Morning Brew Daily
Walmart Cashes In on Affordability Crisis & Critics Warn Against AI Toys
21 Nov 2025
Chapter 1: What does the latest jobs report reveal about the economy?
Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, the jobs report finally came in. Better late than never.
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.
Chapter 2: How is Walmart responding to the affordability crisis?
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's 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 50 cringy, maybe AI generated Slack statuses than have to use Teams even once. So we still have that going for us.
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That's usbank.com slash split card. 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 1st. So we're just starting to get the trickle of numbers now that D.C. is open again.
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Chapter 3: What concerns have been raised about AI toys for children?
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 rates 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 cut, which helped 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 were 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 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.
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Chapter 4: What record growth did Amtrak report this year?
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 dress 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 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, 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. as well.
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Chapter 5: Why is Bath & Body Works facing challenges in the current market?
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 data 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 a Home Depot can't necessarily pull it off in the same breath, which is why 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 ChatGPT 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 from the Singapore-based company Folotoy, 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.
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Chapter 6: What are the projections for the 'Wicked: For Good' movie opening?
Yesterday, the nonprofit children's safety organization Fair Play 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 the cuter the package, the more the risk rises because you think it's a teddy bear, you think it's a children's toy.
And yet, if you have one of these frontier models in there without the proper guardrails established, 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 everything from...
Smart TVs to children's toys, the risk goes up that one of these models is going to go, not even rogue, just not be installed with the proper amount of guardrails for the environment in which it's being deployed.
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 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 chat bots 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 saying 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
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 and come back with our stock in Dog of the Week.
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Chapter 7: How are inflation and consumer spending affecting retail?
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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 stank. 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%.
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