In this podcast, Motley Fool senior analysts Emily Flippen and Jason Moser discuss topics including:

  • Walmart beating expectations and raising guidance.
  • Home Depot and Lowe's delivering the goods (without a boost in share price).
  • Target's self-inflicted problems continuing.
  • Former Domino's CEO Patrick Doyle taking his talents to Restaurant Brands International.
  • The latest from Williams-Sonoma, Berkshire Hathaway, and Taiwan Semiconductor.
  • Sam's Club's new pricing strategy.
  • Two stocks on their radar: Chart Industries and Zoom.

Emily talks with Sumit Singh, CEO of Chewy, about the pet products industry, when it's OK to lose money on customer acquisition, and why his company is expanding into pet healthcare.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

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This video was recorded on Nov. 18, 2022. 

Chris Hill: The retail picture is getting clearer, and one major company is clearly struggling. Motley Fool Money starts now. From Fool Global headquarters, this is Motley Fool Money. It's the Motley Fool Money radio show. I'm Chris Hill and joining me in studio, Motley Fool Senior Analyst, Emily Flippen and Jason Moser. Good to see you both.

Emily Flippen: Hey.

Chris Hill: We've got the latest headlines from Wall Street. We'll talk pets and pet retail with Chewy CEO Sumit Singh. As always, we've got a couple of stocks on our radar, but we begin with the biggest retailer. Walmart, same-store sales in the third quarter, rose more than 8 percent. Profits and revenue were higher than expected, and Emily, shares of Walmart, up five percent this week.

Emily Flippen: That's big for Walmart. Walmart is not used to stock price movement like that. It's a good thing, they certainly needed it. It all comes down to what Walmart specializes in, which for them is success and things like non-discretionary purchases. If you're going to Walmart, there's a good chance that you're going there to buy something that isn't a necessity in your life, whether it'd be food or personal care products, and that certainly showed in the quarter. It also helps that Walmart has that perception of being an affordable place to shop with the lowest prices on many non-discretionary goods, which meant that, as consumers felt their pocketbooks be stretched in the most recent couple of quarters, they're headed to Walmart more often as opposed to other places that may have higher prices. As you mentioned, sales rose nine percent over $150 billion in the quarter. Earnings also rose on an adjusted basis. Now, there was a three billion-dollar opioids settlement.

Jason Moser: There was that?

Emily Flippen: Which did weigh on the non-adjusted profits, but the market's overlooking that. I'm hopefully putting that in the rearview mirror and just focusing on where Walmart is doing best, which is understanding where their consumers are and meeting them there.

Chris Hill: You go back in time aways, and there were people wondering about Walmart's push into groceries. Does this make sense? Can they build this at scale, because that has been so key to Walmart success. You look at the fact that groceries now account for more than half of their revenue. I'd say it's worked out.

Emily Flippen: Yeah, and you can also include Sam's Club and the success of Sam's Club in there. Because if you look at the quarterly results, Sam's Club actually had the best performing results from Walmart in the most recent quarter. I think their sales rose nearly 13 percent. That's compared to a seven percent and an eight-and-a-half percent rise for both Walmart International and Walmart US. So again, strong performance across the entire company, but certainly being buoyed by things like groceries.

Chris Hill: The big home improvement retailers reported this week, third quarter results for both Home Depot and Lowe's were higher than expected, but shares of both were basically flat for the week. Jason, we're fans of both these companies. I don't think either one of us thinks that, long term, they're in any kind of trouble. It is interesting to me though, that not only are both these stocks down in 2022. They are trailing the market which is down for the year.

Jason Moser: Yeah, and I think part of that is both of these businesses are making investments in supply chain infrastructure in order to help down the road. So these are costs that are weighing, I think, on margins, a little bit here in the near term. I wouldn't read too much into that though. When you look at both businesses, Home Depot, another really nice quarter from what is a very important company in the home improvement market. One thing that stood out to me on the call, Chris, is the EVP of Merchandising, Jeff Kinnaird said, ''We're excited about the holiday season.'' That's encouraging. Home improvement? That's interesting.

Chris Hill: We want to hear that.

