In this episode of MarketFoolery, Chris Hill and Motley Fool contributor Brian Feroldi go through the latest news from the markets. There is a massive retail partnership announcement. They've got some news and announcements to share from the energy and food industry, and much more.
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This video was recorded on June 15, 2020.
Chris Hill: It's Monday, June 15. Welcome to MarketFoolery. I'm Chris Hill. With me today, our man in Rhode Island, it's Brian Feroldi. Brian, good to see you.
Brian Feroldi: Chris, how's it going?
Hill: It's going pretty well. We've got some restaurant news; we've got some energy news. We're going to start, though, with retail, because Walmart (WMT 2.48%), which last time I checked was already doing pretty well with e-commerce, Walmart is partnering up with Shopify (SHOP 3.19%) to expand its third-party marketplace site. And you know, you and I were talking earlier today, this seems like a good move for both; it's the proverbial win-win. But in terms of stock prices, it's moving Shopify up about 5% today.
Feroldi: Yeah. These are two companies that are just having stellar years. And when you see yet another announcement like this comes out of Shopify, it's easy to understand why. So, Walmart is essentially opening up its Walmart.com platform, which as you highlighted, is just seeing explosive growth. Last quarter, [laughs] 74% sales growth over the prior year. So, they're really having a big success, but they're going to allow Shopify's users, and there's more than a million of them right now, to essentially seamlessly offer their products and sell them directly on Walmart.com.
So, I think this is a big win for both companies, it certainly broadens Walmart's product offering, and also gives them a nice PR win for supporting small- and medium-sized businesses. Obviously, a big win for Shopify, further solidifying them as the go-to place if you are a small or medium-sized business and want to beef up your e-commerce capabilities.
And Walmart did say, they are initially limiting this. Their plan is to have 1,200 businesses started up by the end of the year, but could easily see this being expanded down the road.
Hill: Yeah. And it's -- you know, I was thinking about this earlier, because every once in a while, we'll get an email from listeners or comments in, you know, The Fool Live chat, that kind of thing. And every once in a while, you get something along the lines of, "Why do you guys like Shopify so much?" And, you know, it's deals like this. [laughs] It's just their focus, their ability to continue to execute. And this is a massive partnership, you know, in the wake of the recent partnership they did with Facebook as well. And, you know, Shopify is, sort of, establishing itself, as you indicated, as sort of like this go-to platform.
Feroldi: To me, the thing that put Shopify on my radar was when several years ago, Amazon essentially said: "We give up, we can't compete [laughs] against Shopify. If you're on our platform, we suggest you transition over to Shopify." There's no bigger boost in the arm or vote for another platform than Amazon throwing in the towel against you in the e-commerce world.
And to your point, we've also now seen Facebook announcing a big partnership with them. Etsy also has deals with them, and now Walmart. So, Shopify is clearly the top dog, and that's why we like it, Chris.
Hill: Doug McMillon, the CEO at Walmart, it's pretty remarkable the methodical investments he and his team have made in e-commerce over the last, you know, five, six years after a really good stretch of time when you [laughs] could have made the case that they really should have been doing this a lot sooner. But Walmart, I'm impressed by how they have made up for lost time.
Feroldi: Yeah, the same, I agree with you there. They should have made those investments 15 years prior, but, hey, they did [laughs] recognize, "We're behind here and we really need to spend big." The big move for them was when they bought Jet.com a couple of years ago, which had a whole bunch of people, including me, scratching my head. But they really have turned that into a big success. So, good for Walmart, they recognize e-commerce as the future, and they're investing accordingly.
Hill: Let's move on to energy, and BP (BP +1.76%), formerly British Petroleum, in the news because BP is going to take a writedown in the current quarter. And keep in mind that [laughs] their next earnings report is coming out the first week of August, but they've already come out and said, we're going to have a writedown of up to $17.5 billion.
Maybe we shouldn't be surprised by this. The thing that caught my eye was, I don't know if "bearish" is the right word to use, but just how -- yeah, for lack of a better word, how bearish BP is on oil, just in terms of part of this announcement, in terms of their writedown was, sort of, their forecasts for what they see for the next 30 years in terms of oil production, the price of oil. And we've talked a lot about various businesses and various industries accelerating innovation. And if you're looking for a silver lining for BP, I suppose it's the fact that they're saying, this is going to accelerate us moving away from fossil fuels even more than we had initially planned.
