High-Income Shoppers Flock to Walmart & Jersey Mike’s $8B Bet to Take On Subway

0:00Tuesday on NBC, Jimmy Fallon and Bozma St John host the highly anticipated new competition show. I hired 10 creatives from all walks of life. They will be battling it out to see who can impress the world's biggest brands. This is a huge opportunity. This is the battle for the next big idea. This is not play play. We're spending millions of dollars. I'm so excited to embark on this adventure with all of you. Make the best idea win! On Brand with Jimmy Fallon. Series premiere Tuesday on NBC. Good Morning Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, Jaguar hits the reset button with a completely new identity, but can it save the iconic car maker from obscurity?

0:42Ben, Jersey Mike's just got bought out by private equity, and I hope Danny DeVito gets his bag. It's Wednesday, November 20th. Let's ride.

0:55Breaking news out of the music world. There is a new record holder for the fastest song to reach one billion streams on Spotify. The soaring retro duet Die With a Smile by Bruno Mars and Lady Gaga reached the mark after just 96 days. Toby, how many of those have you accounted for? Neil, I might be losing my fastball. I might have to hang up the mic because I have never in my life heard that song, even for a second. You know what's worse? I have never even heard the second fastest song to reach a billion streams either. That is Seven by Jungkook and Lotto. But then finally, three, four, and five are Flowers by Marley Cyrus, Espresso by Sabrina Carpenter, and Stay by Kid LaRoy.

1:38But I apologize to Bruno and to Lady Gaga because I have just been sleeping on your game. Never heard this song before. This song is incredible. I know you just listened to 10 seconds just to see if you had heard it and you were like, nope, nothing. But definitely listen to it. You're going to listen nonstop like I have. It's a really, really good song. Now a word from our sponsor, Yahoo Finance. Lance. Neil, did I ever tell you the story of the first stock I ever bought? For as much as we hang out, surprised it never came up. It was Sherwin-Williams, the paint company. It was winter at the time, and I thought that buying a paint company before it was time for spring renovations was a good idea.

2:12Okay, I follow logic. The only issue was, I was a bit of a stock market newbie, so instead of buying 10 shares, I fat-fingered it and bought 100 shares. At the time, that translated to about$40 ,000. I did not have$40 ,000 to invest, Neil. Wait, so you bought it on margin? Somehow I bought it on margin and immediately got a notification from my brokerage saying like, hey, you do not have the funds for this. I don't know. It was all a little bit murky and I panic sold most of it right away. But the moral of the story is the place to mess around and test new ideas is on Yahoo Finance, not in your brokerage account.

2:47Yahoo Finance has real-time market data so you can construct a portfolio and a watch list without putting real money on the line. Much more responsible than college, Toby. To avoid mistakes like Toby's, head to yahoofinance.com to play around with their portfolio feature. That's yahoofinance.com. Eczema isn't always obvious, but it's real. And so is the relief from EBCLIS. After an initial dosing phase, about 4 in 10 people taking EBCLIS achieved itch relief and clear or almost clear skin at 16 weeks. And most of those people maintain skin that's still more clear at one year with monthly dosing.

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3:50You should not receive a live vaccine when treated with Epglis. Before starting Epglis, tell your doctor if you have a parasitic infection. Searching for real relief? Ask your doctor about Epglis and visit epglis.lily.com or call 1-800-LILY-RX or 1-800-545-5979. America just had a divisive election, but if there's one thing that unites everyone in our country, it's that we buy stuff from Walmart. Yesterday, the United States' biggest retailer announced a mammoth third quarter and raised its guidance for Q4, the key holiday shopping season. Shares gained about 3 % to hit a new all-time high. They're up more than 63 % this year compared to the S &P 500's 25 % gain.