Jason Moser: Yes, we do. The numbers were strong. Sales, $38.9 billion for the quarter. That was up 5.6 percent from a year ago. Comp sales, up 4.3 percent, and comp sales in the US, up 4.5 percent. Earnings per share, up 8.2 percent. When you look at ticket versus transactions during the quarter, comp average ticket grew 8.8 percent. The transactions themselves fell 4.4 percent, not terribly surprising. But it was also encouraging to see the big ticket comp transactions, those over $1,000, up 10.1 percent compared to the same quarter a year ago. So people are spending some money there. When you look at Lowe's, a lot of the same, maybe a little bit of a slower growth rate there. But revenue of $23.5 billion was up 2.4 percent, comps, up 2.2 percent, and US comps, up three percent. Ultimately, though, earnings-per-share growth here, 20 percent, as Marvin Ellison just continues to do a wonderful job in maximizing efficiencies here and really bringing things down to the bottom line.

Chris Hill: You're sceptical, Emily?

Emily Flippen: Yeah. You saw me rolling my eyes.

Chris Hill: I did. 

Emily Flippen: No. This a well-performing business. Both of these businesses have been incredible investments over the past 5, 10 years. But I will say I think Lowe's in particular has really benefited from just a secular shift in demand for their products, and I do worry about how management is going to be dynamic when that inevitably changes in the future. They've had an incredible past couple of years, but I think Home Depot has a longer track record of executional expertise that is likely going to outshine Lowe's long term. I think that includes reputations with high-value contractors and professionals. I could totally be wrong. The expectations for Lowe's is lower than Home Depot. I don't want to give Ellison too many pats on the back before he's really had a chance to prove for himself.

Chris Hill: The expectations may be lower. The share count at Lowe's also lowers. 

Jason Moser: I'm glad that you said that, Emily, because I think you are exactly right. When you look at these two businesses, Home Depot is clearly the better business and the better performer. When you look at the way these shares have performed over the last 5 and 10 years, though, it's impressive. I think most investors would guess that Home Depot has outperformed. It clearly is the other way around over 5 and 10 years, Lowe's has outperformed rather significantly. But it's not really, because the businesses is run. I would say firing on all cylinders. It's doing well, but the share repurchases with Lowe's have had a material impact on what's been going on here, and when you just go back over the last 10 years, and so this predates Ellison, Ellison accelerated this capital return program, Lowe's share count is down 49 percent and over that same stretch of time, Home Depot only down 33 percent. Those are good numbers either way.

Emily Flippen: In their own way. 

Jason Moser: But I think it really does help explain Lowe's outperformance to an extent, and I think you're right. You need to keep an eye on this business going forward to see what growth rates are reasonable to expect from a Lowe's versus a Home Depot. I own Home Depot, I don't own Lowe's. This is making me wonder if I don't need to consider adding Lowe's. I got a MasterCard Visa vibe going on here. Maybe it's just wise to own both. I think you really keyed on one of my concerns right there.

Chris Hill: Target's third quarter profits fell 50 percent, and the company lowered guidance for the holiday quarter. Shares of Target down 6 percent this week. Emily, let's face it. It's been a tough year for retailers, but it seems we are getting more evidence that some of Target's problems are self-inflicted.

Emily Flippen: Yeah, ouch. This is a bad quarter for Target. They needed a win, too, because this is a second quarter in a row that the market has hammered their results, in large part due to what many perceived to be an effective use of inventory. The results themselves actually weren't that bad at face value. Their comps increased nearly three percent. That's on top of nearly 13 percent compared to last year. Traffic was up more than one percent. Ticket sales were up more than one percent. It wasn't like Target is just dead in the water, but management provided some commentary around the demand trends that really scared investors. In particular, what happened in October, sales and comps suddenly fell off.

People became a lot more concerned about the money they were spending, all tying into this fear over consumers and discretionary spending headed into the holiday season, so they had to do some massive discounting to move inventory. As you mentioned, Chris, that's what we saw on the bottom line. That's the reason why their profits were cut nearly in half, is because they were essentially getting hit on their margins to move inventory. Now if I were a Target shareholder, I wouldn't be too concerned. It does seem like a lot of this is related to the general economy. The question I'd be asking myself is, is this executional weakness or economic weakness? If sales are declining because the economy is not here, or consumers are just spending more money on groceries like at Walmart versus clothes at Target, I'm less worried about that.

