Walmart’s Warning Sign & Unusual AI Data Sources

**John Carteau** (0:00)
This episode is brought to you by Charles Schwab. Timing the market, fighting inflation, managing risk? Financial decisions can be tricky. Investing isn't just math, it's psychology. Your neurons are playing favorites, and the market doesn't care. Financial Decoder, an original podcast from Charles Schwab, can help.
Join host Mark Reapy as he breaks down practical strategies to help overcome the mental traps that may affect your investing decisions.
Listen at schwab.com/financialdecoder.

**Ann Berry** (0:32)
Pop Mart, the Labubu craze is fading, but can the company's Twinkle Twinkle collection be its next shining star? Spirit Airlines, the defunct carrier is now a source of data for AI training. We have the latest on the surprising ways that Big Tech is feeding its models.
Walmart, the retail bellwether's rare sales miss just set investors nerves on edge. We break down what it tells us about consumer sentiment. For Thursday, August 20th, it's Brew Markets Daily and I'm Ann Berry.
More market details to come. But first, Walmart, the bellwether stock getting hit today after the world's largest retailer delivered a rare sales disappointment. The Arkansas giant is usually viewed as one of the most reliable reads on US consumer spending and today, investors did not like what they saw. That's despite actually a lot of good news in the earnings report. Walmart posted adjusted earnings of 81 cents a share, beating expectations and the company nudged its full year outlook higher, something that usually prompts a round of applause from the market. But the company now expects adjusted earnings of $2.80 to $2.87 a share. Good, but it seems not good enough because the problem is that US comparable sales rose 2.6% in the last quarter. Positive, yes. Growth, yes. Actually pretty decent. The problem is it was well below the roughly 3.8% growth that Wall Street had been expecting. And as Walmart's first same store sales missed versus expectations in more than five years, the stock fell sharply following the report down about 8%.
Well, the concern is what Walmart is seeing from shoppers. Management says consumers are pulling back on more discretionary purchases. That's as higher fuel costs squeeze household budgets. Traffic growth at Walmart's US stores slowed to 1.5% compared to double that in the previous quarter. And those higher fuel costs are hitting Walmart's own cost structure. The retailer now expects fuel expenses to come in about $2 billion above its original forecast. Although, frankly, this is just my own view. The fact that the giant was able to bump guidance despite that speaks to its operating chops.
There are other significant bright spots in the report today too. Walmart Connect, the in-house digital advertising business, grew 43%, notably a much higher margin business than selling groceries and merchandise where you're eking out cents on the dollar. E-commerce sales also jumped 24%, which tells us that shoppers are still spending, but they're becoming more selective. So we're going to keep on watching because if Walmart sneezes, much of the consumer sector tends to catch a cold. We're coming up in a moment, a spin through the headlines that are moving the markets today, including an executive departure that sent CrowdStrike's shares tumbling. But first, this episode is brought to you by Charles Schwab. Timing the market, fighting inflation, balancing risk. No one says financial decisions are easy. In fact, it's the exact opposite. Financial decisions can be really tricky, and it's often your own thinking that can lead you astray.
Financial Decoder, an original podcast from Charles Schwab, can help.

**John Carteau** (3:49)
Join host Mark Reapy, head of the Schwab Center for Financial Research, as he offers modern strategies to help combat the wait, what in your head?
Mental traps like overconfidence, loss aversion and recency bias may cloud your investing decisions. When you understand these patterns, you can take steps to make better informed financial decisions. Listen at schwab.com/financialdecoder or wherever you get your podcasts, that's schwab.com/financialdecoder.

**Ann Berry** (4:17)
Let's take a quick spin through some of the headlines that have been moving the markets today. Keeping first with earnings results, shares in John Deere gained more than 6% after the heavy equipment maker reported better than expected quarterly results.

**John Carteau** (4:29)
The company got a boost from tariff refunds. It also saw a strength in its construction and forestry business where sales rose 18% from a year ago. But Deere's agricultural division, its biggest business segment, saw sales fall 6%.
The cost of a bushel of corn is relatively low right now. And generally, as crop prices fall, so does farm income, which means less money to spend on machinery upgrades.

**Ann Berry** (4:51)
But Deere said it expects 2026 to mark the bottom of the agricultural equipment cycle and raised the low end of its income outlook. Over now to Alibaba, known as the Amazon of China, its US listed shares trading up a percent despite the tech giant reporting a 75% fall in quarterly profit.