Motley Fool Money: "Walmart Shows Other Retailers How It’s Done"

Air Date: August 21, 2025
Host: Tyler Crowe
Analysts: Matt Frankel, John Quast
Theme: Why Walmart is outperforming other retailers, Meta's AI hiring freeze, and a lightning round on current business stories.

Episode Overview

This episode explores Walmart's strong performance in a challenging retail landscape, contrasting it with Target and other rivals. The conversation also covers Meta’s surprising AI hiring freeze, dissecting what it means for investors in the ongoing AI boom. The show wraps with a spirited lightning round on topics including Chipotle’s drone delivery test, the resurgence of SPACs, Cracker Barrel’s controversial rebrand, and finishes with the analysts’ stocks to watch.

Key Discussion Points & Insights

1. Walmart’s Earnings: Why It’s Outperforming (00:22 – 07:25)

• Walmart’s Q2 earnings—slightly below analyst expectations, but for reasons unrelated to consumer demand (insurance and legal costs, rather than tariffs or weak consumption).
• Contrast with Target:
  • Target and peers are struggling with tariffs, hesitant consumers, and tepid outlooks, while Walmart has increased sales guidance.
  • Quote – John Quast (02:03):
    “Walmart is cheaper than Target, generally speaking... That’s kind of a big thing right now in the economy in 2025 with consumers.”
  • Walmart’s pricing advantage is attributed to sourcing only about a third of its products internationally (vs. Target’s over half, much from China). This allows Walmart more flexibility facing tariffs.
• Consumer Behavior:
  • Even if shoppers prefer Target’s branding, they’re shopping at Walmart to save.
• Comparison to Past Recessions:
  • Walmart historically thrives in downturns—performed best in the S&P 500 during the 2008 crisis.
  • Quote – Matt Frankel (03:11):
    "Walmart has a long history of doing better when consumers become a little more cost conscious... 4.6% comparable same store sales growth is impressive, especially considering Target's decline.”
• Omnichannel & New Business Segments:
  • Walmart’s omnichannel investments (online, delivery, especially in groceries) are now significant bottom-line contributors.
  • Quote – Matt Frankel (04:45):
    “Walmart has just done a fantastic job of building out their omnichannel, especially when it comes to groceries... It's really resonating with consumers.”
  • Advertising business: now over $4 billion—high margin and gives pricing/competitive flexibility.
    Target is just beginning to build out a similar third-party marketplace and digital ads strategy.
• Caveats:
  • The full impact of the current tariff regime is still playing out and third-quarter results may bring new challenges.

2. Meta’s AI Hiring Freeze: Strategic Pause or Red Flag? (07:54 – 14:43)

• Recent News:
  • Meta freezing hiring in its AI divisions, undergoing restructuring (“corporate overhaul”) as reported by WSJ—shocking given its recent major recruiting efforts for top AI talent.
• Meta’s Spending Trajectory:
  • Pattern of “erratic spending”—large outlays for AI and prior for VR/Metaverse, with business outcomes unclear.
• Is This a Bad Sign?
  • Analysts defend the move as a pause to regain organization and direction, not an indicator of a pullback on AI investment.
  • Quote – Matt Frankel (10:04):
    “Meta can burn through billions of dollars on AI spending and Facebook is still going to keep the company really profitable... I applaud the move if it results in more organization and a clearer direction, but it is kind of erratic.”
  • Quote – John Quast (10:57):
    "Meta just needs to get organized now and develop its plan. That's what the pause is all about... Meta has earned the right to throw gobs of money at what it wants."
• Investor Perspective:
  • As long as Meta continues returning value via buybacks/dividends and profits remain strong, making “big bets” is justified.
  • Metaverse investments still haven’t paid off, but hope remains for AI.
• Bigger Picture for AI Investing:
  • Tech breakthroughs tend to come in “stepwise” fashion, not smooth exponential trends; investors should expect setbacks and slow periods.
  • Quote – Tyler Crowe (12:35):
    “Progress in this industry... isn’t going to be, you know, only exponential or go parabolic. There will be stumbles along the way.”
  • Patience and reasonable expectations are key for retail investors.