Feroldi: Yeah. Even prior to this announcement, they said that they wanted to be a net-zero company between now and 2050. So, kudos to them for realizing that essentially the writing is on the wall and green energy is the future. But, yes, them taking up to $17.5 billion writedown, and amazingly, stock only down a few percent today. So, Wall Street wasn't exactly taken off-guard by that.
But the reason for that writedown is they essentially said they now predict that Brent crude oil futures prices are going to average $55 per barrel between 2021 and 2050. They're also now predicting natural gas prices will be about $2.90. Those are down about 30% from their prior outlooks. However, they're also significantly above where those prices are trading today. And as part of this, they're also cutting 10,000 jobs.
So, the new CEO, Bernard Looney, which is the name I just love by the way, says that this is a move to reimagine energy and reinvent BP. And at least they're taking it seriously, and they seem to be at the forefront, as at least from the big oil companies, of recognizing that the future is forever changed because of coronavirus.
Hill: I suppose, if you're looking at whether it's BP, Royal Dutch Shell, ExxonMobil, Chevron, I mean, I've heard -- as I have been, during the pandemic, been consuming more CNBC -- I've heard more people making the case for buying these stocks and a lot of it is tied up in the dividends that they pay. But I think if you're looking for dividend-paying stocks, I don't know, it seems like Johnson & Johnson or 3M would be more worthy of your consideration if you're looking for dividend-paying stocks than any of the oil companies out there.
Feroldi: Yeah, we've seen numerous oil companies slash their dividends down to the bone. And so far, BP has not. In fact, this company actually increased its dividend in February. Its former CEO, Bob Dudley, increased the dividend and then retired. [laughs] So, he gave a gift to shareholders before he left. And BP has not made any sort of announcement about this recently, but when you basically say, yes, $17.5 billion of assets need to be written down, and Wall Street is pricing your stock so that your dividend yield is 10%, that's the market's way of saying, expect a big dividend cut in the not too distant future.
Hill: Yeah. It was surprising, maybe I shouldn't be, but it was surprising to see that dividend increase on his way out the door. But, you know, in a way, we've talked over the years on this show about how CEO succession is tough. And it's all the more remarkable when not only is there a smooth transition to the corner office, but the subsequent CEO is able to follow on the success of the previous CEO. I'm not talking about, like, cleanup jobs. I'm talking about, like, oh, the CEO does pretty well, hands the reins off to someone else, and that person sort of builds on that success. This seems like one of those moves where Dudley was basically, like, "I'm going to do this on my way out the door and I'll leave it to you to cut it if you feel like that's the right move, but I'm not going to be the bad guy here."
Feroldi: Yeah, exactly. That's my read, too. And you know, Bernard Looney certainly has his work cut out for him. The next, let's say, 10 years are going to be extremely challenging in the fossil fuel industry, so navigating those waters is going to be hard.
Hill: Let's wrap up with Burger King, because why not, it's Monday, we'll wrap up with Burger King, which is part of Restaurant Brands International (QSR 0.88%). Burger King announced they are launching a breakfast sandwich made with the meat-free Impossible sausage. Burger King has that partnership with Impossible Foods. This is going to be a nationwide addition to the menu; they've been testing it out in January.
And I think if watching the fast-food and fast-casual industry has taught me anything, it's that, almost every time, I mean, it's 90% or higher, when a restaurant comes out and says, "We're testing this," it's just a matter of time before they roll it out nationally. So, you know, we can't be surprised that this is coming. But this will be interesting to see what this does, both in terms of Burger King and in terms of Impossible Foods, which is a private company. We talked about them in the wake of the Beyond Meat IPO last year. And thinking, gosh! if you're Impossible Foods, you have to be looking [laughs] at what Beyond Meat stock price has done and you got to be eager to get in there. Their CEO seems to be very measured in terms of not wanting to rush into the public markets, but what do you think about this move?
Feroldi: I love it. I love it, I love it, I love it. I am speaking as someone that pretty much never eats at Burger King ever, and yet, this past weekend I was out with my son at a baseball practice. Baseball is back in our town; kind of a big deal. And it was around 11 o'clock in the morning, I saw a Burger King and said, "Who wants an Impossible Whopper for lunch?" [laughs] All of my kids raised their hands. So, we went out and bought four Impossible Whoppers. And I actually had [laughs] two Impossible Whoppers for breakfast this weekend, because why not? So, Chris, I for one really look forward to giving the Impossible Croissan'wich a try. And have you tried these foods?
