Walmart Warns of Tariff Price Hikes & Dick’s Sporting Goods' Risky $2.4B Deal

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 I do win! On Brand with Jimmy Fallon. Series premiere Tuesday on NBC. Good morning for your Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, Walmart is raising prices due to tariffs as the trade war finally hits home.

0:40Then Dick's Sporting Goods is trying to become Dick's Sporting Great, snapping up Foot Locker in a multi-billion dollar deal. It's Friday, May 16th. Let's ride.

0:53Happy Friday. Hope anyone who put a meeting invite on your calendar today realizes their error and cancels it immediately. Okay, here is a question. How much does an Apple Vision Pro cost. The contestants on a recent episode of the Price is Right primetime edition were asked this by Drew Carey, and they answered$1 ,000,$750,$1 ,001, and$1 ,270. That is off by thousands of dollars. As you all know, since you listened to this podcast, the Vision Pro virtual reality headset retails for$3 ,500. And when Carey revealed the true cost, the audience gasped in disbelief. The clip has since gone viral. Toby, what's your takeaway?

1:37My takeaway is I would also stink on the prices, right? So no shade to these people whatsoever, but the hits just keep coming for the Apple Vision Pro. The Wall Street Journal wrote a deep dive on early adopters of the technology who have now had the device for over a year, and it was tough to read. Here are a smattering of quotes from the piece. It's just collecting dutzt. I think I've probably used it four times in the last year. It's still way too heavy. I wouldn't recommend anyone buying it unless you're really rich and you don't know what to do with your money. Despite all of that, though, Apple is still shipping updates to this product.

2:11They just announced a new feature that lets you scroll with your eyes. We'll see if people stop rolling them long enough to actually use it. Now, a word from our sponsor, Iterable. Neil, you ever done the New York City airport mix-up? Toby, no. I actually double-checked my tickets. Well, so do I, but one time I thought I was flying out of JFK. Turns out my flight was at LaGuardia. Nothing worse than rushing to security to find your gate, only to realize you're 13 miles away from where you need to be. What's even crazier is that's how most marketing still works. You think you know where your customer is, but you're showing up in the wrong place at the wrong time with the wrong message.

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3:23And when it comes to checking off coverage, a State Farm agent can help you choose an option that's right for you. Whether you prefer talking in person, on the phone, or using the award-winning app, it's nice knowing you have help finding coverage that best fits your needs. Like a good neighbor, State Farm is there. Walmart, a retailer known for rolling back prices, is going to start rolling them up. On the company's earnings call yesterday, execs said they'll be raising prices on some products by the end of the month, attributing the hikes to President Trump's tariffs on other countries. CEO Doug McMillan said, we will do our best to keep our prices as low as possible.

4:01But given the magnitude of the tariffs, even at the reduced levels announced this week, we aren't able to absorb all the pressure. The higher tariffs will result in higher prices. CFO John Rainey chimed in. the magnitude and speed at which these prices are coming to us is somewhat unprecedented in history. Walmart imports about one third of the stuff you see in stores from abroad, with most of that chunk coming from China. The U.S. and China agreed to significantly lower tariffs on each other at the beginning of the week, but the current rate of 30 % on Chinese goods is apparently still too high for Walmart to eat all those costs.

4:36It is an ominous sign for American shoppers when Walmart, the biggest chain of them all, says it'll have to pass on tariff costs. The company is considered a bellwether for the U.S. consumer since 90 % of the population lives within 10 miles of a store and people from every walk of life shop there. Even with tariffs though, Walmart said its business is chugging along just fine and didn't change or scrap its guidance for the year as other companies have in recent weeks. It's just too big of a ship to be thrown off course by the trade war winds. But still, if the tariffs weren't real yet, they are now.

5:08Yeah, Walmart is just so good at dodging price hikes, which is why it was concerning to hear them saying that they're going to hike some prices. One, it is very good at doing this because it has massive leverage with its vendors. It's just so big. Two, it sources two-thirds of its merchandise in the U.S., groceries making up the majority of that. And three, it can keep the cost of everyday items like those groceries low because it can raise prices on other items like electronics and household goods. So groceries account for roughly 60 % of its business, which is where consumers would feel the most impact, the most bite from those price-backs.

5:42So the fact it can keep those prices in check will probably lead to actually a similar pattern post-2008. Walmart emerged from that financial crisis with an even bigger market share, even more brand loyalty, because it was able to keep those staples low. So we're almost seeing a similar pattern emerge here where keep the everyday items where they're at, but then raise prices elsewhere across the business to offset those. They did talk about what specific categories would be most impacted by price hikes. And those include some of those goods that only come from China, which are electronics, toys, vacuum cleaners, baby strollers and car seats.

