Morning Brew Daily - Walmart Cashes In on Affordability Crisis & Critics Warn Against AI Toys

Episode Date: November 21, 2025

Episode 719: Neal and Toby talk about the latest jobs report…that reports September numbers? That’s because of the government shutdown. And it’s a mixed bag, of course. Then, Walmart, America’s largest, and seemingly most reliable retailer reports strong earnings as consumers prioritize affordability. Meanwhile, AI toys are a thing and parents are being warned to keep their kids away from them. Plus, Amtrak reports a record year and Bath & Body Works CEO thinks the company stinks. Finally, ‘Wicked: For Good’ aims for the biggest opening of 2025. Learn more at usbank.com/splitcard  Get your MBD live show tickets here! https://www.tinyurl.com/MBD-HOLIDAY  Subscribe to Morning Brew Daily for more of the news you need to start your day. Share the show with a friend, and leave us a review on your favorite podcast app. Listen to Morning Brew Daily Here:⁠ ⁠⁠https://www.swap.fm/l/mbd-note⁠⁠⁠  Watch Morning Brew Daily Here:⁠ ⁠⁠https://www.youtube.com/@MorningBrewDailyShow⁠ Learn more about your ad choices. Visit megaphone.fm/adchoices

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Good morning, Brew Daily Show. I'm Neil Fryman. And I'm Toby Howell. Today, the jobs report finally came in. Better late than ever. Then Walmart is crushing it, which is actually a bit of a warning sign for the economy. It's Friday, November 21st. Let's ride.

It's almost time to set your away message before heading home for Thanksgiving, and Slack has a few ideas to pumpkin spice it up. Yesterday, our colleague Jen noticed that Slack is now suggesting punny seasonal statuses that alert your coworkers. You're not at your computer because you're doing holiday things. Here are just a few of Slack suggestions for an out of office message, busy eating all things pumpkin, harvesting notifications, and my personal favorite, feasting on my backlog. Toby, which one of these are you tossing up? I mean, if you see my status say turkey trotting to my next meeting or on a crescent roll, just know I have been

kidnapped and being held against my will. Still, I'd rather use food. 50, cringy, maybe AI-generated slack statuses than have to use teams even once, so we still have that going for us. And now a word from our sponsor, US Bank. Picture this. It's movie night at your place. You've prepared everything perfectly from snacks and drinks to the movie selection. There's just one problem.

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USBank.com slash split card. 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, or get $50 off a select Weber Spirit grill and bring big flavor to your backyard. Then set the scene with Hampton Bay string lights that bring it all together. Shop spring backyard days for seven days at the Home Depot. Now through May 6th. Exclusion supplies to you home. The monthly jobs report came in yesterday, and it was a surprisingly solid one.

The U.S. economy added 119,000 jobs higher than expectations, and a rebound from the 4,000 jobs lost the month before. Oh, there's one thing I should mention. This was the jobs report for September when the leaves were still on the trees and your football team still had a chance of making the playoffs. Economic data releases, including this jobs report, were postponed because of the government shutdown that started October. first, so we're just starting to get the trickle of numbers now that DC is open again. Wall Street and the Federal Reserve are certainly happy to have the jobs numbers finally released because they've been tasked with making high-stakes decisions without key data to go off. However, they probably won't read too much into this September report because,

unlike San Giovese, you don't really want your economic data to be vintage. It's nearly Thanksgiving, and this is a what have you done for me lately, economy, whose dynamics could have changed a lot in two months. Making things even trickier, the foggy conditions from the show, shutdown are still lingering because of data collection issues, the Labor Department is going to lump in an October job snapshot with the November jobs report on December 16th. That date happens to be after the next Fed meeting in early December when central bankers have to decide whether to cut interest rates again. They're not going to have any fresh jobs data to inform that choice,

just the moldy leftovers. This is like when your ex texts you right before Thanksgiving and says, hey, I got feelings for you. And you're like, this is data I needed earlier. but at this point, it's completely useless to me. It doesn't clarify anything. That being said, it was, not only was it late, it was also a bit of a confusing jobs report if you look at the numbers themselves because it did kind of contradict claims

that the labor market was softening because 119,000 jobs, that is a lot of jobs added in the month of September, but then you did see the unemployment rate tick up as well. So those two pieces of data were kind of contradicting themselves a little bit. The reason why the unemployment rose, and it's not necessarily as bad as it maybe initially looks. It's just more people entered the labor force.

