Will Walmart Gobble Up Other Retailers’ Holiday Sales?
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It's the tale of two retail giants. Target earnings disappoint a day after Walmart posts standout results. Walmart has been so good at drawing customers in that Target might be something like a collateral damage to Walmart's success. And a little-known Utah drone company wins a huge Pentagon contract. What would this mean for other U.S. drone manufacturers? ♪

Plus, more Americans are struggling to pay their car loans. So why isn't Wall Street worried? It's Wednesday, November 20th. I'm Traci Hunt for The Wall Street Journal. This is the p.m. edition of What's News, the top headlines and business stories that move the world today.

We'll begin with developments in Ukraine. For the first time, Ukrainian forces today fired British-made storm shadow missiles into Russian territory. It's the second time this week that Kyiv has hit targets inside Russia with newly authorized Western missiles. The Biden administration earlier this week gave authorization for Ukraine to use the U.S.-made Army Tactical Missile System, or ATAKOMS.

Kyiv, for months, has been seeking authorization to use long-range missiles to strike Russia. But President Biden, wary of escalating the conflict, withheld permission. But the arrival of some 10,000 North Korean troops in Kursk has shifted the calculus.

Defense Secretary Lloyd Austin today also said that the U.S. would provide Ukraine with anti-personnel mines, another measure the U.S. has previously resisted. Austin said the mines are safer for civilians than the ones Ukraine is currently using. They're fabricating their own anti-personnel landmines right now.

The landmines that we would look to provide them would be landmines that are not persistent. You know, we can control when they would self-activate, self-detonate, and that makes it far more safer eventually than the things that they are creating on their own.

Meanwhile, the U.S. military has selected little-known Utah manufacturer Teal Drones to provide thousands of small surveillance drones. That's according to a regulatory filing and an Army document viewed by the Wall Street Journal. Teal was founded a decade ago by a teenage drone racer and has almost no record as a defense supplier. This purchase could give the company roughly $260 million in revenue in the coming years.

WSJ reporter Heather Somerville covers technology and national security, and she joins us now. So, Heather, what does the military hope to do with these drones? What's the plan?

The plan for these drones is to provide them to platoons of soldiers in the army so that they can put them in backpacks and take them out and use them for surveillance and reconnaissance. And the idea is that they want to arm as many soldiers as possible with these drones so that they're basically part of their kit that they carry out and have with them at all times. These drones are actually very similar to what Ukrainians have deployed in vast numbers in the war with Russia.

Is this a sign that the Pentagon is maybe taking a page from Ukraine? The drones that this company, Teal, makes are similar in some respects to what Ukrainians have been deploying. But what's probably more important is that Teal took lessons from Ukraine to harden their drones against electronic warfare.

And so a fair conclusion is that the U.S. military is recognizing in its selection of Teal that the drones that it needs to be buying are drones that will perform in electronic warfare environments because electronic warfare is going to be an inevitable element of wars going forward. So is the U.S. military turning now into a regular customer of American drone manufacturers?

While this Army program that Teal Drones is now a part of is a really big deal for the U.S. drone industry because of the size of the program the Army wants,

wants at least 11,700 drones, if not many more. It's worth pointing out that it's really an exception to the way the U.S. military works. The Defense Department is a very, very, very small customer of U.S. drone manufacturers. It's less than 2% of total annual drone sales in the U.S. that go to the Pentagon. It's also worth noting that

The concept for arming U.S. soldiers with these type of backpackable drones dates back to 2009. It's kind of a war on terror idea that the Army thought, we need to get on this. And it was a long process. And here we are 15 years later with a final result.

That's way too long. That is very, very, very long. And that's not going to work to keep these drone companies alive and to arm the U.S. military with the technology it needs going forward. That was our reporter, Heather Somerville. Thank you so much, Heather. Thanks, Tracy.

The bipartisan House panel probing sexual misconduct allegations against former Representative Matt Gaetz declined today to release its report on President-elect Donald Trump's pick for attorney general. This sets the stage for an effort by Democrats to force a vote on the matter. The report was expected to be damaging to the 42-year-old Gaetz. Coming up, Target's holiday season starts with a lump of coal in its stocking. That's after the break.

Okay, I have to tell you, I was just looking on eBay where I go for all kinds of things I love, and there it was. That hologram trading card. One of the rarest. The last one I needed for my set. Shiny like the designer handbag of my dreams. One of a kind. eBay had it, and now everyone's asking, ooh, where'd you get your windshield wiper? eBay has all the parts that fit my car. No more annoying, just beautiful.