6:18That's what John Rainey, the CFO, said would be impacted the most from price hikes. He said those were coming at the end of the month and they would probably continue through the end of the year. Let's talk about retail writ large, because this is a bad sign for any other retailer not named Walmart. They don't have the scale or the leverage or that grocery business to back up their what they sell. So if Walmart says it's going to raise prices, it's the biggest one of them all. Then you're looking at a bunch of other retailers who probably do the same because the dam has broken. We haven't heard from many retailers so far.

6:51this earnings season but we're about to because we got target home depot lows coming up next week and then best buy as well they're way more exposed to china best buy about 55 percent of what it sells is sourced through china because all of those electronics target imports about half its sales uh compared to just one third of walmart so we're uh a little girding ourselves for what those retailers say in terms of price hikes and we did get some government data to parse through u.s retail sales growth slowed in April to just 0.1%. That is coming off of a revised 1.7 % gain in March, which is actually the largest in two years.

7:29But what is that actually showing? It's showing that a lot of these retailers kind of, or a lot of consumers front-loaded those purchases ahead of these tariffs coming in and then started cutting back in April. So we'll see what government data paints a picture of once we also pair it with private companies like Target, Best Buy, etc. Dick's Sporting Goods went on a shopping spree yesterday and snapped up Foot Locker for$2.4 billion, but investors are taking a long, hard look at the acquisition. The idea behind adding Foot Locker into the fold is for Dick's to expand its influence on the sneaker world and also internationally, where Foot Locker has stores in 20 countries.

8:08It also gives Dick's a big leg up in the wholesale market, particularly with Nike. Nike's big partners are Dick's, Foot Locker, and JD Sports, So bringing two of those brands together gives Dick's significant leverage over Nike at a time when its business is especially reliant on wholesale. However, not everyone is sold on the synergies. Dick's stock fell 14 % yesterday as investors digested the big swing. First, there's antitrust concerns from two big sports brands teaming up. And also, most of Foot Locker's store footprint is located in malls, which are more exposed to economic downturns. So, Neil, some see the acquisition as buying low.

8:48Others see it as a strategic mistake. I see a chance to change the name of the combined company to Foot Dick's Sporting Locker. Well, you said investors were digesting this deal, but they spent a lot of time in the bathroom afterward because this did not go down well. The shares were down 14 percent. TD Cowan, an analyst called John Kernan, kind of railed on this acquisition. He called it, quote, a strategic mistake. He said, we've been looking at this particular retail sector for many years. I've never seen a single piece of M &A accrue value to shareholders. I have seen it lose billions of dollars in value for shareholders.

9:24So he was totally against this. He thinks it's a distraction for Dick's Foot Locker. It's in a really bad spot. They're way exposed to moles. And we haven't even talked about tariffs. I mean, we talked about tariffs in the first story. But as it pertains to this story, 99 % of footwear is imported. So you're buying a company that is very much exposed to the trade war. So these guys are looking at it and saying, I don't know what Dix is doing here. Like Foot Locker, yes, it's cheap, but it's cheap because there's a reason for it. Its business is not doing great. Yeah, but you can see where Dix is coming from here.

9:58Foot Locker's client base tends to skew younger. Young kids like going in there shopping for the new cool sneakers. Dick's customer base typically is suburban older people because that's the only place where these giant, you know, sporting palaces can exist. So I think they are being lured by the sirens call of a younger customer base as well. And then also Foot Locker did just recently hire a new CEO from Ulta Beauty back in 2022. And she's kind of expanded Ulta's retail experience online and is trying to apply the same sort of principles to Foot Locker. So there's an e-commerce angle there as well.

10:34So again, you could take the TD cow inside because this is a business that is exposed to a lot of different pressures from tariffs, from just the fact that no one really shops at malls anymore, or you could just see it as buying low. So you do see two sides of the coin here. All right, it's stock of the week, dog of the week time, where Neil and I pick one stock from the week's news who figured out the New York Times Thursday crossword without hints, and one stock who needed a little help to figure out that theme. Neil, I actually lost the pre-show game of onion dicing because my eyes were watering too much.

11:06So you are up first. What's our stock of the week? My stock of the week is Coinbase. The largest crypto exchange in the country has popped 19 % this week after it was invited to join the S &P 500 on Tuesday. It's another watershed moment for the crypto industry's move into the traditional financial world as Coinbase becomes the first crypto company to join the benchmark index. If you're wondering who it's replacing, that would be Discover, which is getting eaten by Capital One in a mega merger that was just approved. Shares of companies typically rise when they're added to the S &P 500 because the funds that track the index have to add the new company to their portfolios.

