Morning Brew Daily - Target Struggles To Recover from Pride Backlash & Is Food Delivery Dead?

Episode Date: August 17, 2023

Episode 127: Neal and Toby discuss Target's latest earnings report and explain why the retailer struggled last quarter. Also, record labels are not producing pop stars like they used to and people are heading to restaurants more and more to pick up their own food. Neal shares his favorite numbers and global wealth rises while inequality falls. And would you buy a... pink pineapple? Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Listen to the Our Future Podcast Here: https://chartable.com/podcasts/our-future-looking-beyond-with-michael-sikand Learn more about your ad choices. Visit megaphone.fm/adchoices

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Good morning brew daily show. I'm Neil Freyman. And I'm Toby Howell. On today's pod, we'll talk about the unknown country musician who's topping Taylor Swift, Drake, Olivia Rodrigo, and Morgan Wallin on the Spotify charts. Plus, we'll play a round of, would you eat it or not? Pink Pineapple Edition. Then more and more people are opting to pick up their food rather than get it delivered. Plus, we'll dig into a report that shows the world's middle class is getting wealthier, while the rich have taken a bit of a haircut.

It's Thursday, August 17th. Let's ride. Toby, I found this a little interesting. A new survey showed that 63% of Americans under the age of 30 prefer to watch TV in a language that they know with subtitles. And that is a far greater share than older Americans who prefer to watch TV with subtitles. What do you make of this? I make a bit that I'm totally on the subtitle bandwagon. Even when I go to theaters, sometimes I feel like the movies need subtitles.

And this is not just me thinking that. into the Spiderverse which just recently came out, they admitted they had sound mixing issues in the first scene and it was hard to hear. And so I think a lot of people are coming to realize why struggle through and like barely pick up on dialogue when you're in the comfort of your home, might as well put some subtitles on.

It just helps with like the cognitive load of it, I think. It's definitely been a trend, but I do not subscribe to subtitles. It's not the way the movie or the show was intended and especially if you're watching a comedy show or something. You don't want to see the joke. You don't want to see the punchline or joke ahead of time that completely ruins it. So I can't imagine watching Seinfeld episode, 30 Rock episode.

The whole idea of comedy is the timing and the tension waiting to hear the punchline. And the fact that you can read it ahead of time kind of ruins it for me. But I kind of get it. It is obviously subtitles are important for accessibility for a lot of people. But it is kind of interesting to see Gen Z really embrace subtitles and reading a show as much as watching it. But yes, you don't want to miss anything. I hear that. And there are some shows like, you know, in dairy girls or other movies that are in kind of a thick Irish accent with Colin Farrell.

We're like, yeah, it might need a subtitles to understand what he's saying. Absolutely. Team subtitles, baby. All right, now let's jump into our top of the show or we are digging into target earnings to see how the retailer fared. The answer, not too great, Bob. Target's comparable sales fell 5.4% in the second quarter, which was worse than Wall Street's expectations of a 3.6% drop. Two factors at play that hurt Tarje. One was the hullabaloo around its Pride Month collection that saw the same sort of conservative backlash as Bud Light has been facing.

The other, though, is a much more looming threat, and that is the fact that consumers may be taking their discretionary spending elsewhere to places like T.J. Max and Dollar General, who had much better quarters than Target. Both those things have led to Target shares kind of getting hammered over the last three months to the tune of a 22% drop. Neil, how do you think Target is positioned right now in terms of the overall retail landscape? Not too great.

You know, so Target is the place that you go for discretionary items like toys and decor and things that you don't necessarily need. So as consumers pull back on that, and they head to Target and lower cost retailers for the things that they absolutely need. Away from Target. Oh, did I say towards Target?

Towards Target, yeah. Away from Target. 54% of Target sales are in that discretionary bucket, so they are really not in a good position. That's why I think that you see investors shying away from them a little bit. Though we should say that sales, that their stock actually popped yesterday on the earnings report kind of because expectations were so low. Right.

And Target beat profit expectations, not sales. expectations but profit expectations because they did fewer discount less discounting than they did previously. So I would say the overall mood around Target is a little antsy, especially with student loans coming due in the fall, with more people pulling away from discretionary spending. Yeah. And I was also looking into because the two main questions Target has to answer is, how long would this shopper backlash too, kind of like the conservative shopper backlash that I mentioned. And the answer is it's already kind of fading. So sales in June were down more than 7%. But in July, that number was down to 5%. So we see it slowing a little bit. And then if we actually

go back to another target controversy in 2013 when it was hit with this massive data breach, it was this really big, bad PR fiasco for Target. Comparable sales were covered within two quarters of the event happening. So I think we've made it through the first quarter. We'll see what the second quarter brings, but it usually these things don't last much beyond two quarters if we look at historical data. Right, but when this happened to Bud Light, I think the general vibe was that, okay, Bud Light's getting boycotted by conservatives and this will blow over like in the past. Like you mentioned, a lot of these boycotts kind of fizzle out within a first few weeks.