But I do want to ensure that Target is maintaining its merchandising power. I think that if there's one person to know at Target, it's Jill Sando. She's the Chief Merchandising Officer. She's been with the company since 1997 but is relatively new to the CMO role, having only owned that position for about a year. Before that, she was the CMO of owned brands, which have been a great spot for Target, again, in that role for about a year, so a lot of pressure on Jill Sando to actually perform and execute in merchandising. The good news is, this quarter, it seems that they're growing their unit power in each of the five categories that they own, so not all dead in the water but, certainly, a weak quarter.

Chris Hill: Next week is Black Friday, and there are years where we go into the holiday retail season with a pretty clear picture. Almost like most, if not all, retailers are singing from the same page in the song book. I feel this is not that year. I don't know about you, but how are you guys feeling as investors heading into the holiday retail season because I can't think of the last time I was this uncertain about how it's going to play out for retailers?

Emily Flippen: I'm actually cautiously optimistic. Now I don't think there'll be great things for businesses because, like we saw with Target, there's going to be a lot of discounting happening and that could definitely hurt margins for lot of these retailers. But they are in a position where they need to move inventory and they need consumers to spend money, so I'm really looking at Black Friday and Cyber Monday. I think those sales will give us a great first look at what the full holiday season could look like. But if there's enough discounting, I think that will catalyze consumers to spend more money than they may otherwise have spent. That's why I have this cautious optimism, you could say.

Jason Moser: I like that cautious optimism because there is the opportunity to exceed expectations here. If you look at some of the projections, National Retail Federation noted recently that they are calling for holiday sales this year to rise between six and eight percent from last year. If you go back to 2020, those sales were up 8.2 percent. Go to 2021, they were up 13-and-a-half percent. So it feels like there is some caution out there understandably so. We heard that on calls from companies like Etsy, for example, but by the same token, it's an expectations game too. If we see those National Retail Federation expectations conservative, after all is said and done, then I think you get to feel pretty good about that.

Chris Hill: The federations track record in terms of holiday retail predictions is pretty solid.

Jason Moser: They know a couple of things.

Chris Hill: This week we found out what stock Warren Buffett has been buying. Details after the break, so stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here in studio with Emily Flippen and Jason Moser. Williams-Sonoma posted a record result for the third quarter, but shares of the home and kitchen retailer fell eight percent on Friday after Williams-Sonoma's management team pulled guidance through 2024, Jason. That is a level of uncertainty I was not expecting from Williams-Sonoma.

Jason Moser: Yeah. But remember too, they were reporting fiscal '23, third quarter, so it's a little bit closer, I think. This guidance that they yanked is a little bit closer than it sounds perhaps. But I understand the market's trepidation toward a company like this in this environment. The stock is valued today at less than 10 times the full-year earnings projection. To me, it's really more like seven, which is fascinating because this is a pretty strong collection of brands, but I think if you flip it around where economic conditions have recovered whenever that may be, this is probably a bit more of a glass-half-full view on this company. The numbers, I think, were fairly encouraging. Revenue, just shy of 2.2 billion dollars, was up seven percent from a year ago, and the earnings per share, up 12 percent. Gross margin; feeling some pressure, 41.5 percent.

That was down 220 basis points from year ago primarily due to shipping and freight. We're just seeing that playing out across the board. But they still grew operating income two percent and a very strong performance in the Pottery Barn side. While it's still a small part of the business today, their business-to-business, their B2B side, that they're making investments here, that's starting to gain some traction. It's still really small, but it grew 17 percent, and it represents a really big market opportunity as they start selling to various commercial and hospitality companies. Let's think about like hotels and stuff like that, but I think it does go back to what you said there at the top. They're pulling that guidance for this coming fiscal year. That's just enough uncertainty, I think, for the market to want to hold out and see how things play out for this one.