3. Lightning Round: Business News & Quick Takes (15:13 – 20:04)

A. Chipotle Drone Delivery Test

• Chipotle to test drone burrito delivery in Dallas (partnering with Zipline).
  • John Quast’s reaction (16:03):
    “This just feels really lazy to get a burrito delivered to me by drone… I will not be ordering.”
  • Matt Frankel’s view (16:21):
    “For me, it's not about being lazy or not, it's about efficiency… bring me lunch right through my third floor window.”
  • Zipline: highlighted as an innovative company with real-world impact (e.g., medical deliveries in Rwanda).

B. The Return of SPACs (Special Purpose Acquisition Companies)

• **Chamath Palahapitiya launching a new SPAC focused on “American exceptionalism.”
  • Lessons from SPAC boom/bust (2021):
    • Matt Frankel (17:37):
      “Don’t believe any projections you read... Evaluate the business on its own merits.”
    • John Quast (17:56):
      “Check how many shares are being sold to retail investors and how many are being held for insiders... understand the incentives.”

C. Cracker Barrel’s Redesign

• Cracker Barrel undergoing a major rebrand/redesign, sparking backlash.
  • John Quast (18:57):
    “I think that Cracker Barrel might be barking up the wrong tree... what it’s doing is risking alienating its loyal customer base... I would have liked them to focus more on the menu and how to drive more profits out of their store before the rebrand.”

4. Stocks on the Radar (20:11 – 22:09)

• Matt Frankel:
  • Trex (TREX): Decking company down after earnings, set to benefit if interest rates fall and home projects pick up.
• Tyler Crowe:
  • Small Regional Banks:
    • Undervalued vs. large banks, solid credit quality, less covered segment suggests a “pocket of value.”
• John Quast:
  • TripAdvisor (TRIP):
    • Not for its main brand, but for its little-known Viator division (travel experiences marketplace)—high margins, fast growth, and potential spin-off value.
    • Quote (21:18):
      “Viator is actually doing really well… I think if it was a standalone company, it would honestly be worth somewhere around five times sales at least... TripAdvisor is worth less than $2 billion, so I’d say this company is significantly undervalued.”

Memorable Quotes & Timestamps

• “Walmart is cheaper than Target, generally speaking... That's kind of a big thing right now in the economy in 2025 with consumers.”
  — John Quast (02:03)
• “Walmart has a long history of doing better when consumers become a little more cost conscious... 4.6% comparable same store sales growth is impressive...”
  — Matt Frankel (03:11)
• “Meta can burn through billions of dollars... and Facebook is still going to keep the company really profitable... but it is kind of erratic.”
  — Matt Frankel (10:04)
• “Meta has earned the right to throw gobs of money at what it wants... It’s not being stingy.”
  — John Quast (10:57)
• “Progress in this industry... isn't going to be only exponential... There will be stumbles along the way.”
  — Tyler Crowe (12:35)
• “Don’t believe any projections you read... Evaluate the business on its own merits.”
  — Matt Frankel, on SPACs (17:37)
• “I think Cracker Barrel is risking alienating its loyal customer base... I would have liked them to focus more on the menu and kitchen.”
  — John Quast (18:57)

Conclusion

The episode offered an in-depth look at Walmart’s winning strategy amid turbulent economic conditions, explored the real meaning behind Meta’s AI hiring freeze, and delivered smart, snappy takes on headline-grabbing business stories. The analysts repeatedly emphasize the importance of both discipline and patience for long-term investors—whether in retail, AI, or buzzy story stocks.

For investors:

• Look for retailers with pricing power and adaptability (Walmart’s omnichannel, ads).
• Expect volatility and “stepwise” advances in AI, not instant exponential returns.
• Always scrutinize incentives and fundamentals—especially in cyclical fads like SPACs.
• Consider hidden value in overlooked company divisions or sectors.

Stay Foolish and focus on the long game!