America in Crisis.

I think the only reason Chipotle is

frankly going down and frequency is

going down is because we're used to our

memories of like 10 years ago getting a

really nice burrito bowl or a really

[music] fat burrito to go where we're

like, dude, it doesn't even stay in. You

know, you take a bite at one end and

like the back explodes because there's

so much food in it. That was the

reputation Chipotle had. Now all of a

sudden it's like, yo, man, I got to

order two of these sometime. Especially

when you get them to go. You get them to

go, you got to order like two of the

burritos to be like what they used to

be. Those, you know, fat burritos where

they're like, "Damn, Chipotle loves me.

They load this crap up." Now, you know,

you go in for a burrito or you door dash

worse a burrito. If you door dash the

burrito, the $19 burrito with guacamole

is going to end up being like $25

because of the tip and the delivery fee

and all this stuff. Uh, and then you get

it and it's like half the size of what

you're used to and you're like, "Bro,

I'm getting scammed." Is what it feels

like. Like it's the worst feeling ever

when you're hungry and you Door Dash and

then you get the product and it's like

yo this is not not okay. It's the worst

feeling ever. So anyway, it's not a

surprise to me that low to middle inome

consumers are further reducing their

frequency. Now they saw this earlier

this year when consumer sentiment

declined sharply. They say which is not

surprised because you know we sort of

had the tariff disaster. But now what

they say is we believe that guests with

an income of below $100,000 represents

40% of our sales. So one in four of

their customers they believe have an

income of under $100,000. Honestly,

that's also kind of interesting. And

this is their estimate. I mean they

don't really know. So they're, you know,

maybe there's a guy like in the back

who's like that guy's broke, you know,

judging us. But anyway, um you know that

means 60% of sales are to uh six figure

plus people essentially based on our

data. Dining out less often due to the

economy inflation. The particularly

challenging cohort is 25 to 35. We

believe this trend is not unique to

Chipotle and occurring across all

restaurants. Well, it it might makes you

an excuse younger. Well, it makes sense

because man, I mean, people who are

graduating college right now are just

absolutely getting effed. You know, new

grads today uh uh have a really tough

time. Now, in fairness, millennials had

a tough time too who were graduating in

2008, 9 10 11, right? So, like

unfortunately cyclally that can happen.

You go through these periods of time

where it's it's hard to get a good job.

Uh, you know, I I was looking at a

somebody took a screenshot of like a

Reddit post the other day. Uh, and

they're like, there's this person who,

you know, they uh they they lost their

their job in bookkeeping. They uh now uh

are a server and they're waiting tables,

their credit score is 500, and they're

like, man, I just can't get ahead. Like,

there's there's a little bit of balance

here. We generally have to start with

the financial education of like stay

away from buy now pay later, stay away

from debt because oftent times what

happens is you could be waiting tables,

but that doesn't mean you need to have a

500 credit score. So there's a broader

problem there too. Like when I was a

server, you know, I had a 770 credit

score. Uh actually I was more just like

bus boy and host and expediter and

occasionally I was able to sneak in

serving a table, but it never actually

made it to server. Lauren did. Uh, and

then she made it to manager. She's

freaking awesome and I got her the job

there. But that was that red robin. But

anyway, the point is like that's not an

excuse for having a bad credit score,

right? Uh, credit's really important.

But anyway, finally, the promotional

environment has intensified. This is not

uncommon either. So, you're finding this

with Starbucks as well. And and this is

this is what happens when the economy

slows down. So, pricing power shrinks,

right? PP shrinks. This is one of the

reasons why breadth in the stock market

is so narrow that people are just

plowing money into stocks like Nvidia

because the pricing power is absolutely

insane at companies like Nvidia.

Remember, they're taking 58 cents out of

every dollar to the net income. That is

absolutely insane. You know, that's like

a great gross margin, but their gross

margin is even better. their gross

margin is sitting at, you know, 72%.

These are incredible margins. That's

exactly what you're not seeing at

Starbucks uh in their earnings release.

You know, their earnings release

yesterday actually indicated more of a

deterioration in margins. And we'll look

at it as well at Chipotle, but

Chipotle's earnings call really points

this out to us that this is these are

companies that appeal to everyday

Americans and they don't have the

ability to offset inflation. This is

what we're seeing consistently with

companies saying, "Hey, you know what?

We're not going to raise prices at the

pace of inflation next year." That's

what Chipotle was saying. Part of that

is because they can't cuz their margin's

going to tank even more. Look at uh

Starbucks's earnings here. This is a

sign of what's going on with the

K-shaped recovery. This is why we've got

frustration supporting politicians like

Amom Domin, right? But look at this.

I've got quarter end uh net revenues of

$6.9 billion at Starbucks, but look at

their actual operating margin. Operating

margin at just 4.5%.

