead of them that they can capture and that are trading at reasonable prices for long term results. What Jerome Powell or any Fed chair does to short term rates, that doesn't really affect that. Unless there's something happening in the economy that is forcing them to change rates, then I would have to incorporate that into my process.

[Mary Long]

David Meyer, it sounds like you'd make a pretty good Jerome Powell, but we'll keep you as David Meyer. We like it that way. Alrighty, that's our news rundown. Later on in the show, we'll be talking about Amazon and AI plus Albertson's turnaround. But before we get to all that, a quick word from our sponsors.

[C]

Trading at Schwab is now powered by Ameritrade, bringing you an expanding library of education with even more ways to sharpen your trading skills. Access new online courses, insightful webcasts, articles, engaging videos and more, all curated just for traders. Plus guided learning paths with content designed to fit your unique interests. No sifting to find exactly what you need so you can spend your time learning to trade brilliantly. Learn [e-mail] trading we're back and we're.

[Mary Long]

Going to be Talking a bit about Amazon CEO Andy Jassy sent out a letter to employees the other day that's making headlines. It had the vague but newsy title, some Thoughts on Generative AI. So, David, the memo walks through examples of Amazon's AI progress. There's more to it that we'll get to in a second, but we'll pause here. What do you think Amazon's biggest AI play is right now?

[David Meyer]

Right now, it is still providing AI infrastructures to customers through Amazon Web Services. That is just enormous. Demand is very strong, and we're still very early in that cycle. We know companies want to bring AI into their fold as a capability. So, yes, lots of them are turning to aws. And the other place, though, is advertising. So think about. Amazon has an amazing amount of data on all the products that it sells and where advertisers want to make product placements and things like that. AI will definitely help customers place ads better, which should lead to higher prices for ads, which would be good for Amazon shareholders.

[Mary Long]

The beginning of the letter, I think Jassy took about 15 paragraphs to kind of walk through the AI advancements that the company was making. But the big point of it, or at least what caught the attention of Amazon employees, was Jassy's note about employment. He warned that the technology, AI technology is likely to replace employees in future years. He was unspecific about other details like when exactly this might happen and what jobs AI might fully replace. This is not terribly different or surprising. Jassy's not the first CEO to make these kind of vague comments. And whenever these headlines come out, they make headlines, but they can be noise. What should investors actually take away from this letter?

[David Meyer]

So you're right, AI is definitely going to change the way employees work. And employers know this, employees know this. We just don't know how that change is going to play out right now. And that's a little scary. But as an investor, so what I want to hear is, I want to hear how companies are managing both their technical capital, meaning how much are they investing in AI? Where's that money going? How is it doing? But as well as their. How much. How is their human capital? Like, what investments are they making there? Because at the end of the day, people are still important. And for me, as an investor, as someone who looks at management as an important category to analyze when looking at an investment opportunity, I want to see those who make their human capital more productive, not just by cutting. That's the easy thing to do, right? I want to see Them lead and bring the human capital to make it more productive. That's beneficial for the company, beneficial for the employees, beneficial for all stakeholders, and in the end, beneficial for shareholders.

[Mary Long]

I'm glad you mentioned human capital. I guess my follow up question would be how exactly do you as an investor measure that, evaluate that and keep track of it? You talked about this a bit with Nick Seiple, another analyst on the morning show earlier today. While you've got Amazon and others saying AI is going to trim the workforce, it's going to take jobs, you also got news that Meta allegedly offered $100 million bonuses to snag OpenAI's top employees. So AI, like as you said, AI products matter, but right now you also need smart people to build those products. So as an investor, how do you get a good sense of which companies are winning the race for AI talent? Is it just, hey, who's shelling out the most money to get these big names?

[David Meyer]

Absolutely not. I mean, look, I get that you, you know, think about sports, right? You do want productive athletes on the field, on the court, and sometimes you have to pay for them. That's the way markets work. But paying the most for talent is not necessarily winning the race for talent. What I want to see is I want to see companies getting the most out of their tal. So that's difficult to measure. I'm not an employee at any of these companies, so I don't have inside information to see how things are going. But I can use the financial statements and I can use management's commentary. So I'm going to give you a quick example with a company that I'm fairly familiar with called Sportradar. The ticker is S R A D. They recently made a big investment in AI and AI talent. They actually restructured their business at the end of 2024 in order to make AI the focus. And we're already seeing the direct impact of that. We've seen a little bit stronger growth, a little bit better cash flow and we have commentary from management saying, hey, this is working. So again, it's roic. It's return on investment on talent, not just investment.

