Motley Fool Money: Walmart, Etsy Face Tighter Wallets
Release Date: February 21, 2025
Hosted by Dylan Lewis, Ricky Mulvey, and Mary Long

Introduction

In the February 21, 2025 episode of Motley Fool Money, hosted by Dylan Lewis alongside senior analysts Jason Moser and Asit Sharma, the team delves deep into the current landscape of the retail sector. This episode titled "Walmart, Etsy Face Tighter Wallets" explores the latest earnings reports, strategic moves by major companies, and insightful discussions with co-founder David Gardner celebrating his milestone podcast episode.

Walmart's Earnings and Strategic Developments

Jason Moser kickstarts the discussion with Walmart’s recent earnings, highlighting both the positive outcomes and cautious outlook from management.

• Earnings Performance:
  “Sales grew 5.2%. They saw adjusted operating income up 9.4%. The US comp sales increased 4.6%. That included e-commerce sales growth of 20%.” [01:13]

  Walmart exceeded expectations with significant growth in sales and operating income. The robust increase in e-commerce sales underscores Walmart’s successful integration of online platforms with its traditional brick-and-mortar presence.

• Advertising and Membership Growth:
  “Global advertising for Walmart has grown 27% to about $4.4 billion.” [02:00]

  The substantial rise in advertising spend and membership income illustrates Walmart’s aggressive push into digital advertising and loyalty programs, aimed at enhancing customer engagement and long-term revenue streams.

• Global Initiatives:
  Walmart’s ownership of Phonepe, an Indian fintech company, was highlighted as a strategic move towards expanding its global footprint. “Phonepe is prepping for an IPO here in the very near future.” [02:40]

  This move positions Walmart as a modern, diversified retailer, integrating e-commerce, advertising, and financial technologies to stay competitive in the 21st-century market.

• Tariff Considerations:
  CFO John Rainey stated, “We don't have any explicit assumptions in our guidance around tariffs. Our stance is we don't know what we don't know.” [04:06]

  Walmart remains resilient amid tariff uncertainties, reflecting confidence in its ability to navigate global economic challenges.

Etsy's Performance and Market Reaction

Turning to Etsy, Jason Moser provides an analysis of the company’s mixed recent performance.

• Earnings Overview:
  Etsy reported a slight revenue growth of 1.2%, but consolidated gross merchandise sales fell by 7%. “Shares down around 10%.” [06:59]

  The decline in gross merchandise sales, coupled with a cautious market response, reflects challenges in the discretionary spending sector.

• Strategic Shifts:
  Etsy is revamping its seller onboarding process by introducing a seller onboarding fee, intentionally reducing the number of active sellers to focus on quality over quantity. “They are going through and revamping the seller process... like PayPal.” [07:50]

  This strategic pivot aims to create a more engaged and valuable seller base, potentially enhancing long-term sustainability despite short-term drawbacks.

Mercado Libre's Stellar Performance

David Gardner shifts focus to Mercado Libre, a South American e-commerce powerhouse experiencing significant growth.

• Growth Metrics:
  Revenues surged by 37% to $6.1 billion, and operating income grew 2.5 times to approximately $820 million. “They control R&D costs and sales and marketing spend effectively.” [09:16]

  Mercado Libre’s integrated approach in e-commerce, fintech, and logistics creates strong network effects, driving both top-line and bottom-line growth.

• Strategic Investments:
  Investments in logistics and digital banking, including offering higher deposit yields, attract more users into their ecosystem, enabling upselling of various services. “They keep offering higher deposit yields to folks, bringing more into the digital banking fintech realm.” [09:50]

Wingstop's Market Challenges

The conversation pivots to Wingstop, a popular Buffalo Wing-focused restaurant experiencing a tough week in the stock market.

• Stock Performance:
  “Shares down about 20% this week.” [11:19]

• Earnings and Growth Outlook:
  While Wingstop reported a 20% increase in system-wide sales, future comparable store sales growth is projected to slow to low to mid single digits. “There is a tremendous demand in the pipeline for franchisees...” [12:00]

  Despite the current stock dip, Wingstop's strong expansion plans and franchise growth opportunities present potential long-term value for investors.

Axon Enterprise's Strategic Moves

Jason Moser introduces Axon Enterprise, formerly known as Taser, discussing its recent partnership breakup and future prospects.