A collapse from the 18.7%

operating margin that they previously

had. Complete collapse. Now, part of

that they blame on restructuring

associated with the closure of stores

and they're trying to get quote unquote

back to Starbucks, but that's still a

massive decline in operating margin and

it's likely to continue to worsen even

outside of their restructuring. So, get

into uh this promotional environment

that squeezes margin. It means you have

>> little pee,

>> little pee pee. It is what it is.

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down below. Uh, but anyway, despite

these headwinds, uh, Chipotle has

maintained a stable wallet share, but

that wallet share is shrinking. It's

like um uh

what is it? Um

uh oh, what's the what's the joke with

the onions? There's a there's a joke

about this. Uh it's um uh

there are two time something to the

effect of like there are two times my

eyes water every single time. One is

when I peel an onion. Two is when I open

my wallet.

It's just the nature of the environment

we're in right now. Uh but we aim to get

back to consistent share. Yeah, they're

trying to climb back, but it's tough

because it's not just a tough economy,

but they've also got this now reputation

of trying to skimp a little bit. And

their version of skimping is really

because they're also trying to fight

inflation. So you get what's really

called shrinkflation. The generosity

gets cut out, right? What made their

brand gets cut out. And so then they

have to talk about reducing price, which

you get this, all of this delivered at a

price point that is 20 to 30% below our

peers. They're talking about how, hey,

you know, we're going to try to do

better on price. But the problem is even

20 to 30% below our peers is still

expensive. So of course, you're going to

get less frequency. This is what we saw

with Fiserve. You know, Fiserve

responsible for 25,000 transactions a

second, and they tank 40 something%. And

I think they're even down more today. So

that is a sign of two things. One,

people getting nervous about

highfrequency kind of transaction data,

right? Like you don't even get a dead

cat bounce over here on Fiserve today

because A, you don't have buyers lining

up for this stock because people are

basically out of money. And B,

transactions per second. I don't think

anybody's standing on a hill going, "Oh

yeah, they're about to skyrocket." It's

important we deliver this exceptional

experience consistently across 4,000

restaurants, blah blah blah. Uh, so

let's look a little bit more to see what

they say about the consumer, especially

in the Q&A portion. Uh, and then we'll

look at pricing. So, consistently peak

periods. Okay. Through our research, we

found that over 90% of Gen Z uh would

say they would visit a restaurant just

for the new sauce. You know, I don't I

don't think they understand uh people.

They're like, "Hey, Gen Z is going to

come visit our store because we got a

new so sauce. How about you just get

back to the basics and take care of your

customers and actually give them true

value and rebuild that reputation that

you used to have? Maybe get back to

that. Maybe get back to like like

honestly if they just did a marketing

campaign that was like try us. Order

Door Dash on Chipotle and if you get a

small burrito, you get your money back.

And I just I want to see them load up

that burrito so damn fat that it like it

comes ripped and then they throw some

extra in the bag just on top of that.

Some extra meat in the bag like the

expensive stuff. Just to reiterate that

you're getting your load, right? Like

that I feel like could almost go viral

to go anti- uh this. But you're still a

t in a tough environment. So that

doesn't change. you know, it doesn't

that doesn't give people more money

again, but it maybe gets people to focus

on Chipotle more versus the others. So,

anyway, uh they say they're looking at

Q4 with a conservative view. We're

trying to re-engage people through extra

promotions that we ran. We're trying to

get the consumer back into our business.

You know, once you lose people, it's

really hard to get people back. You

know, once you lose that consistency, uh

it seems the consumer Yeah, they need a

Sydney Sweeney. Exactly. [laughter]

Consumer environment is deteriorating

and the many marketing efforts are not

fully offsetting traffic. So it's like

there you can still try to market but if

you blow too much like I rather than

spend the money on advertising just go

pure social in my opinion and and you

know get people to be like damn they

really load up the plate now. That's the

business you want to build because

that's the business that'll have a

reputation for the very long term

anyway. Uh so yeah, I mean this is a

perfect example here of just this sort

of layoff environment that we're in

where people are really constrained. Uh

and and it sucks. I mean look at this.

We believe the consumer slowdown is

really affecting our business in a

meaningful way, but we would never let a

crisis go to waste. You literally have

Chipotle saying what's happening is a

crisis. I mean to be frank the crisis

that I think is going on is the crisis

in their stock because if you look at

their stock since peak these puppies

have eviscerated value. We are now down

on Chipotle from their peak of $69. We

are now down 52.2%.

More than half of the value of this

company has absolutely been eradicated.

Uh so and I part of that is because a

lot of these restaurant chains they they

grow their revenue by adding stores but

at some point you start cannibalizing

your own you know other stores by just

continuously adding more. That's why

comp sales are such a good measure. In

case you're not familiar when you look

at uh comp sales you're comparing your

existing restaurant sales to um existing

restaurant sales just to see what the

difference is. Uh and and these are just

companies that are suffering right now.