Emily Flippen: It always reminds me that Pottery Barn exists. Why is the demand for Pottery Barn's? Williams-Sonoma's an amazing company. It has done well, but I'm always surprised by the demand for slightly too expensive home goods.

Jason Moser: You're right. That demand, that surprisingly is still fairly robust, and then also that Pottery Barn brand represents, I think, a real big driver for that B2B investment that they're making, so we'll see how that plays out. But that should be a big player in that investment if it does work.

Chris Hill: Ripple effects from the slowdown in the video game industry could be felt this week in Nvidia's latest earnings report. Third quarter profits for the graphics chip maker were light due to lower demand, and Nvidia's guidance was a bit low too, Emily.

Emily Flippen: Revenue did beat in the quarter, but as you mentioned, earnings came in worse than expected, and guidance for the remainder of the year was really muted. Revenue fell 17 percent year-over-year in the most recent quarter and 12 percent sequentially, and that really sounds dismal. I think if you don't know this business well, and you're hearing about a 12 percent sequential decline in revenue, you're thinking, wow, that's a company that is really on the fritz. But this is actually very normal for Nvidia because their demand, as you mentioned, is driven largely by very cyclical industries, gaming being one, and gaming revenue fell more than 50 percent year-over-year.

They've had an amazing past couple of years as the chip shortage and gaming demand has really increased demand for Nvidia's GPUs, but moving forward, a lot of those investments have already been made especially for their lower end models, and they're having a hard time moving inventory there now. But there's a silver lining. Datacenters and automotive demand each grew one up more than 30 percent, that's data centers, and automotive are up more than 80 percent. Those are smaller aspects of their business but still massive opportunities. We've seen this cyclicality in Nvidia before. Whenever their GPUs were being used for cryptomining just a few years ago, there was a big boom and bust cycle with this company, but they still drove shareholder outperformance over the long term. So same thing is happening here with gaming. I expect demand will come up if you're willing to be a patient shareholder and hold what is, in my opinion, one of the best-in-class GPU manufacturers out there. The demand will come even though it is a very cyclical industry.

Chris Hill: If the automotive division keeps growing at 80 percent, it's not going to be a small part of the business for very long. 

Emily Flippen: No. The thing to watch there is just to make sure that Nvidia's processors are being used for all of the most cutting edge technology. If you actually go through and read Nvidia's earnings calls, they'll talk about that a lot, all the places where their processors are being used. For instance, 72 percent of the top 500 supercomputers in the world use an Nvidia-powered system, and that rises to 90 percent if you're considering just the newest supercomputers, so a good sign that Nvidia has the best technology. The demand cycle is just very cyclical.

Chris Hill: In a filing with the SEC, Berkshire Hathaway revealed it now owns more than 60 million shares of chip maker Taiwan Semiconductor, and shares of TSM rose 12 percent after the news broke. It's nice to see the validation, Jason, but as a Taiwan Semiconductor shareholder, I'd feel even better if there was something materially stronger about the business.

Jason Moser: This is a materially very strong business, so I think you should feel very good about being a shareholder. You could probably argue that this is one of those situations where Buffett is being greedy where others are fearful. I think Emily's talk there on Nvidia really, I think, highlighted a lot of the concerns in the space, the near-term concerns but also the long-term opportunities, and so that was where he's coming from here. Listen, Taiwan Semiconductor, they own over 50 percent of the foundry market. The global foundry market is reliant, and this business can't go away. This is a very Buffet-esque kind of business, and so I think he sees an opportunity to play in a lower-risk investment opportunity in what is a very big opportunity going forward as the tailwind start to turn for the chip industry. It's just a matter of being patient which we know is one of his specialties.

Chris Hill: Restaurant Brands International is the parent company of Burger King, Tim Hortons, and Popeyes. Shares of the company, up 10 percent this week on the news that former Domino's Pizza CEO Patrick Doyle will become the chairman of the Restaurant Brand's board. Emily, Doyle turned around Domino's, so I suppose I understand the optimist.