Bud Light has been wrecked because of this. And Target, I think people were surprised to find out in this earnings report just how much the backlash to its LGBTQ merchandise. which really wasn't any different than any other Pride Month situation that any other retailer did, really, really banged it. And they are getting hit on both sides because it's not just that they had it in the first place, but their response to it by removing a lot of this merchandise, moving it to the back, and taking it out of their stores was hit by liberals as well.

And so they had two sides kind of boycotting target. For sure. And then if we look just broadly at consumer spending in general, retail sales actually jumped 0.7% last month, which is more than expected. Again, Americans have just continued to shop, even though we've been in this huge rate hike cycle, we have seen consumer spending be super resilient. Although one thing that's lost in that resilience role narrative is the fact that Prime Day happened this past quarter. And Prime Day was the biggest ever on record. Of course, that's the day that Amazon offers a bunch of discounts. So I do think we might have been seeing

Prime Day put consumer spending on its back a little bit. So maybe next year, quarter is a it will be a better indication of where consumers truly are at. Also people are shopping less for apparel and home goods and doing more experiences. The Cornell, who's the CEO of Target, says, guests are going out to concerts. They're going to movies. They've seen Barbie. They're having these experiential moments and spending less time in department stores, which does not work to Target's favor. Okay, moving on, I want to talk about two massively popular songs that emerged in the past week or so. They could not be any more different in tone and substance, but I think when viewed together,

they can reveal a lot about where the music industry is right now, because neither of these songs come from a professional musician. The two songs I'm talking about are Richmond, north of Richmond, a country tune from a Virginia farmer named Oliver Anthony, and the other is this Eurodance parody, Planet of the Base, written by TikTok comedian Kyle Gordon. The success of these songs is pretty staggering. If you go to Spotify's top 50 most played tracks in the U.S. right now, you'll see Richman North of Richmond is number one ahead of Taylor Swift, Olivia Rodriguez, Morgan Wall, and Drake, and Billy Elish. Planet of the bass, meanwhile, caught fire on Twitter where the music video racked up more than 100 million views.

Gordon, who became popular during the pandemic for his comedy sketches on TikTok, was recently invited by the Jonas Brothers to perform the song at their concert. And the crowd went, I think, even more bonkers for that song than the boys from New Jersey. From a musical perspective, I think these songs are pretty good. Oliver Anthony has this soulful Chris Stapleton vibe, and Planet of the bass has one of the catchiest hooks you will ever hear. Plus, it's very funny. But to be this popular is kind of nuts. Like, what do you think is going on?

Well, so that, yeah, the narrative that people have been kind of introducing is this is the new age of the music industry. You can go become famous without any help from record labels. But I also think that this has been happening since almost the rise of the internet. If we go back to YouTube, the early years of YouTube, you had songs like, like remember the bed intruder remix. Oh, yeah. And then also, I'm in your window. Yeah. And then chocolate rain was one where so as soon as you have platforms that allow people to post their own content, of course you're going to have like these rising stars,

these diamond in the roughs. So I don't necessarily think that this is a modern thing. Obviously TikTok hyper accelerated this trend. But it was interesting to see that like Twitter and X played a big role in sending both these songs viral. So I do think that, yes, the music industry is changing, but it's been changing since the mid-2000s when YouTube started, not just in the TikTok era. The big question here that a lot of people are wondering is whether Oliver Anthony is an industry plant. Because this guy came out of nowhere. He's this Virginia farmer. He's a former factory worker who just set up a video with him playing a guitar with a microphone in his Virginia backyard with his three dogs sitting below him.