If we we saw this with uh I mean there's

a reason Target is laying off people as

well. Bloomberg just had a piece about

how uh the building materials

uh sector of even housing is probably

going to slow down. So uh you know

they're looking at like Owen Corp for

example and they're like hey like we're

going to see a slowdown in building

materials as well because people are

just they're kind of running out of

money there. And and mind you, remember

what I say sort of about the consumer.

We had this explosion of enthusiasm and

euphoria after Trump got elected because

people, you know, had this mindset of,

okay, pro business, stocks will do well,

we could spend, hiring will do well,

there'll be tax cuts. Uh, great. But at

some point that euphoria also goes away

and we get back to reality, which is

like, ah, we're still kind of in like a

I call it a a slow bleed economy. You

know, I don't like to say I don't really

like the idea of a soft landing, mostly

because soft landing implies like we're

on final approach in a plane and we're

actually coming into land. I think of

this as more as just like we're kind of

like, you know, we got like buff uh

during CO or like maybe like really big

during CO or whatever. Uh and and now

we're just like slowly getting cut and

cut and cut uh walking through a field

of cactuses and we're just sort of

slowly bleeding out. Uh, and so it's

it's that doesn't mean like the stock

market's going to fall off a cliff, but

you're going to keep seeing these signs

where like one at a time these companies

just start getting taken out basically.

So, uh, comp sales increased.3%.

It's actually like this is you have to

understand that is negative because now

I want you to adjust comp sales for

inflation, right? adjust comp sales for

inflation and their sales basically

shrunk what 2.5%.

Right? So that sucks. And those

delicious margins that uh Chipotle has

always had shrinking. It's because of

the economy stupid. You know, as as they

say, it's economy stupid. Uh so

highfrequency uh companies like FiServe

uh you know I'm I'm heavily concerned

about SoFi. I love SoFi. Okay, don't get

me wrong. I think they are an example of

like banking done right. But I do think

that one of the next order effects of a

company or of this sort of economy we're

in is that a company like SoFi, which

is, you know, just rejected the 3175

line essentially here,

SoFi is so heavily exposed to personal

lending that once we start seeing a rise

in personal bankruptcies because people

can't get a new job, unfortunately,

that's where personal loans will

probably start getting hit a little bit

more. And so look at what's moving. I

mean, look at these. We were looking at

these in the course member liveream this

morning. Uh Parker Hennean, Rockwell

Automation,

Symbotic. What do these companies have

in common that are doing really well

right now compared to like a Cheesecake

Factory or a Chipotle? They're not

relying on the consumer. The consumer is

crushed. The next order effect of that

is going to be when the consumer stops

paying their bills. you know, SoFi

doesn't have that issue yet. So, that's

obviously a real risk factor. And I'm

not trying to like bag on SoFi. I love

SoFi. I'm just saying if you're in SoFi,

it's something to keep in the back of

your mind as a very real risk factor.

Uh, but you know, the consumer getting

whacked. We see it over and over again.

Uh, so now another thing to look at when

you look at Chipotle here, uh, is

they're blunt about it. We continue to

see persistent economic pressure. I

mean, they're calling this a crisis.

Now, they say they're trying to sharpen

their marketing message, but again, you

still have this this impression of them

trying to cut costs everywhere they can.

Now, let's see if that actually exists

in their earnings call because sometimes

what you could do is you could actually

see that executive pressure in here.