11:43So it's like joining a club where you're paid to be a member. But as great as the week started off for Coinbase, it ended the week on a couple of major sour notes. First, Coinbase revealed that cyber criminals had swiped some personal data of its users and were demanding a$20 million ransom payment in order to not release that information to the public. Then the New York Times reported that the SEC has been investigating whether Coinbase inflated its user numbers in past disclosures. With the new Trump administration going more lax on crypto, Coinbase thought it didn't have to worry about the feds breathing down its neck.

12:16Apparently not so. So it's been a whirlwind, one step forward, two steps back kind of week for Coinbase. Yeah, when they were added to the S &P 500, we're like, oh, lock for stock of the week. Like, it's fine. And then as the week progressed and these news stories kept dropping, we're like, ah, I don't know. It still is up for the week. So we're like, all right, we'll put it in the stock of the week column. Let's talk about this hack, though. So on Thursday, they reported that cyber criminals based overseas were using social engineering to steal customer data by attacking support agents located overseas.

12:50And they said that the incident could cause up to$400 million to fix. But it's not the worst thing in the world because no passwords and private keys were compromised. And so that's the bread and butter of an exchange like Coinbase. So definitely not a headline that you want right on the heels of you joining the S &P 500, but unfortunately one that they have to deal with right now. And Coinbase stock has been on a true roller coaster over the past few months, right after President Trump was elected, which Coinbase donated$75 million to crypto friendly policy candidates around the country. So they were a huge corporate player in the election.

13:28So they shot up 31 % the day after the election. But this spring, it's been a different story with the market overall not doing so well and the legislation that was supposed to come for crypto just kind of stalling in Krongus. They fell 26 percent in February, 20 percent in March. And they thought that all of these investigations that the SEC was doing into them during Biden administration were going to go away. But then we found out that they're still being investigated this for perhaps inflating user numbers. They said that they stopped using this particular metric two and a half years ago and that it is a carryover from the previous administration.

14:04But clearly they're not, you know, running free wild like they thought they were in this administration. All of this legislation that they thought would get passed to be more lax regulatory policies toward them just haven't come to fruition. We really should have made Coinbase both the stock of the week and then come out of break and say, hey, never mind. It's also our dog of the week. It could have been both. Up next, let's actually do our dog of the week. Does it ever feel like you're a marketing professional just speaking into the void? But with LinkedIn ads, you can know you're reaching the right decision makers, a network of 130 million of them.

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15:42You should not receive a live vaccine when treated with EBCLIS. Before starting EBCLIS, 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. United Health Group has been an absolute lock for Dog of the Week as things went from worse to worser for the nation's biggest healthcare company. First, longtime CEO Andrew Witte stepped down for personal readings, leading to a double-digit drop in the stock. Then the Wall Street Journal reported that the DOJ had opened a criminal probe into the company for possible Medicare fraud.

16:18That came on the heels of investors suing UHG this month for allegedly downplaying the business impact of the December killing of UnitedHealthcare CEO Brian Thompson. It's all led to a stock route almost unfathomable for a company of UnitedHealth's size and scope. Over the last month, the stock is down 53%, shaving off more than$300 billion from its market cap and leading to a growing crisis of confidence over the most influential player in American healthcare. Neil, this company was once the most influential stock in the Dow Jones by waiting, but now it has fallen to 16th. Pretty shocking. This company is imploding right now.

16:54There's a criminal investigation into possible Medicare fraud, a devastating hack last year that's still feeling the effects from into its payment system. There's antitrust investigations into its past acquisitions, the murder of one of its top executives last December, an actual business model that's hurting from much higher costs. I mean, you just go down the line and you talk about the new CEOs coming in, Stephen Hemsley, he's getting paid$60 million in an equity award to come in and fix it. It almost doesn't seem like enough because those problems are so many. It's lost so much in value. Truly one of the, like, something we just haven't seen before in many, many years for a company of this size to fall so quickly.

17:35Yeah, it used to be everyone knew UnitedHealth Group because it just dominated the Dow Jones so much. Because remember, the Dow Jones is price weighted, which is just an interesting way to form an index at all. And UnitedHealth always had the highest share price. So it always, however it went, basically the Dow went. But for most of its history, it just doesn't really go that much of anywhere because it's just this big hulking monolith that, you know, it's just always been what it's been. But now it is just so numerous, the amount of issues that it has faced. Like we've talked about it multiple times And we're like, we have to do it for dog of the week.