and he sings this kind of white working class anthem that a lot of conservatives have latched on to and says he's speaking for the, you know, the unclaimed white working class person who has been forgotten in our, you know, liberal elite world and Washington, D.C. Fat Cats are kind of just thriving while everyone else is getting left in the dust. So a lot of progressives are saying, how is this possible that this guy is so popular? And so that is the main question and the debate is whether he is a, industry plant. That's just such a trendy thing to say right now. Whenever someone gets famous, you just go industry plant for sure. I do think both the songs are incredibly catchy. And you can't, you can never overlook like the actual substance of the songs themselves. Even Planet of the bass just I can't, I've been saying life. It never died. Women are my favorite guy just in my head over and over because it is such, it, it encompasses what Europop is like those catchy lyrics that they don't really mean anything. They're just general positivity. And I think that

one is, it's a parody obviously, but it's unironically also a pretty catchy song. And then the other one, Richmond, north of Richmond, is if you look at the lyrics, some you might think that it could verge into parody territory, but it's also a very, very good song. He's a very good singer. So I don't think that you can separate the fact that these two things have some substance to them and they actually are just bangered. Yeah. And the fact, and just the fact, and just, the fact that they were so popular, I think speaks to the existential crisis that labels are facing right now. They're like, how are we supposed to pick pop songs when, you know, a TikTok guy can go to the top of the charts and this random guy in Virginia who's a farmer can go, you know,

viral and be more successful than Taylor Swift on Spotify? How am I supposed to pick a pop star in this world where basically we're living in a never-ending American Idol audition where anyone with a phone and TikTok can go viral? And you don't, I think the other big thing is you don't stay on top because there's always someone else who's willing who can go viral right after you so success is fleeting i think in this new music industry era let's launch a song you know let's let's go to the top of the charts you and i all right let's move on uh today it's not toby trends but i have a trend i want to tell you about anyways food delivery is getting a lot less popular as people are increasingly opting for takeout or in-person dining so sweet green fulfilled fewer delivery orders and

more pickups in the last few months. Kava deliveries have also declined while Chipotle's delivery revenue dropped 16% last quarter compared to last year. Besides helping them get their 4,000 steps in a day, analysts attribute the drop in deliveries to consumers watching their wallets a little bit more. Plus, now that the pandemic lockdowns are behind us, it's a lot tougher to spam that delivery button from your couch,

given the fees that come with it. Neil, we had a lively discussion over Slack yesterday about delivery versus going to pick it up yourself. Do you ever treat yourself to some delivery? Sometimes, but only when there's a crazy deal, because delivery is so expensive. So expensive. And it really does blow my mind how much people deliver food to themselves. And I know for a lot of people, it is necessary and, you know, they may have, you know, mobility issues and delivery is important. But for the people who can go walk outside and grab a takeout, it always kind of blows my mind how much people get delivery, but that's just me. The canary and the coal mine here, I think,

was Domino's because you always associate Domino's with delivery. But recently, we talked about this in an earlier episode, Domino's after years of saying, no, we're not going to go on Uber Eats. They decided to go onto this third-party marketplace because they were seeing a massive decline in delivery and they need to juice those sales because that accounts for a large part of their business because they're higher profit margins to this delivery because they can charge, often restaurants charge more for delivery for the same food, just the price. It's just so expensive. And then also tipflation is an issue that people started cited because when you ask for delivery,

most people, like the social norm is to tip. So obviously that makes it more expensive. But then only 13% of consumers say they left tips when picking up takeout orders. So it's basically like, do I want to spend an extra $5 tipping this delivery person 20% or do I want to just get my butt off the couch and go pick it up and then don't have to pay that extra tip? So, yeah, tipflation is also an aspect of this. Are you also worried about getting less food when you get delivery from places like Chipotle and Sweet Green? So this guy in Chicago did an experiment. He went and picked up Sweet Green and he also ordered delivery of the same menu item of Sweet Green.

And he found that the online order weighed 24% less. Wow, that is so interesting. And I think it must be when you're observing the person making their food, they feel responsible to top it off. That's so interesting. of one, we should say, but it doesn't, you know, it confirms a couple people's hypotheses. More food. All right. All right, Neil, before we jump into the next story, we're going to take a quick break. It's time to refresh your yard during spring backyard days at the Home Depot. Get low prices guaranteed on propane grills starting at $179, like the next grill three-burner gas grill,

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Typically, salaries are greater in a place with a higher cost of living and wealthier residents, right? It's why when Toby and I complain about how much we pay for rent in New York City, people in know, Oklahoma are like, well, you get a New York City salary so you can afford it. And while this relationship may be the case for many professions, it is not the case for one. Doctors. In an analysis by the Washington Post, the top states for the highest earning physicians are South Dakota 1, North Dakota 2, Alaska, Alaska, then Wyoming, and Nebraska, not exactly the super wealthy cosmopolitan places you might expect. A doctor's average annual income in their prime earning years was 524,000 in South Dakota compared to 454,000 in Connecticut. So what's going on here? First, there's a lack of supply

of doctors in more rural states, so economics 101 means that doctors have more pricing power where there's less competition. But how can these people in rural areas pay up? Well, the government puts its thumb on the scale in a big way through Medicare. Medicare makes sure that retirement age Americans in rural states like North Dakota can afford to pay as much for health care as the same people in Connecticut, which allows doctors to charge the same whether they're in Fargo, or Greenwich. Wait, you're on a New York City salary? I'm on an Oklahoma salary.