Emily Flippen: There's certainly optimism there. As you mentioned, Doyle is known for the great campaign over his eight-year tenure at Domino's and turning it from, probably one of America's most hated pizza brand to a great performing investment. In my opinion, delicious pizza. What is encouraging to me about this is that his compensation is entirely in QSR, that's Restaurant Brands International's stock. There's a portion of which only depending upon the share price performance of QSR as well as him putting $30 million of his own money into the company as well. He's clearly invested alongside shareholders. But here's the thing. Burger King, a little bit more complicated than Domino's, I don't know if that turnaround comes as easily as his past experience may imply.

Chris Hill: Isn't Popeyes the jewel of the Crown in that business?

Emily Flippen: Yeah.

Chris Hill: I feel like whenever we talk about their earnings, it's like Tim Hortons and Burger King are hanging out together, wishing they were as popular as Popeyes.

Emily Flippen: My fear is that he's going to mess up Popeyes if I'm honest with you. Look, you can play with Tim Hortons. You can play around with Burger King. Do not touch Popeyes.

Jason Moser: Strong words.

Chris Hill: Jason Moser, Emily Flippen, we will see you later in the show. Up next, we're going to talk pets and pet retail, and yes, pet healthcare with Chewy CEO Sumit Singh, so stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Earlier this week, my company, The Motley Fool, had its annual meeting. In addition to talking about investing. We also got the chance to hear from business leaders outside of our company, and one of them was Sumit Singh, the CEO of Chewy. Emily Flippen talked with Singh about why the company is expanding from pet products to pet healthcare and when it's OK to lose money on customer acquisition.

Emily Flippen: I doubt there as a fool that is listening right now that isn't familiar with your business, either through our investing advice or as a customer themselves. But how would you describe Chewy for somebody who may not be familiar with the company?

Sumit Singh: Hi, Emily. It's nice to be here. Hello to all the Fools. It's wonderful to be here. Chewy, obviously, is a wonderful company. I'll describe it both from a point of view of team members as well as from point of view of customers. Let's start with customers. We strive to be the most trusted, convenient destination for our pet parents but also for partners who service the pet community. Of course, today we're United States-focused. In the future., we hope to be international as well. But the way you want to look at Chewy is we want to deliver convenience and personalization at scale. Think about a trip to your local neighborhood store. Think about the best memories. Think about a trip to Disney.

These places that just bring you joy when you interact because it's personable. It's emotive. The person you are is speaking with remembers your name or delivers an experience that just sticks with you and keeps bringing you back. That's the mantra that we lead Chewy, and that's how we want our customers to perceive us. In terms of team members, we're a happy place. Obviously, lots of people bring their pets, so pets also make us happy, but at the same time, we're just trying to create a culture where everybody can be their best version of themselves, can bring their best version of themselves, can make us better, learn through tremendous challenges, robustly contribute, effectively innovate, and yeah, just stay in service of for customers.

Emily Flippen: I tried to bring my cat for this interview, but he wasn't cooperating today, unfortunately. But I do have to say, yeah, the focus on the customer and the experience is really unique. But skeptics will say, hey, there's Amazon, there's PetSmart, there's Petco. Why does Chewy need to exist when I can get services from organizations that I may be already connected with or paying for? Despite that, Chewy still has a dominant market share of growing numbers of loyal customers. In your mind, what is it that makes Chewy so special?

Sumit Singh: So first of all, you're exactly right. When you look at it in the e-commerce world, and you say, hey, the basic tenets of e-commerce, whether it's competitive pricing, broad choices or selection, convenience, post-purchase, you can say, hey, there are neutralizing factors. You just have to be good at them, but then there's other people who can be good at them. So what's the differentiator then? When you look at pets, particularly, pet is an emotive category, it is the only category outside of kids that we know of where customers refer to themselves as pet parents. If you take that sentence and run with it, and you, and there's one more sentence: Just like it takes a village to raise a child, it takes a village to raise a pet.