4:29What's working? Everything. U.S. comparable sales grew 5.3%, crushing expectations of 3.7%. In e-commerce, Walmart is looking like the spitting image of Amazon with online sales up 22%. E-commerce now accounts for 18 % of Walmart's total sales. Plus, people are buying not just things for their day-to-day needs, but also those want-to-have items. After declining for 11 straight quarters, sales of general merchandise, which doesn't include grocery, have increased for the second quarter in a row. Neil, Walmart is looking like Saquon Barkley in the open field ahead of the holiday shopping season. It's got a head of steam and looking to run some people over.

5:08And you know who's driving most of the growth is rich people. The 1 % households making over$100 ,000 a year or more accounted for 75 % of the market share gains that Walmart has made. And this has been a concerted effort by Walmart dating back to 2019 to refresh their items, refresh their stores, to go after wealthier shoppers who might be trading down for more value. They released this premium food brand that we had talked about previously on the show called Better Goods that has things like oat milk, non-dairy ice cream and cardamom jam and curry chicken empanadas. And that's just one part of their strategy to go after those wealthier shoppers who account now for the second biggest cohort of all shoppers at Walmart.

5:57And interestingly enough, that households making$100 ,000 a year are typically Amazon's bread and butter competitors. So you mentioned Amazon. Walmart is infringing. They're stepping on their turf because Walmart has created this really strong online operation that is almost rivaling Walmart at this point. You can now buy online. You can pick up at thousands of stores. They have this program called Walmart Plus where you get same-day grocery delivery. So they really are trying to take business away from Walmart because – Sorry, yeah. Take business away from Amazon because it has been this big push and pull fight.

6:32Walmart's online sales have grew 22 % in the United States in the last quarter. So it's clearly got its sights set on the biggest e-com player as well. So what could slow Walmart's roll? Because it really is on a roll, very Saquon Barkley-esque. Well, tariffs, right? President-elect Trump has pledged to enact sweeping tariffs up to 20 percent across the board, up to 60 percent on China. That that will impact retailers among the worst of any industry. Walmart CFO came out yesterday and said, look, we are not going to be immune to tariffs. We never want to raise prices. But if tariffs do come down the pipeline, it will probably cause prices to go up for consumers.

7:14So the biggest retailer in the United States making this warning, it's probably insulated better than other retailers like Target or smaller ones, but it issuing that warning saying consumer prices may go up if these tariffs do come to pass. And that is certainly going to send a sliver up the spine of a bunch of other retailers as well. But as you mentioned, Walmart is actually decently situated to weather tariffs. About two-thirds of its products are actually sourced within the United States. And remember, a lot of Walmart's business actually comes from its grocery division. When you're not getting, it's not supplying its groceries from China.

7:51That is all sourced more locally. So that is one thing that can, 60 % of its revenue came from the grocery category last year. So potentially it's a little bit more insulated. And one thing that Walmart CFO has said is that their general merchandising products typically have a little bit of a higher markup than grocery. So they have some wiggle room there. If they wanted to choose to not pass on those costs to customers, they could just eat into their own margin a little bit. So they do have some kind of slack to play with, even though that these tariffs are something that they have to kind of broadly say like, hey, prices might go up.

8:25But they are trying to say, we'll do everything we can not to pass those prices on to consumers where possible. Private equity giant Blackstone took a break from rolling up companies to focus on rolls and hoagies. taking a majority stake in Jersey Mike's yesterday that values the sandwich chain at around$8 billion, including debt, onions, and extra olive oil and vinegar. Jersey Mike's is the second largest sandwich company in the U.S. by sales following JustSubway, but it didn't start out that way. Back in 1975, Mike's founder, Peter Cancro, opted to skip college and instead borrowed$125 ,000 at 17 years old with the help of his high school football coach to buy the sandwich shop he had grown up working at.

9:07Fast forward to today, and Jersey Mike's has more than 3 ,000 locations, but Cancro and Blackstone think they can reach 10 ,000 locations eventually. The deal also makes Cancro one of the 500 richest people in the world with a net worth of$7 billion. So not bad for the 17-year-old. Now Jersey Mike's locations make about$1.4 million per unit, more than double that of its rival Subway. So it looks like Blackstone's got themselves a winner. It looks like it. I mean, if I'm Subway, I am sweating. Subway has 37 ,000 locations, so a lot more than Jersey Mike's. But as you just mentioned, they don't make nearly as much on a per store basis.