Hill: So, last year Dunkin' came out with their partnership with Beyond Meat. They had like a Beyond Sausage breakfast sandwich that I tried at the Dunkin' Donuts right across the street from Fool HQ. And the Beyond Sausage part of it was pretty tasty. My problem [laughs] was the actual Dunkin' contribution, which was this incredibly bland English muffin, that I thought, "Boy! Just strike up a deal with the people at Thomas' English muffin and get those in there, substitute those in there."
But it tasted good, good texture. It was one of those things where I just thought: "My problem with this sandwich is not the Beyond Sausage. That's actually the best part of this sandwich. If they can fix the rest, I'll try this again."
Feroldi: That's super-surprising coming from you, because I think of you as Mr. Dunkin' Donuts, just like I'm supposed to be, being in Rhode Island, although I'm a Starbucks guy myself.
But, yeah, listeners, if you haven't tried these foods, go give them a try, they are delicious in my opinion. And Burger King has also been struggling with the breakfast foods, obviously, so many people are not commuting in ways that they used to, so their breakfast sales are down. I think this announcement really has the potential to amp that up. And they're also doing a promotion where they're giving away 100,000 of these things if you use the mobile app to make an order. So, hey, there's a chance you can get one of these things for $1.
Hill: Well, and that's a smart move on their part, because we've seen this with Starbucks, with all kinds of fast-casual restaurants: The more people you can get downloading your mobile app, the more you can get them in that routine, making it convenient. That to me is the smartest part of all of this, is -- maybe not the smartest, but from a promotional standpoint, I think it's a really smart move.
You know, Restaurant Brands International, they've got Burger King, they've also got Popeyes, which has been on fire lately. They've got Tim Hortons, which has not been on fire lately. And Restaurant Brands reminds me a little bit of Yum!, you know, where [laughs] Yum! Brands have got KFC and Taco Bell, which are usually the bright spots in their quarterly report, and then they've got Pizza Hut, which is just dragging its feet quarter after quarter.
And I don't know, I mean it will be interesting to see how long Restaurant Brands continues to hold on to Tim Hortons, because that thing just continues to be the albatross around this stock.
Feroldi: Yep. I speak from experience there, Chris, Tim Hortons tried to make a big push into the New England area five or six years ago, tried encroaching on Dunkin' Donuts territory, and while Starbucks was successful, Tim Hortons admitted [laughs] defeat and went back to Canada it seems like. So, yeah, that's a concept that doesn't seem to translate across the border as well as they were hoping.
But I like their strategy of having multiple brands, and as you mentioned with Yum!, if one's not doing great, another can, kind of, pick up the slack. But I, for one, have been eating more Burger King than I ever have [laughs] in my life recently. So, my hat's off to the management team for signing up with Impossible Foods so early.
And, Chris, the day that Impossible Foods comes public, I'm going to buy some, no matter what the valuation. It's one of those few companies where I think the future's so bright that I just want to be a shareholder myself.
Hill: Yeah, it is going to be interesting to see when they do that. I think, in part, because of what we've seen with the pandemic and the -- not complete stop of IPOs, but a major slowdown in IPOs. I don't think it's going to be this year. But I think if they can build on the success of this partnership, then going into 2021, it could set them up in a really strong way.
You just reminded me of years ago, maybe eight years ago, I was back up in Maine, saw a Tim Hortons, and pulled over because I just -- partly I had done the double-take of: "Holy cow! There's a Tim Hortons and I'm not in Canada." And I said, "Well I got to try this." And boy! Was it not good. [laughs] The doughnut, not good; the coffee, not good. And I just thought: "Oh, OK, yeah, Dunkin' is going to be fine in New England. If this is what Tim Hortons is bringing to the table, they're going to be fine."
But, you know, as Brian said, drop us an email. [email protected] is our email address. You know, we always love boots-on-the-ground research. So, to the extent that people want to take a page out of Brian's book and test drive the Impossible Croissan'wich, we want to know what you think. So, [email protected].
Brian Feroldi, good talking to you. Thanks for being here.
Feroldi: Chris, thanks for having me.
Hill: As always, people on the program may have interests in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear.
That's going to do it for this edition of MarketFoolery. The show is mixed by Dan Boyd, I'm Chris Hill, thanks for listening, we'll see you tomorrow.