So there's this whole community out there that services pet. When you try to put these two together in a way that is high bar, customer-centric, personalized, memorable, magic happens, and that magic for us is in the way that customers try us out. But then they love the experience, and they just keep coming back for more. That actually forms a big part of our business model and has fueled our growth, but also the operating fitness has fueled our profitability. So I would say that's what makes Chewy special. It's that concentric circle around the core that everybody else seems to want to deliver. So we deliver the core really well, but then we leave you with something more and wanting more to come back to us every time that you shop with us.

Emily Flippen: My Rover cat sitter has a lot of pricing power over me. She could charge anything she wants, and I have that connection with her. My cat knows her, depends on her, so I think Chewy also has a little bit of that, that network effect going for it. But if it's not the Amazons and the Petcos of the world, what's the biggest threat to Chewy then?

Sumit Singh: It's ourselves. If we stop innovating on behalf of our customers, if we stop thinking about our customers in our daily interaction, if we stop thinking about how do we bring the best value forward, deliver the best service in every interaction and find you more ways to keep coming back to us, ultimately, the culmination of what I've said is if we stopped innovating. In that way, the threat is much more internal, and I fundamentally believe that that it is external. Our speed of innovation and the longevity of care that we can demonstrate toward our customer will ultimately determine our long-term destiny and our success or failure. That's the mantra that we've led with. If you look at Chewy five years ago, our disposition, our thinking toward customers was always robust. At the same time, there's been so much innovation that we've put on the platform the last couple of years that has just amplified not only the number of customers but also the share of wallet, or the amount that customers are spending with us, and that's fueled both growth and profitability.

Emily Flippen: I love that because when I first read through Chewy's S1, one of the things that stood out to me that's your initial registration filing was how deeply you understood the customer. You talked a lot about how we may lose money on customers when we first acquire them. But the ones that retain with us spend so much more money over the life cycle that we end up being really profitable on those customers. It's interesting, the Motley Fool also follows these similar customers' dynamics. What advice would you have for a company that does have that customer dynamic, like it loses money maybe initially on acquisition but makes it up in long term.

Sumit Singh: First of all, you should do my shareholder calls. That was very well articulated. The advice that I would give, it pays to be long term-oriented. A lot of companies, they start out in this insurgency mode in service of customers. But then when the pressures come, they immediately revert their original mantra which was growth and customer experience to perhaps short term management of goals. I think that can be punitive to companies, so one, just always be long-term-oriented. The second thing I would say is be customer-oriented. Ultimately, customer orientation, shareholder value creation, and team member-orientation should all line-up behind the company's mission statement. I'll repeat it for us. To be the most trusted and convenient destination for pet parents and partners everywhere, each of our team members at Chewy can find themselves in this mission statement.

You're either working to make the engine more custom-convenient, you're either working to launch a new service or a new product or a new solution that makes us a destination for either our pet parents or the partners that service pet, or you're working on perhaps a future vertical such as taking us international. Then of course, if we deliver this mission statement, what do we do? We create a ton of value for our shareholders. So who won? All three parties won here. Customers won, shareholder won, and employees or team members won. So that would be the second kind of advice that I would provide. The third I would provide is discipline, focus, and prioritization are just huge table stakes. They're very hard to maintain an achieve, but focus on prioritization, I think, are key to achieving long-term success.

Emily Flippen: You're speaking with the long-term mentality, which is very indicative of the way that we invest here at the Fool. But I have to say there are a lot of organizations that talk about being customer-centric, and it's one of those easy thing to say, like, oh, yeah, we put our employees and our customers first, but what does that actually look like at Chewy in practice?

Sumit Singh: It's a great question. I'll give you a couple of examples. When you come into our customer service organization or customer care organization, even today at a scale of thousands of customer service agents and professionals that we have, we don't have any automated voice lines. We don't have metrics that measure productivity for an agent. That's unheard of, particularly in orientations like customer service, which is typically perceived to be an OpEx heavy or a cost-led event. We, on the other hand, let our agents and our team members just be who they are, engage with the customer for as long as they want to or as long as it takes to solve the customer's need, state, or challenges, or just have a conversation with the customers wanting to engage, and we do that a lot, by the way. Or just take the moment to surprise and delight.