More people are looking for jobs, which is hypothetically a good thing as well. So not only was it confusing, it was also late. So what do you do? You try to look forward to the next piece of data, which isn't necessarily coming. We're kind of flying blind, you know, whatever metaphor you want to use. You're driving without headlights in the dark right now. That's how the Fed feels. Yeah, let's talk about the unemployment rate.

So it ticked up from 4.3% in August to 4.4%. in September, that is the highest unemployment rate since October 2021. This is the data point that the Fed is going to look at most closely when it comes to whether they are going to cut interest rates at the next meeting in December. As I mentioned, the next few jobs reports are going to come December 16th a few days after they have to make this decision. So this is the last piece of data. They're going to go off of.

But there is huge divisions in the Fed right now. They're at each other's throats, which you never see among central bankers. They can't make a decision about whether to cut interest rates or not. And they're looking at, on one hand, they're looking at a deteriorating labor market. And at the other hand, they're looking at higher inflation. Those forces are opposing each other. One indicates that you should hold interest rate steady. The other suggests that you should cut interest rates.

So that unemployment rate ticking up is a bit of a warning sign. But when traders were looking at whether the Fed is going to cut at its December meeting, it looks like this jobs report led to a lower likelihood that they are going to. going to cut, which help stocks kind of tank yesterday, which we'll talk about a little bit later. If the numbers are looking confusing, maybe the better thing to do is ignore the government data that is late and actually just look at what's happening in companies in corporate America. And we have seen a spate of layoffs ticking up. I mean, UPS and Amazon, we're among several companies to announce these very large layoffs. So you could point to that and say, hey,

if we're just ignoring what's going on with the data coming out of the government, these people are clearly laying off. These companies are laying off people right now. So maybe that's a better data point. And then you look at other companies that reported earnings recently that we spoke about, Home Depot, Target. These both lowered their full year expectations, saying that shoppers are pulling back a little bit. So maybe it is just a thing where government data is not the number one data point that you use to make these decisions, look at what companies are saying, and they are reporting some softer environments out there. When the going gets tough, the tough go to Walmart. Faced with high prices and stretched budgets, Walmart's earnings yesterday revealed

a growing number of Americans, including middle and upper income households, are visiting Wally World. It saw an increase in customer trips to stores and shoppers spending more on each visit, which led to an overall U.S. sales increase of 4.5%. Specifically, it was the basics that helped Walmart dominate. As pocketbooks have been stretched, its CFO said, you're seeing more consumer dollars go to necessities versus discretionary items. Walmart noted that it is seeing a restrained spending among low-income shoppers, reflected in faster growth for sales of things like grocery and health items versus broader merchandise categories.

The other side of its business, e-com, is doing just fine too, reporting 27% growth, which may have gone to its head a little bit because it appears Walmart fancies itself a tech company now. The company announced that it will move from trading on the New York Stock Exchange to the more tech-focused NASDAQ next month, as it tries to frame itself as a tech forward competitor to Amazon. Neil, we just talked about how Target is getting killed recently as it struggles to compete on value. Walmart, on the other hand, is killing it because it represents value.

There was a very stark contrast between those two earnings calls. Yeah, not just those two companies, but we saw that through these retail earnings this week, a bunch, two different camps form. On the one hand, you have Target Home Depot and Lowe's. All of those companies lowered their guidance for the rest of the year. those are not necessarily known as discount retailers. On the other hand, Walmart, TJX, and Ross Stores, whose literal motto is dressed for less. All of those three companies raise their outlooks for the rest of the year. So this is what's going on in retail right now. If you're not offering customers value or

discounts or, you know, helping them get through these inflationary times, then you're not doing well. And it was very stark to see these two camps form this week. Walmart just has a great value proposition. And they can execute on that as well. their rollback strategy is, which is when they reduce prices, they have about 7,400 rollbacks currently active. Over half of those are in the grocery aisle as well. And over 2,000 of those eventually became permanent price cuts this year. So amongst all this conversation about tariffs raising prices,

Walmart can point to the date and show, actually we're cutting prices on a lot of things. That is something just their sheer scale and their supply chain expertise allows them to do. Someone like Target or, you know, a Home Depot can't necessarily pull it off in the same breath, which is why, you know, Walmart, Walmart has just always represented value, and they're showing it in their price rollbacks as well. Yeah, prices at Walmart rose 1.3% over the quarter, which is very tame and much slower than overall inflation, which came in

at 3% for September. So in the broader economy, people are paying 3% more. At Walmart, you're just paying 1.3% more. And that is the value proposition that they're offering to customers. They're also killing it in e-commerce. E-commerce was up 27% in the most recent quarter. they can say that they can deliver something to you within hours to 95% of U.S. households. So they're in the same level right now as Amazon in terms of building out that infrastructure to deliver things to people in just a few hours. They clearly think they are because it was the headline of like Walmart is turning itself into a tech company, but it thinks it's investing in AI.