9:46Jersey Mike's system sales have boomed an average of 24 % over the past five years. The industry average for rivals like Jimmy John's, Firehouse Subs is 5.2%. So whatever Jersey Mike's secret sauce is, and maybe we can get into why it's been so successful, is really leading to tremendous growth. And then getting bought by Blackstone, which has$220 billion, can absolutely put a jet fuel on your growth, and they can get to 10 ,000 locations worldwide from just 3 ,000 now. So I do just want to compare Jersey Mike's and Subway once again. Jersey Mike's is selling for$8 billion with 3 ,000 locations.

10:26Subway sold for$9.6 billion with 37 ,000 locations. So Subway had 12 times more locations, but only sold for about 20 % higher value. So clearly franchisee success, the fact that Jersey Mike's is making$1.3 million per unit is more important than the overall unit count here when you're looking at private equity valuations. And I think Jersey Mike's has had a very successful marketing strategy. People who are in our area and are watching TV might know that Danny DeVito, the actor who is a Jersey native was hired in 2022 to be the company's spokesman. And he does a great job on those commercials.

11:04So a huge win for the Jersey Shore. I think Jersey Mike's, or his name is not Jersey Mike's, is now probably the second most famous person out of the Jersey Shore after Bruce Springsteen. And this has been just a great business success story. I'm sure they will study what Peter Cancro did from buying this chain at 17 years old with a loan from his football coach to grow it into an$8 billion sub behemoth. I thought you were going to say Snooki was the most, second most, or the most popular name from Jersey Shore, but you know, Bruce Springsteen works too. The car brand Jaguar is making headlines for dropping a colorful and confusing new ad to announce its refreshed brand.

11:43The only issue is, as many have pointed out, there's no cars in it. Instead, a group of models dressed in futuristic get-ups and eye-popping makeup, kind of wiggle around to some techno industrial beat in a sci-fi looking landscape. There's an elevator involved. It's a whole thing. But Jaguar is hoping it is the start of a long road back to relevance for the once iconic British brand that has been relegated to a footnote of the modern car industry. Jaguar sold fewer than 67 ,000 cars globally last year, less than 8 ,000 in the US, down 80 % since 2017. So it made the bold choice to switch things up, introducing new minimalist logos and emblems to replace the well-known growling cat badge.

12:24It also dropped a mismatch of new slogans like delete ordinary, live vivid, and copy nothing to try and paint a picture that this ain't your Bond villain's Jaguar anymore. In the lead up to this rebrand, Jaguar cold models, which its CEO said had close to zero profitability until it was producing just one vehicle, the F-Pace SUV, but now it is replacing everything gas-powered and launching three new high-end EVs instead. So they are really starting over from scratch here, Neil. Yeah, this is not a rebrand. This is a refresh. They're starting over from a clean sheet. They want you to forget everything you knew or thought you knew about Jaguar, maybe didn't even know, and adopt their new mentality, their new brand of a modern high-end EV company.

13:09And they are clearly moving upmarket here. So for the past few decades, Jaguar has been competing with BMW and Mercedes. So upper middle class, upper class, but not at that luxury level. They want to compete against the Porsche and Bentleys of the world. And it's fascinating that they just don't sell any cars. They stopped production for multiple years. They're just producing this one SUV that they're going to stop producing next year and then completely restart anew in 2026 with just three EV models, a coupe, a GT coupe, a sedan, and a utility vehicle. We don't know whether that's going to be an SUV or not.