What the heck is going on? But yeah, this is, this was a super interesting stat. It's doctors working in like one of the few industries that actually isn't determined by demand or disposable income because, yeah, the government comes in and can subsidize health care. So, God, I would just ball out on a doctor's salary in North Dakota. Well, would you, I think I have a couple of friends that are doctors and I've heard this before where they talk about friends who moved to rural areas, you know, outside of suburban Texas

as well, where your dollar goes a lot farther and you get paid the same. And there's this question of like, do I leave all my family, my friends? Personally, I'm an East Coast guy, so I'm just talking about northeast people who are like, should I ditch it and just become like a millionaire in South Dakota where I could have a mansion or do I stay closer? It's not a mansion. You open a compound, invite all your friends to live on that and just have a great time. I like that one. Um, All right, our second number on Tuesday, a Vietnamese electric vehicle startup went public via SPAC, and its valuation shot up to $85 billion, which made it more valuable than carmakers that have been doing this for decades, Ford, GM, BMW, and Volkswagen.

So what is Vin Fast? I hadn't heard of it before yesterday, that's for sure. It is a six-year-old company that started deliveries of its first model, an electric SUV just this March. It's the automaking unit of Vietnam's largest private conglomerate VIN group, which is owned by Vietnam's richest man, Fam Not Vuong. Needless to say, this guy is doing really well. Already a billionaire, he added $39 billion to his net worth in a single day as

VINFAS shares shot up 255%. The key for VINFAS to sustain its momentum will be to gain a foothold in the U.S. Right now, it imports its cars to the U.S., but it's made plans to spend $2 billion to build a new factory in North Carolina. This gave me shades of Rivian, this gave me

shades of Lucid. It's the EV boom happening in another part of the world, although the growth narrative of if we can catch on in the U.S., then we can justify this valuation, that is very compelling. So I can see why it jumped so high. Obviously, if I had a little dip yesterday. If I had to guess, yes, it will come back down to Earth a little bit. But saying, like, hey, if we can establish foothold in the largest consumer market in the

world, that's a pretty good growth narrative. Yeah, especially because Japanese and Korean cars are so popular, but Chinese cars I've never caught on here. It's, I mean, if they can do it, I'll check out the fifth. If it's a big word in the car industry, because Rivian and all those other electric vehicles were like, we're going to the moon and then they can't produce, you know, a couple hundred cars because of production delays. All right.

Our final number comes from a tweet I saw by economic researcher Joey Politano, who posted a chart showing something that may explain why no one can afford a home right now. More of America's housing stock is from the 1950s than the 2010s. Yes, our neighborhoods are more boomer than the crying, laughing a moment. 13.7 million units online in the U.S. were built between 1950 and 1959, while 13.6 million were built between 2010 and 2019. And in super-pricing markets like New York City, the problem is even worse. 71% of New York City's units are from before 1951. And you'd think we'd address this, right? Get some new housing stock to bring down rents like Minneapolis? Of course not. Manhattan, where rents

soared to a record high last month, approved approximately zero New York. units of housing in July, and in the other four boroughs, just 10 buildings with 279 units in total were approved. This made me actually bullish on the remodeling industry because if there's no new houses being built and you're buying all these aging houses, then you have to update them, have to remodel them. So I guess this is why Home Depot's had such a last couple of decades has done really well. Warren Buffett's betting on housing, but also the housing remodeling market. So to me, remodelers are looking at these stats and just looking their chops. All right, Neil, thanks for those lovely combo of Neil's numbers.

As always, I actually have a little one-two punch of positivity that I want to float your way as well for our next story. The total amount of wealth in the world is rising substantially while at the same time global inequality is falling. Those conclusions come from Swiss Bank UBS's 14th annual global wealth report and are a little bit of odds with basically most of human history where most new wealth quickly concentrated in the hands of the rich, both in terms of individuals and countries. But in 2022, that trend reversed a little bit. Global median wealth went up by 3% last year. And for the world as a whole, median wealth has increased fivefold this century, according to the report. Now, a lot of that gain in the last century has come from China developing into the world's second largest economy. But this report still forecasts

total global wealth will rise 38% in the next five years, with middle-income countries benefiting the most. So, Neil, this was obviously a report that kind of shined a good light on where the world's at. Anything else stand out to you? Well, you just see all these narratives being like, everything is getting more unequal, everything is getting more unequal. And you actually say that without looking at the data. And if you look at the data, the world is more equal now than at any point since 1875. So middle income people across the world are gaining wealth at an extraordinary pace. And the wealthy really, the wealthy really has to do with what happens in the stock market and exchange rate moves.