It's investing in these delivery operations. So why not trade on the NASDAQ? It's more symbolic than anything. Nothing really changes about. it, except for which exchange is getting the fees. But it is just a signal to the world saying, like, hey, we want to be forward thinking this is where we see a growth potential. And we did see 27% growth when you're talking about Walmart scale is significant. Okay, folks, here's a riddle. What happens when you put chaty BT into a plush teddy bear sold to kids? You get a toy that talks

about how to find knives in the house, gives instructions on lighting matches, and engages in conversations around sexual fetishes. The Kuma Bear, an AI-enabled toy for from the Singapore-based company, Folo Toy, was taken off of shelves this week after researchers from the public interest research group found it would say all those things and more showing how the growing category of AI toys could put small children at great harm.

The report said, we were surprised to find how quickly Kuma would take a single sexual topic we introduced into the conversation and run with it simultaneously escalating in graphic detail while introducing new sexual concepts of its own. In response, the company is conducting an internal safety audit, according to its CEO, while OpenAI, which supplied Folot toy with Chatchapit software,

suspended it for violating its policies. The BDSM Teddy Bear debacle comes at a time when more advocacy groups are warning parents to stay away from these things. Yesterday, the nonprofit children's safety organization Fairplay issued an advisory endorsed by more than 150 experts urging adults to avoid buying AI toys for kids this season. And we thought iPads were bad. I mean, AI toys are the wild west when it comes to where AI is being deployed, across the economy right now because, you know, the cuter the package, the more the risk rises

because you think it's a teddy, but you think it's a children's toy. And yet if you have one of these frontier models in there without the proper guardrails establish, this is when you see it going to places that you don't want children's toys to go. So as AI starts to infiltrate, you know, everything from smart TVs to children's toys, the risk goes up that one of these models is going to go, not even road, just not be installed with the proper amount. of guardrails for the environment in which it's being deployed in. But this is absolutely happening. Mattel just signed a big partnership with OpenAI to support, quote, AI-powered products and

experiences based on Mattel's brands. Mattel is one of the biggest, if not the biggest toy company in the world. And it's leaning into AI toys. So this is absolutely coming. And now you have all these children's safety groups saying, whoa, whoa, whoa, look at what's happening here. This was just one test that we did. And we found this teddy bear saying all kinds of crazy things.

we have to take a step back and see what kind of harm this is going to place on children and what it's going to do to their development. I mean, we already have seen research coming out recently that says that chat GPT and other chatbots are harming mental health of teens. And these are kids who are, you know, in their teenage years, compare that to these toys are being marketed to kids as little, as young as two years old. So there are a lot of ethical issues to work out here. Yeah, not only is the fear that the models will go rogue and start staying inappropriate, things, but there is just the other conversation is should they be developing kinship with these AI generated models? So every time you go deeper into this issue, it's not solved right now. I do think

it's like the next frontier of children's safety is how do we regulate and how is the best way to deal with introducing these AI companions to your kids. Maybe we might see some, you know, as the data comes out, we might see some more scrutiny on this and some more regulations around what kids are allowed to buy and talk to. All right, we're going to take a quick break. can come back with our stock in Dog of the Week. Head to the coast in Abercrombie's latest summer drop. It's short season, and their new C-Fade shorts add the perfect wash look to your fit. They're so easy to throw on and pair with everything in your closet.

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celebrating its 40th anniversary. You in? Must be 21 to enter. It's Friday, and you know what that means. Stock of the Week, dog of the week, the segment where Toby and I pick one stock that's giving thanks, and another that's giving stink. Not my best work.