When you talk about surprise and delight, we call these wow mechanisms, which are basically unanticipated moments of celebration or joy or empathy that we create with our customers, where we will invest with local artists to create a portrait that we'll send to you. If sometimes, unfortunately, pets pass away, we'll send you flowers. Our return policies are most generous. You can buy from us. If you don't like the food, we will ask you to donate it to a shelter or a local rescue. This all cost money, and at the same time, to us, it's not the cost that we are after. It's the experience, and the memory, and the loyalty that it generates or garners, the network effect that it creates. When a hand-drawn portrait of your pet shows up on your doorstep, we have you for life. You're going to talk about that with your friends at dinner, you're going to show it to your officemates, etc. These are just very live examples of how we invest in customer experience and put our money really where our mouth is. I think that's how we live that.

Emily Flippen: You mentioned you do measure a lot of things. It might not be that way. You might talk in the abstract, but a lot of what Chewy does is very measured, and one of the things that has changed over the past year for your business app, which surprised me happily as a shareholder is you're getting into more pet health: insurance, telehealth offerings, e-commerce, Chewy compounds. Why is pet healthcare such an important growth area for Chewy right now?

Sumit Singh: It's a good question. Let's come at it from two sides. First of all, you're right, that healthcare is an important area, and I believe it should be, more so in today's world than ever in the past for two reasons. One, that healthcare is just a really large opportunity. The TAM, total available market size, for pet health exceeds $40 billion, and it's growing at two times the rate as of food and supplies, comparable vertical might. Number 2, when you come at it from customer in orientation, we believe pet healthcare has opportunities to be more affordable as well as more accessible, particularly when you double-click the data point, you find that a third of US customers, so about 100 million US pet-owning households, a third of them either do not take their pets to the vet or don't do so at a recurring frequency. Not only is the opportunity size large, there's also genuine friction and barriers that need to be addressed that we can put our mind toward innovating on behalf of our customers. If we are able to unlock this, which we're very proud of the progress that the team is making, because we continue to chip away and unlock these opportunities, it creates tremendous value creation for the platform as well as a great experience for our customers.

Chris Hill: Coming up after the break, Emily Flippen and Jason Moser are back with a couple of stocks on their radar. Stay right here. You're listening to Motley Fool Money. As always, people on the program may have interest 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. Welcome back to Motley Fool Money. Chris Hill here. Once again in studio with Jason Moser and Emily Flippen.

Before we get to the radar stocks, one more news item from the world of wholesale retail. Costco is known for, among other things, its hotdog and soda combo, which sells for $1.50. That has been the price since Costco started selling the combo in 1980. On Walmart's earnings call, CEO Doug McMillon shared a new pricing strategy for Sam's Club, which is Walmart's competitor at Costco. Now these Sam's Club hotdog-soda combo, Emily, is going to sell for, wait for it, $1.38. I have no idea how they came up with that particular price. But clearly, they want it to be able to say, we've got the best value deal at our wholesale club.

Emily Flippen: Even more confounding is that they said this has nearly a 10 percent decrease. If you just rounded it out to 10 percent, that would have made more sense.

Jason Moser: A dollar 35, what are we doing here?

Emily Flippen: Now but in all seriousness, it is funny. Costco and Sam's Club, obviously, go head to head. Sam's Club has been trying to undercut Costco for a number of years. I think their membership is around $10 cheaper than a Costco membership, but the question is, is there a premium for a Costco hotdog? We need somebody to go out there and quality test these two hotdogs to determine whether or not it's worth the extra $0.12.

Chris Hill: Then email us [email protected]. Please do a little boots on the ground research for us. Just to put some numbers around this, Jason, Costco has 119 million members. Sam's Club, less than half, 47 million. Maybe on some level, they think this is going to help boost that number.

Jason Moser: Chris, I consulted regional Costco expert Mac Greer on this earlier to get his feedback, and there are several concerns here. First and foremost, the $1.38 price just seems to be very odd. Who's got $1.38? Furthermore, though, it does seem like just a pathetic one-upper. We talked about the one-upper, I can do it a little bit better. This is Sam's Club trying to be a little bit of a one-upper, and Mac suggests, you know what, he said, Costco is going to buy all those $1.38 dogs and drinks, and they're going to sell them at their place for $1.50 and make money off the whole opportunity. I like Mac's enthusiasm there.