Because most of the decline in wealth at the top here was because of certain moves of various currencies against the dollar. So they have all of their wealth stashed in markets and other assets. Meanwhile, regular people are doing pretty well all across the globe. And it's really cool to see. Yeah. there has been what people have coined a rich session, which is a drain of wealth on the top. But, and so if we actually want to put a number on to that, the world has now 3.5 million fewer millionaires in U.S. dollar terms than it had in 2021. But there's still a total of 60 million

millionaires in the world. So I wanted you to quiz me. Oh, on how many? There were. Yeah. There's 60 million millionaires. Okay. Well, I actually do have another quiz if I can find the stat real quick. How much private wealth do you think there is in the world? I think I read this out like 685 billion. What is it? No, in the world, Neil, in the world, we're talking 500 trillion. Yeah, it's 454 trillion at the end of last year. That would be a good... How did I say billion? That was really embarrassing. That was, hey, it's early. But that would be a good consulting question. Estimate the total net worth of the entire world. And there you have.

I would ask, I would ask a consultant how many billionaires are there in the world? That would be a question. I think you asked me this and I still got it wrong. and I'm not going to answer again this time. All right, so that's some good news on the inequality front. Let's wrap up the show in the produce world, which is proving yet again that anything pink turns the gold this summer. Food producer Del Monte's profits surged 26% last quarter thanks to booming sales of its pink pineapple called Pink Glow.

Surprise, that is not a Barbie collab. The pink pineapple is just a pink pineapple that hit the market in 2016 and has become this luxury show piece to show off at events and on Instagram and TikTok. and the reasons profits are so meaty is because this pink pineapple is not cheap. On the East Coast, it'll cost you $39 to order a single pink pineapple, but maybe it's worth it because apparently it is less sour and juicier than a traditional yellow variety. I am all in on a pink pineapple.

How about you? I am all out on a pink pineapple because if you Google images of this pink pineapple, which I encourage you to do, it looks fleshy. It looks like a slice of Christmas ham if you open it up. Even better? You say it looks delicious and kind of gives you candy vibes, but I think it gives fleshy vibes. So I do definitely think it so much of taste does come from visuals. And so I don't know if I could get over the fact that it looks almost like human flesh eating it. Well, if the texture is more pineappley than I think it's fine. But I'm all in on the pink stuff,

the rosé, pink lemonade. Like, let's turn everything that Ruby Red a little bit. So it's pretty interesting how they made this thing. I'm wearing a pink shirt as well. Neil is the summer of Barbie. I do have a question for you, Neil. If you could see one other food bioengineered to make it a different color or enhance a color, is there one that you really think that you'd like to see? I have an answer while you think. We're really putting on my side. Go ahead. My answer was grapes, because you have the green grape. You have the purple grape, but I think if you had like some more Skittles flavors in there, what a beautiful like grape bowl. I guess there are some yellowish grapes. Well, there are cotton candy grapes, which has been cited as

very similar in terms of GMO foods like this pink pineapple where they just ratcheted up the sweetness and they released them to a lot of success. So cotton candy grapes, I think you are thrown in on the right produce. I'm going to hit up Trader Joe's after this, see if they have any. Do you have an answer? No. Okay, that's fine. You contributed cotton candy grapes, so we'll allow that. Like different. Maybe mayo would be more palatable if they turned it more to like a barbecue sauce kind of, like a little darker. I think people get turned off by that eggy, I was talking like whole fruit or something like that. They could turn mayo any color they want with just some food done.

Also, yeah, you might straight to jail with that take. I do not want my mayo to be any browner than it is right now. Holy mind. Let's just leave it at that because we're about to go to, we're about to fight. That is our show for today. I hope everyone has a wonderful Thursday. We are almost there to the weekend. We always love getting messages from our audience.

So if you want to share your thoughts on anything you heard of this episode, maybe which food you would turn into a different color. Our email is Morning Brew Daily at Morningbrew.com. Let's roll the credits. Emily Milliron is our editor and producer. Samantha Bellas and Raymond Lue are associate producers. Isabel Wynne is our technical director. Don't worry everyone.

Eugenna is fine. He's just on vacation. Billy Minino is on audio. Hair and makeup is out for delivery. Devin Emery is our chief content officer and our show is a production of Morning Brew. Great show today, Neil. Let's run it back tomorrow. You can't reason with the sun.

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