Walmart's pulling an Uber

MARKETS

• U.S. markets: Indexes ended down to kick off a massive week of earnings and economic data. All eyes are on Apple's report today (after the bell).
• U.S. economy: Inflation hit the Fed's target rate of 2% in March.
• Earnings today: Apple, Pfizer, Merck, BP, Mondelez, Aetna.

RETAIL

Walmart Thinks Globally, Selling UK Grocery Business

Walmart's pulling an Uber.

It's handing over its UK grocery business, Asda, to rival grocer Sainsbury, making off with a 42% stake and $4 billion in cash. That'll leave Sainsbury with majority control in (what would be) a $68.9 billion revenue-generating behemoth—aka, the largest grocer in the UK.

From Walmart's POV: International revenue is just one-fifth of its $500 billion annual intake. If it hopes to boost that number, battling for brick-and-mortar market share abroad won't help. But investing in e-commerce might.

That's why it's close to a $12 billion bid for a majority stake in Flipkart...

...you know, India's $15 billion e-commerce company, started by two ex-Amazon employees.

Here's why Walmart wants a piece:

• The Indian online retail market hit $20 billion last year. It's on pace for $35 billion in 2019.
• Flipkart is the market leader, controlling 35%.
• Meanwhile, Walmart only has 20 stores in India.

A deal could close by June, so long as Flipkart's open to an offer

But some think it might be.

Why? Because..."the enemy of my enemy is my friend." Amazon's gaining ground on Flipkart with 27% market share. And it's investing $5 billion to bridge the gap. So Flipkart might turn to Walmart—a company with the industry know-how and capital to back Bezos down.

Or at least try to...

The Crew's take: It's only the 3rd quarter and Walmart's lining up in shotgun. Asda has been Walmart's cash cow since it coughed up $10.8 billion for the chain in 1999. It's trading in consistent cash flow for the high-stakes Indian e-commerce arms race. Risky, but necessary.

+ Walmart's trying to back out of its Brazil business—a market it's been in since 1995.

+ How to mess with Jeff Bezos: Back in 2014, Flipkart paid for billboards in an airport and on highways to taunt Bezos as he entered India to talk e-commerce investments.

RESTAURANTS

McDonald’s Took a Bite Out of Q1 Earnings

And guess what? It didn't feel awful afterwards. Same-store sales grew 2.9% in the U.S. and 5.5% internationally thanks to big appetites from the Brits and Germans.

Mickey D's menu for success
Fries: It's not exactly a French bistro, but McDonald's (+5.77%) is getting consumers to spend more. It can thank gourmet burgers ($6-7 a pop) and a successful $1, $2, $3 value menu.

Burgers: This month, McDonald's is swapping out frozen quarter-pounders for fresh beef to meet U.S. customer demand for higher quality food.

Milkshakes: CEO Steve Easterbrook is on a mission to stay ahead of restaurant trends. That's meant 1) investing in mobile ordering, 2) partnering with delivery companies like Uber Eats, and 3) spending $2.4 billion to renovate stores.

Breakfast? Still needs work. U.S. customer visits dropped as McDonald's competes with Burger King, Dunkin' Donuts, and other rivals over who's got the best omelette.

ENERGY

Marathon Petroleum Is on an M&A Sprint

Marathon Petroleum (-8.01%) decided, "If you ain't first, you're last," buying Andeavor (+13.03%) for $23.3 billion. That would push Marathon past Valero to become the No. 1 oil refiner in the U.S.

Getting on the same page: Oil refineries do the dirty work of converting crude oil into petroleum products we actually use (like gasoline).

So what does being first actually mean for Marathon?

• Handling 3 million barrels of oil a day, Marathon would control 16% of all U.S. production.
• It would have 16 refineries across the country and 7,800 branded gas stations. Marathon-owned Speedway is already the country's No. 2 convenience store chain...

Any antitrust issues? Regulators might let this deal slide, since there's little geographic overlap between east coast-focused Marathon and west coast-based Andeavor.

Zoom out: Things are trending up for U.S. energy companies in a hyperactive M&A season. You've got surging domestic oil production thanks to shale, increasing demand, and higher oil prices.

ENTERTAINMENT

Not Even Thanos Could Ruin Disney’s Day

How'd Avengers: Infinity War perform its opening weekend? It Hulk Smashed expectations, collecting a record high $258 million in the U.S. and $640 million globally. Slide over Fate of the Furious.

But we shouldn't be surprised. The Marvel Cinematic Universe has raked in $15 billion since 2008 (Disney bought it for $4 billion in 2009). Not to mention, Disney's a well-oiled opening weekend machine: it now holds 9 out of the 10 spots for the biggest box office debuts in North America.

And there's more action in Disney's world

ESPN will start producing live sports shows and other content exclusively for Twitter (+4.52%). Which is our roundabout way of saying, "The same way Walmart's locked-in on e-commerce, Disney's locked-in on streaming."

It just released ESPN+ for $4.99 per month, and it's got a streaming service preparing for takeoff.

Bold prediction: Thor takes over for Scott Van Pelt and Twitter's (+4.52%) stock skyrockets.

WHAT ELSE IS BREWING

• The White House extended the deadline for steel and aluminum tariff exemptions by 30 days.
• WhatsApp co-founder Jan Koum is leaving Facebook (-0.92%) amid reports he clashed with the company's privacy policies.
• Sprint shares fell 13.7%. Some people think there's no way this T-Mobile merger goes through.
• The DOJ gave its closing arguments in the AT&T-Time Warner merger trial.
• The U.S. Treasury borrowed a record high $488 billion in Q1.
• Amazon (-0.41%) is adding 3,000 jobs to its Vancouver office (soon to be multiple offices) by 2022.

THE BREAKROOM

THEY SAID IT
"Equity trading: 15-20 years ago we had 500 people making markets in stocks. Today we have three."—Goldman Sachs President and (most likely) Lloyd Blankfein's successor as CEO, David Solomon.

"So who's going to buy all of our hair gel?"—Walgreens, probably.

AROUND THE WORLD
The Australian government said it would dedicate nearly $400 million to protect and save the Great Barrier Reef. Researcher Terry Hughes said, ‘good luck.'

Strap on your economic goggles: The Great Barrier Reef supports 64,000 jobs in Australia and contributes $5 billion to its economy.

BRAIN TEASER
As Mr. Smith's birthday approaches, he starts to collect leaves. On the first day of the month he collects one leaf, on the second day he collects two, and so on. So by his birthday he'll have collected 276 leaves altogether. On which day of the month is Mr. Smith's birthday?

(Answer located at bottom of newsletter)

Breakroom Answers