[D]

Test, test, check, 1, 2. You know you need unique New York. You know you need unique New York. Does that sound alright? Ah, that's better. You can always tell something's missing when you get isolated results like AI. That's only right for one of your systems. Get AI that can work across your data and applications. Learn [e-mail] the AI built for business. IBM.

[Mary Long]

So we'll keep on the talent train for a bit. But attack it from a slightly different angle. The Wall Street Journal had an interesting profile out the other day of Susan Morri. She's the CEO of Albertsons. She just came into this role about a month ago, but she's been at the company for decades. Got her start working at the grocer when she was in high school, selling lottery tickets at the store's customer service counter. Morris comes to the helm of Albertsons when it. When the company is in a bit of an interesting spot. Albertsons spent years trying to merge with Kroger, only to have had that deal blocked in December and seems to be in a bit of a pickle right now. In the company's last fiscal year, its profit declined 26%. Morris, for her credit, has plans to cut costs and save about a billion and a half dollars over the course of the next three years. But still seems to be a tough time to be at the helm of Albertsons. David, how much of this company's troubles have to do with the blocked Kroger merger?

[David Meyer]

So probably not much. I would hope that the executives there could walk and chew gum at the same time. And what I mean is, yes, it does take time and effort to try to affect a merger, but at the same time, you're still the day to day focus is on the operations of the business. So I would think it's more of a day to day thing, like how many customers are coming in, do we have the right merchandise, how much is it costing to do this, how are our labor relations, all those things like that. So like I said, I don't think it has. I think the blocked merger didn't help, but these are things that should have been paid attention to along the way.

[Mary Long]

Morris's plan involves some cost cutting. Is there anything else that you would like to see in order for her to successfully turn this company around?

[David Meyer]

Yeah, cost cutting is obviously the easiest thing. The low hanging fruit. The bigger challenge would be do I have the right data about what merchandise I need to put in the stores? Are the customers that I'm attracting, are they going after, you know, are they buying the things that I have in the store? What is my, what are my price points? Are those right? How much promotion, couponing? This is like this is a very complicated business, right? So we have to get all of those things right. And the worst part of it is it's only to make a very slim margin. Now this is, this is the way the grocery business works all over. Like none of this is, is really unique to Albertsons. So Albertson has to basically get its own shop in order. Pardon the P. Um, it's going to take getting in again, to the details of what's. What is everything that is happening in our operations. And from Susan Morris's background, she might be the perfect person to do that, given that she used to work directly in the stores.

[Mary Long]

Like, her background notwithstanding, how much faith do you actually have in her ability to execute this? If you look at this stock, do you think that Albertsons has the potential to beat the S and P over the next five years?

[David Meyer]

That's going to be difficult, but I think it's difficult for any grocer. Again, we're talking companies that make on the order of 1 to 3% margins. This is about throughput, like we need. You need to get lots of customers in the store buying lots of things all the time. And the other challenge that they have. Right. Is we don't necessarily buy things the same way we used to 10, 20 years ago, maybe even two years ago. Right. We're starting to see the rise of Instacart and companies like that. So the. Again, this is why I think you need to go back to the data. What is the data telling you about what people want and where is Albertsons meeting them in order to affect that transaction?

[Mary Long]

Well, we'll pivot briefly to Albertsons, perhaps chief competitor Kroger, that grocer reports on Friday. Is there anything that you're going to be looking out for to gauge a success of that business or just maybe the industry at large?

[David Meyer]

I will say this. I took a quick peek at the Kroger stock chart because it's not a company I follow enormously. Honestly, I don't follow it a lot. It's actually done very well. And if I look at their margins, they're pretty steady. Growth is slow. But what I want to know is, what do they say about the consumer? Because if they say the consumer is healthy, shopping with them and things like that, One, not only is that good for Kroger, but two, that should be a good sign for the rest of the economy.

[Mary Long]

Broadly, as always, people on the program may have interest in the stocks they talk about, and the Motley fool may have formal recommendations for or against. Don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley fool editorial standards and are not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes for the Motley Fool Money Team. I'm Mary Long. Thanks for listening. We're off tomorrow for Juneteenth, but we'll be back on Friday. See you then. David Meyer, always a pleasure to have you on. Thank you so much for spending your morning with us and for dropping some insights from Motley Fool Money.

[David Meyer]

Thank you for having me.