13:46So they're just going very slimmed down. They're not going to try to sell a lot of cars at all and just hope to increase the price point and sell to more affluent customers. One thing execs said about this new image is that they expect to retain just 15 % of their existing customers. So that is pretty insane. There is no real plan B here. They are going all in on plan A. They're going all in on luxury EVs. From the ad perspective, though, a lot of people are saying this is a bit of a head scratcher because if the goal is to sell cars and you show an ad with dancing models, it's going to be hard to maybe sell those cars.

14:21So that was not a very controversial take. But Jaguar said, like, hey, we're trying to break away from the traditional old money aesthetic of Jaguar to this new, brand new, colorful, bold. I mean, it's like a word salad of phrases that they put out in association with this ad. They said 800 people have worked on this rebrand. And the guy who led it joked that we have not been sniffing the white stuff. So really trying to drive up press, really trying to go bold with this. We'll see what the cars actually look like. You were deep in social media about this free brand. What was the general reaction?

14:54The general reaction was like if you are trying to reintroduce yourself to the world, like you shouldn't do it with some esoteric high-level concept. Like you need to just show like, hey, we are still the brand that makes these high-quality cars that you guys have used to know us by. So people are saying that they may have just gone too far down though. like conceptual path, but this is just the start of the rebrand. So maybe they're, they're obviously going to unveil some cars later. Actually, they are unveiling their first car at Art Basel this year in early December. So I guess circle your calendars there.

15:26If you want to see what their team that was sniffing white stuff came up with up next, Northwestern is rethinking what a college football stadium can look like.

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16:34You don't typically associate Northwestern University with college football innovation, but that was before Monday when it revealed the blueprints for a new stadium that could literally change the game. Ryan Field, the same name as the old stadium that's on the demolition block, will cost$850 million, making it the most expensive college football stadium ever built. It is the brainchild of the Ryan family, Northwestern's biggest donors, who will finance the majority of the project with the school chipping in a little. So what's so different about this stadium, you know, besides the NFL level price tag?

17:09Well, it's kind of a stadium for ants with a capacity of 35 ,000 people. It'll be the smallest stadium in the Big Ten and SEC and has fewer seats than almost any major college venue. That's all about giving the fans who do come an experience that's better than TV. For instance, its vertical cantilever design means that the worst seat in Ryan Field is 100 feet closer to the field than the most expensive seat at Michigan's big house, which has that classic bowl structure. Toby, one of the Ryan's sons, Pat Jr., compared existing stadiums to driving a Model T and that his family was building something for, quote, the world you're moving into.

17:47Do you think they're going to accomplish that? Yeah, I mean, it is a bold move to reduce your stadium capacity by 30%. One thing that they did say, though, is that the overall footprint of the property is actually going to be 78 % larger. And that is because they constructed about 200 ,000 square feet of just shops and lounge areas and places where you can hang out around the stadium. Because what they observed when they were trying to set out to build this field is that upper bowl seats are just really not that popular. Yes, they are cheaper, but you don't have a great view of the game. So what they found was that people kind of migrate down to hang out because they want to be part of the game day atmosphere, but they want to be closer to the action.

18:28So they usually go down to the lower bowl or just hang out near the concessions area. So they're like, what if we just got rid of that entire upper section, which is the most expensive to build, the least revenue, and just gave people more places to hang out? So you can see the thought process here of going this smaller, more fan forward experience. So I think it's a pretty good idea. And another major consideration was monetization and revenue maximization, which are very business terms. But that's the way you have to think in the NCAA now with it becoming more of a quasi-professional sport. The previous stadium had none of those luxury boxes, premium seating, clubhouses where you really can charge people a lot of money.

19:10So they just weren't making that much money. But you have to make money as a college athletics department now. It's not even a question because coming through the pipeline is a major NCAA settlement that would allow schools to pay athletes directly. That's House vs. NCAA. It's in the settlement phase right now. If that comes through the pipe, then Northwestern might be on the hook for essentially a$20 million payroll. They need to make money from these stadiums. So what they're going to do is how many college home football games are there out of 365 games? Six days of the year. Six or seven. So they created this stadium to not just host football games, but to host high school championships and to host all of these other sort of events, concerts as well to really monetize a stadium in a way that that they hadn't before.