Whatever you love, find it on eBay. eBay. Things people love.

Target shares plunged after the retailer today posted disappointing quarterly results and lowered its profit and sales goals for the year. But it's a different story at Walmart, which yesterday reported comparable U.S. sales that rose 5.3% in the three-month period ended October 25th compared with a year earlier. Joining us now is Heard on the Street columnist Jinju Lee.

Jinju, both these retailers serve similar consumers, people looking for a good deal. Why are their earnings reports telling such different stories? Walmart has a natural advantage here because the mix of things they sell is more heavily weighted towards necessities like groceries, whereas Target has a higher mix of sales in discretionary categories like toys, apparel, home products.

And these days, consumers are really getting very choosy about where they spend money on, and they tend to be focusing on necessities.

What's interesting is that Walmart might also be taking away market share from dollar stores. Dollar stores are sort of places that lower income consumers go to for a quick in and out experience because the stores are much smaller. But Walmart seems to be winning that market share as well.

So what's gone wrong with Target? Based on what some analysts have said, one of the strategic missteps could have been locking up too many of their items to prevent theft. And

And then others have also pointed to perhaps not enough newness or excitement in some of their core categories like clothing and home products. Also, the larger thing might be that Walmart has been so good at drawing customers in that Target might be something like a collateral damage to Walmart's success.

If we were in an environment where consumers were feeling great, then all retailers would be winning. But because consumers are so selective about where they spend these days, it's inevitable that only a few retailers will be winning. Jinju Lee is a columnist for the Wall Street Journal's Heard on the Street. Thank you so much, Jinju. Thank you. U.S. markets were mixed. The Dow closed 0.3% higher while the S&P 500 was flat. The Nasdaq composite slipped 0.1%.

NVIDIA's sales surged in its latest quarter and profits nearly doubled, a sign of the strength of an artificial intelligence boom that has made the company the world's most valuable. Sales were $35.1 billion, the company said today, up by 17% from a year prior and ahead of forecast in a fact-set survey of analysts. Profit reached $19.3 billion, also ahead of Wall Street forecast. ♪

Arcego's capital management founder, Bill Huang, today was sentenced to 18 years in prison. A New York federal jury this summer found Huang guilty of 10 counts, including securities fraud and market manipulation. Huang has denied wrongdoing, and his attorney has indicated that Huang intends to appeal. ♪

More Americans are falling behind on their car payments, but Wall Street isn't worried. Investors are snapping up bonds tied to car loans, betting that a strong U.S. economy will keep rising delinquency rates in check. According to data from JPMorgan Chase, sales of bonds backed by their riskiest auto loans to subprime borrowers hit nearly $40 billion this year through October, up 17% from all of 2023.

And delinquencies on auto loans have been creeping up since the economy began reopening after the pandemic, hitting 3.8 percent in June. According to data from the Federal Reserve, which measures payments that are at least 30 days past due, that was the highest level since 2010. Joining us now is reporter Vicky Wong. So, Vicky, can you just tell us how these bonds work?

These bonds are called asset-backed securities. Basically, these are car loans. It can also be credit card debt or mortgages. These loans are put together and then they are sliced and diced into different trenches or levels. And the higher levels of these asset-backed securities can get

priority or be the first in line to receive payments. The lower level debt of asset-backed securities debt tend to get lower ratings, but because the higher risk embedded investors in those debt tend to get higher yields. So why aren't they worried about the risk of a collapse? Wall Street investors are not really worried about a collapse here. And that is because

They believe that the economy is still very strong and the U.S. consumers are really the engine driving the growth of the U.S. economy. The Wall Street analysts believe that the consumers with lower credit scores earning lower income, it's true that they are having difficulties making car payments.

and really struggling. The other side of it is that consumers with higher income and higher credit scores, while they are maybe starting to have some difficulties in making car payments,

They still have other assets such as stocks and bonds. They own homes. So the Wall Street analysts are not as worried about these consumers who tend to make up a large percentage of the consumers we're talking about. Vicky Wong is a reporter for The Wall Street Journal. Thank you so much, Vicky. Thank you for having me. And that's what's news for this Wednesday afternoon. Today's show was produced by Anthony Bansi with supervising producer Michael Cosmitas.

And in case you missed it, we tried something new today. Our own Chip Cutter got a hold of some fellow WSJ reporters to run through the big themes that have stood out this earnings season. You can find What's News in Earnings, Insights into Banks, EVs, Retail, and AI, right before this episode in the What's News feed. Take a listen and let us know what you think. I'm Tracy Hunt for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening. ♪

Thank you.