🛍️ Walmart and Target’s pile problem

…and Paris Hilton’s metaverse mansion party [Disclosures](   How low can they go? (Bob Riha Jr./Getty Images)   Last Week’s Market Moves   Dow Jones 33,761 (+2.92%) S&P 500 4,280 (+3.26%) Nasdaq 13,047 (+3.08%) Bitcoin $24,128 (+3.61%) Dow Jones 33,761 (+2.92%) S&P 500 4,280 (+3.26%) Nasdaq 13,047 (+3.08%) Bitcoin $24,128 (+3.61%) Hey Snackers, This young bear had a wilder weekend than you: an intoxicated brown cub in Turkey was rescued after apparently [eating]( large amounts of hallucinogenic “mad honey.” Don’t worry: she’s chillin’ now. The S&P 500 surged 3.3% for the week, rising for the fourth straight week — its longest rally since November — as investors welcomed hope that inflation has peaked. The pace of inflation cooled in July, largely thanks to lower gas prices, and wholesale prices [fell]( for the first time in two years. Btw... Do you want to start getting Snacks daily? Or prefer to unsubscribe? Manage your subscription preferences [here](. Piles Walmart and Target could take a big profit hit as they aggressively discount to become “guest-relevant” Earnings in Aisle 5... America's favorite retailers are expected to report this week, and it’s looking like a rough quarter for [Walmart]( and [Target](. High food and gas prices are causing Americans to cut back on discretionary splurges (think: TVs, bikes, air fryers). Now retailers have billions’ worth of unsold inventory (picture: a mountain of hoodies). - Walmart cut its annual profit forecast in July and [laid off]( hundreds of corporate workers this month. America's largest retailer missed profit expectations in Q1 as inventory surged 33% from last year. This latest quarter could be worse. - Target issued a profit warning in June, saying earnings would take a short-term hit as it cancels orders and slashes prices to get rid of inventory. In Q1, Target shocked investors with a big profit miss as consumers scaled back on pricier items. Ignoring the decorative pillows... and turning your back on the pajama rack. Like Target, Walmart’s been on a discounting binge to unload stuff like sweatsuits, patio furniture, and blenders. Those were hot commodities mid-pandemic, but consumers are shunning them now: - Clothes down, food up: The pace of inflation slowed last month, but grocery prices continued rising from June, and consumer confidence hit another low in July. - Not saved by the bell pepper: Groceries account for over half of Walmart’s sales (and a good chunk of Target’s) but they’re less profitable than apparel and electronics. THE TAKEAWAY Being behind the curve is costly… It’s not just inflation hitting earnings: retailers have too much of the wrong stuff and not enough of the right stuff. [Gap]( has piles of unsold hoodies and leggings, while customers want cocktail dresses and office blazers. By acting fast to shed undesirables, retailers can make room for products customers actually want (like: groceries, school supplies). But being “guest-relevant” (as Target’s CEO put it) could take a few quarters — and that’s hurting profits now. Zoom Out Stories we’re watching... Dark clouds… US trade officials have [halted]( imports from the Xinjiang province as part of a crackdown on China’s human-rights abuses of Uyghur Muslims and other ethnic minorities. Xinjiang produces over 40% of the world’s polysilicon, a key component of solar panels. Now panels from companies like [Jinko Solar]( and Trina Solar can’t enter the US, and delays are expected to last at least six months. Trade troubles might spread beyond solar, since a quarter of the world’s tomato paste and 13% of its wind turbines also come from Xinjiang. A-list after-party… in the metaverse. Crypto winter hasn’t stopped celebs from bringing the virtual heat. Last week, mega-fluencer and entrepreneur Paris Hilton [debuted]( her virtual Malibu mansion on meta-gaming site Sandbox (think: digi-martinis by the meta-pool). The Sandbox has 2M users and 300 partnerships with big names like Snoop Dogg, Tony Hawk, Gucci, and [Adidas](. These “phygital” deals could help celebs and brands profit from fresh forms of entertainment (picture: a Snoop meta-concert). Still, this year virtual-land prices are down 