18:07It's simply wiped out half of its value, which is just doesn't not something you see at the upper echelons of the Dow Jones, at the upper echelons of the health care business at all. Just pretty wild to watch happen in real time. So what is it getting investigated for? Well, we don't know exactly because the investigators haven't commented. But this is typically how fraud works in Medicare Advantage. So UnitedHealth runs this big Medicare Advantage business. And in this business, companies get paid more for taking care of sicker patients in the programs, and rates are determined by the number of diagnoses that you submit.

18:42So there is a perverse financial incentive for companies to say the patients are sicker than they are. And that has led to previous investigations leading to investigating how taxpayers are on the hook for billions of dollars in extra payments because these companies are portraying their patients as sicker than they actually are because of this incentive structure. So we don't know exactly what's going on with this particular probe into UnitedHealth Group, but that's typically how Medicare Advantage fraud has worked. For this next story, I haven't seen a supposedly fake document make this many waves at Harvard Law since Mike from Suits faked his diploma.

19:20Harvard Law has been sitting on a supposed copy of the Magna Carta that they bought for just$27.50 decades ago. But it turns out that copy is actually an extremely rare original that dates back to 1300. Even more wild was how someone eventually made the discovery. David Carpenter, a professor of medieval history at King's College London, was just sifting through old internet archives looking for copies of the important document when he pulled up Harvard Laws and did a double take. First, he was surprised that he had found one of the most rare documents and most significant documents in world constitutional history.

19:55But secondly, he added he felt astonished that Harvard had been sitting on it for all these years without realizing what it was. For those of you who nodded off during eighth grade history class, the Magna Carta is regarded as one of the earliest declarations of human rights, established the principle that the king is not above the rule of law and has gone on to form the backbone of constitutions globally. So the fact that just one of seven copies dating back to this 1300 version somehow went undetected until now is wild to think about, especially when you consider who is in custody of the document.

20:28Neela, I'm about to start leafing through my own files to see if I've missed anything. I was going to say, got to get David Carpenter to start looking around my apartment because this thing is extremely valuable. They bought it for a little over$27. Well, how much does it cost now? What is the market price for an original Magna Carta? There are only 24 originals out there in the world. The last Magna Carta sold was purchased for$21.3 million in 2007 by the billionaire David Rubenstein, who now owns the Orioles. So they are sitting on a big chunk of change, and it might be the biggest bargain buy in history.

21:06I'm trying to think of anything else, but to buy something for$27, for now it to be worth over$20 million, I don't think you would have made that much money if you bet on Leicester City to win the Premier League back when they did. Maybe just early on Berkshire Hathaway. But I did want to know, how did Carpenter just know immediately that this was the real document? I mean, apparently there's a few telltale signs, but one of the biggest ones was the style of handwriting and the big E at the start of a first line, which apparently is if you are trained in this sort of thing. It's just like a neon green flashing light that says, hey, this is a real copy because only this particular period was written or copied in this particular handwriting.

21:43So I can't imagine going through and like doing the double take, zooming in that moment. It must have just been like pure electricity going through his body because apparently he was looking at a copy. But he's like, whoa, whoa, whoa. This is the real deal, baby. And you know who's doing a victory lap is librarians because they do the dirty work of digitizing all of these archives. So the librarian at Harvard said behind every scholarly revelation stands the essential work of librarians who not only collect and preserve materials, but create pathways that otherwise would remain hidden. So kudos to librarians.

22:12You do so much work under the surface, and you apparently made Harvard a lot of money, except they did say they're not going to sell it, and they'll just put it on display for the public. Very cool story there. Okay, let's sprint to the finish this Friday with some final headlines. New Jersey transit riders are used to dealing with disruptions and delays, and that was when people were driving the trains. Now they are not. Starting this morning, just after midnight, 450 engineers for the nation's third largest transit network went on strike. the first New Jersey transit strike in more than 40 years over a wage dispute with the agency.

22:46With no trains currently running, as many as 350 ,000 New Jersey commuters are now in the lurch, and a contingency bus plan to bring people where they need to go will only handle 20 % of daily ridership. Toby, this is going to be chaos. Yeah, it's going to be chaos, especially when you look at the concert schedule coming at MetLife Stadium. First, there's a Shakira concert on both Thursday and Friday, And then also Beyonce and The Weeknd are coming to the venue over the next three weeks. So unless you iron it out, those Uber prices are just going to go nuts because it's reliably the only way you can actually get to the stadium at that point.