• Partnership Breakdown:
  Axon announced a separation from Flock Safety due to integration challenges. “Axon is deciding to go its own way.” [37:10]

  This move signifies Axon’s intention to develop proprietary solutions, potentially enhancing growth and control over its technological advancements.

• Financial Highlights:
  Axon’s gross profit grew by 14% year-over-year, driven by Cash App and Square businesses. “Cash App gross profit increased 16% from a year ago.” [14:06]

  The focus on scaling U.S. account executives and international sales suggests a strategic push towards global expansion and deeper market penetration.

• Future Projections:
  Axon aims to meet the Rule of 40, combining gross profit growth and adjusted operating income margin. “They expect to total 40 or better.” [15:00]

  Achieving this metric would reflect a healthy balance between growth and profitability, potentially attracting a more favorable market sentiment.

Alibaba's Resurgence in the Chinese Tech Market

David Gardner discusses the notable performance of Alibaba, which saw a 10% increase post-earnings, contributing to a 70% rise since the year's start.

• Government Relations:
  Alibaba benefits from the Chinese government’s shifting focus back to consumer tech, inviting entrepreneurs like Jack Ma back into the limelight. “Jack Ma being seen at a recent meeting with the Chinese leadership...” [16:56]

• Cloud Business Growth:
  Alibaba's cloud intelligence group grew by 13% year-over-year, positioning it as a significant player in the Chinese cloud market. “Their cloud group is only about $16 billion of revenue run rate each year.” [17:10]

  While smaller than U.S. counterparts, Alibaba’s cloud division presents substantial growth opportunities amidst geopolitical risks.

Special Segment: Celebrating David Gardner’s Milestone

In a heartwarming segment, David Gardner celebrates his 500th episode of the Rule Breaker podcast with special guests Morgan Housel and Randy Zuckerberg. They share insightful and entertaining stories from their college days, emphasizing the power of storytelling in education and communication.

• Educational Insights:
  Asit Sharma shares how impactful storytelling in environmental economics left a lasting impression, highlighting the effectiveness of narratives over rote memorization. “People love a good story. They do not want to lecture.” [22:00]

• Amusement and Enrichment:
  Morgan Housel discusses the genius of comedians like George Carlin and Jerry Seinfeld in elucidating psychological insights through humor. “Comedians are the most talented psychologists... they deliver insight by making you laugh.” [23:33]

  Asit Sharma reflects on a personal experiment with ChatGPT, exploring alternate life narratives and the profound realization of infinite possibilities. “Most of the stories I came up with were really sad... it was haunting.” [29:44]

Stock Market Updates and Strategic Shifts

• Kentucky Fried Chicken (KFC) Relocates Headquarters:
  KFC’s parent company, Yum Brands, announced relocating its headquarters to Plano, Texas, as part of broader strategic plans. “If the drumstick on your plate is made by a company domiciled in Texas, is it really Kentucky Fried Chicken?” [34:23]

  Jason Moser points out the irony and trend of major companies moving to Texas for business-friendly climates, lower regulations, and better tax environments.

• Airbnb as a Steady Performer:
  David Gardner highlights Airbnb’s strong free cash flow generation and strategic scalability, despite regulatory challenges. “It's a cash flow monster. It's generating about $4 billion in free cash flow a year.” [39:07]

Conclusion

The episode wraps up with a comprehensive discussion on the dynamic shifts in the retail and tech sectors, emphasizing strategic adaptations by major players like Walmart, Etsy, Mercado Libre, Wingstop, Axon, and Alibaba. Special segments celebrating David Gardner’s podcast milestone add a personal and enriching touch, underscoring the importance of storytelling and varied perspectives in understanding market movements.

Notable Quotes:

• “The rule investing is about what are you going to do for me next? What have you done for me lately.” — Jason Moser [01:13]
• “People love a good story. They do not want to lecture.” — Asit Sharma [22:00]
• “Comedians are the most talented psychologists... they deliver insight by making you laugh.” — Morgan Housel [23:33]
• “The audience member... it is so different, and it is so much more effective to do it that way.” — Asit Sharma [28:11]

Final Thoughts

This episode of Motley Fool Money offers a rich analysis of current market trends, strategic business decisions, and personal insights from industry experts. Whether you're an avid investor or someone looking to understand the nuances of the retail and tech sectors, this episode provides valuable takeaways to inform your investment strategies.

Note: The provided quotes are selected to highlight key discussion points and may not represent the entirety of each speaker's statements.