Chris Hill: I don't know that that's a great strategy to pursue. I could see someone doing that on their own.

Jason Moser: I said I like his enthusiasm, not the strategy.

Chris Hill: Let's get to the stocks on our radar, our man behind the glass, Rick Engdahl is going to hit you with a question. Emily Flippen, you're up first. What are you looking at this week?

Emily Flippen: I'm looking at a company called Chart Industries, the ticker is GTLS, and it maybe a company that listeners are less familiar with. This is an energy business. They supply machinery and other equipment mainly for customers in the natural gas industry. Big oil companies tend to be some of their largest customers. But their management team under their relatively new CEO, Jill Evanko, has been making a lot of investment into greener and cleaner energy, including things like hydrogen and carbon capture. It's been on my radar for a while because I like the business. An acquisition to this point have been relatively small tuck-in acquisitions. But the reason why it's on my radar this week is, earlier last week, they announced a $4.4 billion acquisition of a company called Howden. It effectively doubles the size of Chart's business. It has an attractive service-based business model which should remove some of that cyclicality that Chart experiences. But the stock is down nearly 50 percent since this announcement because it saddles the company with a lot of debt. But I do think that if they're able to reach the profitability goals that they have laid out as part of this acquisition, it could be a really interesting buying opportunity.

Chris Hill: Sometimes Wall Street sent a very clear signal that they don't like the acquisition we just make.

Emily Flippen: Four billion dollars of debt in a rising interest rate environment is certainly enough to scare some investors.

Chris Hill: Rick, question about Chart Industries?

Rick Engdahl: Emily, you buried the lede because I looked at the website, and the first big word I saw was cryogenics. Apparently, this company is into freezing people, I assume. Do they still do the whole body or is it just the heads in jars like on Futurama. What is it?

Emily Flippen: It's just the heads in it for $100,000, Rick. No, I'm joking. No, cryogenics are used to freeze LNG so to transform gas from its gaseous state to something that can be more easily transported. They keep gas really cold. Cryogenics.

Chris Hill: Jason Moser, what are you looking at this week?

Jason Moser: Keeping an eye on Zoom Video Communications, ticker ZM. They've got earnings coming out on Monday, the 21st, after the market closes. Obviously, it had been a very tough year for this company, shares down 55 percent. In the last quarter, they reported just eight percent top-line growth. They continue to add customers, they continue to diversify their suite of offerings with things like Zoom Rooms and Zoom Phone, but again, guiding for full-year growth of just under seven percent, you got to really wonder what the future holds as things start to reopen. It's good business, strong balance sheet at around $5.5 billion in cash, and virtually no debt, profitable cash flow positive, but growth is the big question here so keeping an eye on that guidance going forward and where they want to take this business.

Chris Hill: Rick, question about Zoom Video?

Rick Engdahl: Back in 2020, we all adopted Zoom because they made video chat better. Now that we've all lived with it for a couple of years, do you think that Zoom can make video chat better? 

Jason Moser: Better than better? I think that's a really good question, and I'll tell you, just a little bit of insight for that we've got a lot of people here at HQ today. We've got our annual meeting going on on Friday, and it's been wonderful to see so many people here face-to-face. It makes you realize I need another Zoom call, like I need another hold in the head, man. It's wonderful technology, but it's nice to work face-to-face with people too. They're going to have to figure out a way to walk that line because I do feel like we're going to see this trend of getting back to working in person a little bit more as time goes on. It's not going to fully change. I think hybrid is the way to go. But that really does make you wonder what exactly is Zoom going to do going forward.

Chris Hill: What do you want to add to your watch list?

Rick Engdahl: Not Zoom. 

Chris Hill: Emily Flippen, Jason Moser, thanks so much for being here.

Emily Flippen: Thanks, Chris.

Chris Hill: That's going to do it for this week's Motley Fool Money Radio Show. The show is mixed by Rick Engdahl. I'm Chris Hill. Thanks for listening. We'll see you next time.