I won the pre-show Guess That Song's original key contest, so I get to go first. And my winner is Amtrak because more people than ever are booking their ticket to ride. In its annual report titled A Year of Records, the U.S. train system revealed that it is a punching bag no longer. A record 34.5 million passengers rode Amtrak last fiscal year of 5% from the year before and a new high watermark. Operating revenue rose even more 9%. And while Amtrak is still losing cash, it's losing less than before at about 600. million, which is pretty good because remember, this is American trains we're talking about, and the bar is low. Amtrak expects to reach operating profitability by 2028, so about when your

webpage will load when using their Wi-Fi. Amtrak's growth is a testament to Toby's strategy at the Crabs table. You got to spend money to make money. The rail service received $22 billion from the Biden administration in 2021, and it's been putting that funding into rehabbing aging infrastructure and opening new routes across the Midwest and South. Last year, it invested. a record $5.5 billion in capital projects, a 24% surge from the year before. Toby, it seems like things are getting on the right track. They are getting on the right track. This was a year and a recent timeline where Amtrak kind of had their Super Bowl moment, which was when the government shut down and all the plane turmoil was going on and flight volume was being cut. A lot of people were forced

to turn to the train system to get around. I mean, I think back to Marjorie Taylor Green, who has voted against infrastructure bills that support building more trains in the past, riding a train during this time and saying it was actually a great experience. So not only is it a good year for Amtrak in terms of profitability in terms of ridership, but it also just got a lot of national attention when that specific moment in the government shutdown was happening. Yeah, in the past few months, they've done some pretty cool things. They rolled out the new Acella trains for the Northeast Quarter, which is their busiest route. And those assailers are supposed to be the fastest trains that we have in our system.

even reach high-speed rail status, like a bunch of other countries. They restarted service between New Orleans and Mobile, Alabama for the first time in 20 years. They're seeing huge growth in Borealis service between Minneapolis and Chicago. They are trying to get this new tunnel between New Jersey and New York happening. There's some conflict with the federal government about whether they have the $16 billion to play with. So there does seem to be a little momentum at Amtrak's back. I thought it was interesting, too, that they are seeing the same trends towards premiumization that the airline industry is.

They're saying our business class seats are selling more frequently and are driving more of our revenue than ever before, which is exactly what we are seeing in the air as well. So people just want big, comfy seats in quiet places, no matter if you're on a train, plane, or automobile at this point. My dog of the week is bath in bodyworks because no amount of sandalwood scented candles can mask the stench of the quarter they just reported.

They cut their full year guidance after they adopted a strategy that, frankly, did not work. Under a previous CEO, they got sidetracked on non-core products in order to try and drive growth, then subsequently lost market share in those core products as well. Consumers in stores often describe the expanded assortment as overwhelming and confusing, but under new CEO Daniel Heaf, a new strategy is emerging. Cut non-core categories like hair care and men's grooming and devote more energy to the moneymakers of body care, home fragrance, and soap.

Neil, in addition to the misapplied focus, Heath also roasted his company, service calling stores slow and inefficient. He admitted that, yeah, the current consumer environment is tough, but a lot of the mistakes the company is facing are self-inflicted. Those mistakes are reflected in the market, too. Bath and BodyWorks stock cratered 25% yesterday and is now down nearly 60% on the year. P.U. Heaf went total scorched earth against previous management in a way that I don't think a lot of new CEOs have done. And he said a few things that I'm going to adopt as my life mantra. He said, adjacencies. He's talking about the new product categories.

He said, adjacencies are never quite as adjacent as people think they are. And then he said, laundry is a very different market with different dynamics. And, you know, I think about that all the time as I stare into my hamper. There is a lot of different dynamics going there. And you can't just extend into laundry so quickly. That is something you have to do with care. Maybe you shouldn't even do it in the first place. And they also did something that retailers sometimes fall into the trap of doing,

which is you adopt a promotion strategy that eventually erode your brand. value over time because, you know, once you discount that candle to $5.95, if you jack the price back up to 10, people are anchored to that original price, and it's very hard to go in the other direction. So if you over-promote or you do too many sales, you start to actually eat into your ability to maintain your margin. So that was one thing. And then two, he called out, we are not attracting Gen Z at this point. We are not attracting any younger consumers, which is totally right. Think about a social first company like a glossier, for example, who is doing fragrances like perfumes or something like that or skincare. They are very social focus.

Bath and Body Works does not conjure up images of a digital native strategy or anything like that. So they have to figure out how to attract a younger audience because right now most of their customer base is aging out and are not necessarily someone who you can point to in the market and say, hey, we are growing here. We are a growing brand because young people love us. That is not something you associate with Bath and Body Works. Let's sprint to the finish with some final headlines. Breaking the stock market. If you opened your brokerage account yesterday morning, you were likely bathed in a lovely green glow

as stocks opened the morning higher. But come afternoon, shield your eyes because things took a turn for the red. Invideo was a perfect encapsulation of the roller coaster ride. After jumping 5% in after hours, trading and advancing 2% higher in the morning, it completely Uno reversed and somehow finished the day down a 3%. The sentiment driving Nvidia influenced the whole market.