19:58One thing that you did mention is that a lot of the revenue does come from those premium seats and around 10 percent of the seats in this venue will be higher priced premium areas. But those fans will cover 40 to 50 percent of the revenue each game. So it really is they're they're hoping and praying that these higher revenue seats do cover the rest of the kind of the cost of the stadium. And then one thing that was interesting, the typical old Ryan Field had 47 ,000 seats, but it had one section of premium seating. This year, the Wildcats played their first four games in a 12 ,000-seat temporary stadium, but their athletic director said that they actually made more revenue per game in the 12 ,000-seat arena because of these premium areas than the 47 ,000-seat arena.

20:44So I can't say enough how much it is important that you have these premium sections because it drives so much revenue. It's less fun, though. It is less fun, unless you have the money to buy the premium. Right. Well, what happened with Intuit Dome and Steve Ballmer for the Clippers? I think he did not. He reduced the amount of club seating to create a more fan experience. Then again, he's got more money than God and doesn't really need to drive revenue maximization like Northwestern with that huge payroll bill looming. Let's sprint to the finish with some top news headlines. President-elect Trump continued his hiring spree to fill out his administration yesterday.

21:20He nominated Cantor Fitzgerald CEO Howard Lutnick, the co-chair of his transition committee, to lead the Commerce Department, which is focused on expanding U.S. economic growth and boosting domestic industries. Lutnick was one of those people aiming for the position of Treasury Secretary, so this drops his name out of that bitter contest. Trump also nominated Linda McMahon, the other transition co-chair and former CEO of WWE, as education secretary. And he selected the celebrity TV host, Dr. Oz, to head up the Centers for Medicare and Medicaid. Yeah, Lutnik was aiming for treasury secretary, but getting commerce secretary is probably a good compromise because you still have a role in promoting economic growth.

22:00Dr. Oz might have the most impactful role, though, because he will oversee programs that account for a quarter of the federal budget and also provide health care to around one in two Americans. So he has a big influence over this next administration. And then Lyndon McMahon is interesting, too, because she's been pretty vocal about the fact that higher education has been kind of failing the workforce. So she's been advocating for jobs to require less degrees and then also increase access to technical education, more career focused education. So three vastly different profiles, but three people that Trump kind of thinks are coming from the outside and can help, you know, change things up in Washington.

22:39SpaceX's Starship, the biggest rocket ever created, soared on its sixth test flight yesterday, proving that practice makes perfect or at least less explosions. While the super heavy booster managed to avoid going up in flames this time, its attempt to recreate the chopstick catch it pulled off last launch didn't go to plan. with mission conditions forcing a splashdown in the Gulf of Mexico instead. It did, however, succeed in transporting its payload into suborbit. A single banana made the trip and completed the important objective of the test flight, which was reigniting an engine in space for the first time.

23:13So all in all, a pretty successful mission sans the chopsticks. Yeah, but that was the biggest part. I mean, we all wanted to see the chopsticks, right? We were watching. We were like, and when they said, oh, we're not going to do the catch, that was pretty disappointing. But yes, this is the sixth flight of Starship. It seems to be improving every single time. And there were certainly political overtones there as well. President-elect Trump was in Texas along with his very good buddy, now Elon Musk, to watch Starship take flight. And NASA is very much looking forward to seeing Starship do more of these and complete more successful ones because they're not going to the moon or Mars without Starship being successful.

23:57So it carried its first payload, though, a banana. Banana. A single banana. A single banana. Maybe eventually soon it will carry some humans. You've had the Mile High Club. Now try the Mile High Burger. Delta announced a first-of-its-kind partnership with Shake Shack to serve its burgers to passengers on some flights. This is a bougie airline we're talking about, so the offer won't be available to everyone. It'll be served for people in first class on domestic flights departing from Boston that are at least 900 miles long. But if all goes well, Delta says Shake Shack is coming to more airports come 2025.