85%. Events Coming up this week... Weekend treasure hunt… down the $7 jeans aisle. As inflation squeezes wallets, bargain-seekers are boosting sales at discount legends [Ross]( and [TJX]( (which owns TJ Maxx and Marshalls). Last quarter treasure-hunters helped fuel TJX's 13% sales growth. Off-price chains have also [benefited]( by selling backlogged merch from larger, oversupplied retailers. Still, apparel prices are up 5% from last year and consumer spending is slowing. We’ll see whether the bargain boost is intact when Ross and TJX report this week. Mixed signals… Economists expected unemployment to jump as interest rates rose, but the US economy added twice as many jobs as expected last month, finally recovering all jobs lost in the pandemic. But jobless claims also rose to their highest level since November last week, and mass layoffs are getting more common — a sign job growth may wane. The Fed wants the labor market to cool to curb #flation (just not too much). Economists are anxiously waiting to see if Thursday’s jobless claims rise again. ICYMI Last week's highlights... - [WeCrash]( Investment giant [SoftBank]( lost a record $23B last quarter as its tech investments — from [Uber]( to [WeWork]( to Didi — plunged. Now it’s selling big tech stakes to curb losses. - [#Ad]( [Lyft]( is launching an ad biz (feat. in-car tablets and in-app Oscar Mayer Wienermobiles) to monetize users’ eyeballs as ride-hailing rebounds. Ads could help it gain an edge on larger rival Uber. - [Streamy]( [Disney+]( added an expectation-crushing 14.4M subs last quarter, while Mickey’s parks and resorts posted record profits. But Disney’s streamers (Disney+, Hulu, ESPN+) are still losing billions. What else we're Snackin' - [Green]( On Friday the House Dems passed a massive $430B climate, health, and tax bill (confusingly dubbed “The Inflation Reduction Act”). President Biden’s expected to sign the historic bill into law ASAP. - [Privacy]( [Facebook]( said it complied with a search warrant and provided a teenager’s private messages to Nebraska police. The young woman and her mom now face felony charges in connection with an alleged illegal abortion. - [Dormy]( College students are using student loans to cover their housing costs as average rent prices spike 15% from last year. Waiting lists for on-campus housing at some schools are thousands of students long. Want your Snacks daily? The Daily Newsletter Get fresh takes on financial news every week day. Try a sample: 📡 [Starlink’s subsidy snafu]( • Aug 12, 2022 🏰 [Disney’s streaming surprise]( • Aug 11, 2022 🍟 [USA chips]( • Aug 10, 2022 [Subscribe to the Daily]( Snack Fact Of the Day Over a third of US teens say they’re on social media “almost constantly,” with YouTube being the leading destination [Read more]( This Week - Monday: Earnings expected from Nu Holdings and Tencent Music - Tuesday: Earnings expected from Walmart and Home Depot - Wednesday: Earnings expected from Cisco, Lowe’s, TJX, and Target - Thursday: Jobless claims. Earnings expected from Ross, Kohl’s, and Estée Lauder - Friday: Earnings expected from Deere & Co. and Foot Locker Authors of this Snacks own: shares of Walmart, Uber, and Disney ID: 2379820 Robinhood Snacks newsletters reflect the opinions of only the authors who are associated persons of Robinhood Financial LLC (Member [SIPC]( and do not reflect the views of Robinhood Markets, Inc. or any of its subsidiaries or affiliates. They are for informational purposes only, and are not a recommendation of an investment strategy or to buy or sell any security, digital asset (cryptocurrency, etc) in any account. They are also not research reports and are not intended to serve as the basis for any investment decision. Any third-party information provided therein does not reflect the views of Robinhood Markets, Inc., Robinhood Financial LLC, or any of their subsidiaries or affiliates. All investments involve risk including the loss of principal and past performance does not guarantee future results. [Robinhood Terms and Conditions]( • [Disclosure Library]( • [Our Editorial Principles]( • [Contact Us]( • [FAQ]( [Manage Your Subscription Preferences]( To unsubscribe from all commercial emails, click [here](