Despite the biggest company in the world reporting strong earnings, investors still worry beefy valuations and insane spending could signal an AI bubble. To put things in perspective between 4 a.m. on Wednesday and 2 p.m. on Thursday, Nvidia added, then lost $450 billion in market cap in both directions, a $900 billion swing in just 36 hours. Neil, the word I would use is confusing. There was no obvious news that caused a plunge of almost 5% for the NASDAQ 100. And yet here we are verging on a Liberation Day era price swings.

It was crazy whiplash over the past 24 hours. Here we were yesterday morning saying, Nvidia quell fears of an AI bubble. And then that did not turn out to be the case at all. So there could be lingering concerns over an AI bubble that drew this huge swing downward. but also that jobs report did come out for the first time in a few months. And it showed the unemployment rate taking up to 4.4%. And also, it raised expectations that the Fed would stay put at its December meeting and not

cut rates, which could have fueled this negative sentiment. But overall, this market, the vibes are bad. And this is like paddling your canoe upstream. Bitcoin is another asset that is just absolutely creating right now. It fell to $86,000. Its lowest level in seven months. It's right now on pace for its third worst month this decade. It was crazy. I mean, look at the charts yesterday. It almost looks inexplicable. It looks like something broke in the market because all of a sudden it just completely reverses and goes downward, which people did start to try to read the tea leaves a little bit and figure out why the heck this happened. They were trying to put blame on all the reasons that you mentioned, but there wasn't anything great out there. So people are kind of grasping with straws just because it was so sudden and so intense. And I look this morning, features are down as well so we could be in for another wild ride.

For our final headline, Wicked for Good, is expected to dominate at the box office. The second installment of the movie musical is projected to make between $150 and $180 million at the North American box office this opening weekend. To put that in perspective, that's about $179 million more than Sidney's recent biopic opened to. Should it debut on the higher end of the spectrum, it would surpass a Minecraft movie as the biggest opening of the year and shatter the 2024 debut of the prior Wicked, which brought in $112 million over the same window.

Now, one potential hurdle standing in Alphaba in Galinda's way. The second half of the musical is a little bit darker and has fewer memorable songs than the first half. Still, Neil, I looked at tickets to go see it tonight. Completely sold out. It's Gail Linda, Toby. The first Wicked was the biggest Broadway adaptation ever at the box office. 756 million dollars globally.

Huge movie. And this one does look to be bigger. that opened to 112 million and the projections that you just mentioned are above that. There's so much marketing. I was looking at Lyft for the past few days and it was Glinda's bubble that I had to figure out whether they were cars. So they've gone all out making this movie an event. It looks like the box office is going to reward them for that.

The reviews, though, you said the second act is not as spicy as the first and that is true and that may be reflected in their reviews because they are mixed. A lot of reviews said that they are, this movie was not as good as the first. Doesn't have the same magic. So it was a mixed bag. Some said it was great. Some said it was middling. Some said it was, there should only have been one movie.

Tomato Meter right now has it at 69%, which is not so nice, but people are going to go anyway. I have never seen the musical. That's my admission right here. And so the fact that I said the second part is a little darker. I'm literally just, that's hearsay at this point. So I'm going to go try to see it. I mentioned you. I'm like, should we try to see it this weekend?

you're like, dude, there's no tickets. What do you mean? So maybe we'll have to travel back to New Jersey or something where there's larger Cineplexes with a little more room for us. All right, that is all the time we have. Thanks for starting your morning with us and have a wonderful Friday and an even better weekend. Our live holiday show is just a few weeks away, December 4th in New York. So do not wait another day and grab your tickets now. All you need to do is head to the show description or our Instagram for the link and we can't wait to see you there. For any feedback on this episode, send a note to Morning Brewers. at MorningGrew.com or DM us on Instagram at MB Daily Show.

Let's roll the credits. Emily Milliron is our executive producer. Raymond Lute is our producer. Our associate producers are Olivia Graham and Olivia Lake. Hair makeup is dancing through life. Devin Emery is our president and our show is a production of Morning Brew. Great. Show today, Neil. I wish you all well. Wireless can feel like a world of traps. But not with visible. It's one-line wireless with unlimited data and hotspot. Powered by Verizon for $25 a month.

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