Additionally, inflation is accelerating

in the mids single digits primarily due

to tariffs and rising beef costs and we

expect this to remain in 2026. We do not

plan to fully offset this incremental

inflation in the near term because uh

they don't have PP, right? This will

pressure margins. Remember how I have

always said that tariffs will bite

companies when companies start taking it

in the margin. Nobody wants to take it

in the margin, but they don't want to

lose even more market share than they

have. At the same time, they're paying

more money for labor. Operating costs

are up, marketing costs are up. Uh

they're trying to spend more on

marketing, but they can't. It's not

working. Uh as if we look at other Yeah,

that's all they talk about regarding

costs. This their awareness of cost

though trickles down. You know, district

managers call store managers, hey, we

need to get cost down. when he costs

down, when he costs down, that just

means you're going to get a smaller

burrito. I remember that at Jamba Juice,

you know, I like when I worked at Jamba

Juice, people wanted to see me like load

up that that smoothie, you know, with

the fruit. Uh, and and then when you

when you actually did it by the size

that the scooper was supposed to be, it

felt like you were kind of like jipping

the customer cuz they gave these like

really funky small scoops. Wow, what a

surprise. The store I worked at uh uh

you know, 10 years ago went bankrupt

like four years ago. Uh because, you

know, they started getting into this

mindset. Oh, we got to cut cut cut cut

cut cut cut cut cut cut cut cut cut cut

cut cut cut cut cut cut cut cut cut cut

cut cut cut cut cut cut cut cut cut cut

cut cut cut cut cut cut cut cut and I'm

like man this is bull crap and I always

try to give people a really thick ladle

of food. Uh but anyway uh in our

best-in-class teams we focused on

doubling down on restaurant execution,

sharp messaging fine. We've got comp

[clears throat] sales are basically

down. Uh now average check did increase

1.1%. That's sad. So average check

increased 1.1%. comp sales only up.3

which is negative when you look at

inflation which means that yeah no

surprise lower transactions so you're

getting fewer people coming through the

business so then let's see any other

comments here outlook we are

anticipating declines wow for the full

year they think comp sales will actually

turn fully negative so then if you take

inflation off of that it's even more

negative uh wow wow wow uh yeah I I

mean, it makes sense. It's a consumer

crisis and and it sucks. Uh, somebody

writes, "Kevin was the best scooper.

Nobody scooped better than I did."

Well, I'd like to just say I took care

of my customers.

Um, remember, you know, the name was me,

Kevin, providing more. Uh, who knows,

maybe I'm the reason the Jamba Juice

went bankrupt. I just I just loaded up

the customers too much. I gave them more

than they paid for. or I gave them so

much. I gave I gave.

Uh but anyway, so so yeah, I mean that's

just the consumer environment uh we're

in and it makes sense why people flee to

companies like even AMD. I mean AMD's

had some phenomenal momentum. But look

at I want you to understand Symbotic.

You know Symbotic has been this play

that we've been talking about since 20

bucks in the course member live streams.

And the beauty about a company like

Symbotic is that they sell to a company

like Walmart. And what's so great about

Walmart? Walmart is the place people go

to when you get squeezed on money.

Walmart, Sam's Club, which is obviously

owned by Walmart. Get it? Sam Walton.

Anyway, uh Costco, right? These are

where people are going. Now, what helps

support those companies? Well, they

don't want to raise prices because they

want to be known as the value brands. So

what do they do to to uh increase their

margins? They don't hire more people.

Walmart effectively has a hiring freeze.

So what do they try to do? More

robotics. What does Symbotics supply to

Walmart? Industrial robots for

automation. You know where like Parker

Hannifan industrial play. What are they

trying to do? More robots to try to

increase their um their automotive uh or

automation capacities. Look at um if you

haven't seen yet, the New York Times

robotics article with Amazon. This is

huge. This is what's happening because

companies are getting they're taking it

in the margin. Look at this. Amazon

plans to replace more than half a

million jobs with robots. We don't even

have half a million people working in

the automotive industry in unions in

America. I think we've got like 350,000

union workers still working, not

retired, uh in in the UAW. But anyway,

over the past two decades, no company

has done more to shape the American

workplace than Amazon. Did you know, by

the way, I didn't know this uh the

Amazon logo, like what what makes the

Amazon logo? I did not know this. So,

just like little, I guess extra fun

fact. I also, who knows, maybe it's not

true. I think it is. Uh, it makes sense

that it would be true, but I never knew

this, but apparently uh Amazon

uh Amazon

is the place that you go to to get

everything from A to Z and like that's

the the little logo that they the little

orange. Anyway, I I didn't know that.

[laughter] Oh, that's cool. Uh but

anyway, uh in its ascent to become the

nation's second largest employer has

hired hundreds of thousands of warehouse

workers, built an army of contract

drivers. now in interviews and a cache

of internal strategic documents. This is

what I love about the reporters is that

like they get these internal documents

and all these leaks, right? But uh

revealed that Amazon executives believe

the company is on the cusp of the next

big shift, replacing more than half a

million jobs with robots. Amazon's US

workforce has more than tripled since

2018 to 1.2 mill. But Amazon's

automation team expects the company can

avoid hiring 160,000 people that it

would otherwise need by 2027.

That would save about 30 cents on each

Amazon item that it picks, packs, and

delivers. Executives told the board that

they hoped robotic automation, that's

where money is going to be made, folks,

not in humans, not in consumer plays,

but in industrial

robots.

uh to continue avoid adding to its

workforce in the coming years. They

expect to sell twice as many products by

2033. I totally agree. Amazon's not

going anywhere. That would translate to

more than 600,000 people whom Amazon did

not need to hire. Facilities designed

for super fast deliveries. Amazon is

trying to create warehouses that employ

few humans at all. And documents show

that Amazon's robotics team has an

ultimate goal to automate 75% of its

operations. Of course, it's it like

Amazon's robotic revolution.

All I just want to know is exactly every

single company in the Amazon robotics

supply chain uh for for you know what

move the racks uh the pickers the

industrial arm robots everything man

that's what you got to do is put

together a list of Amazon uh robotic

plays uh but yeah I mean unfortunately a

lot of people especially even seasonal

workers are going to get hit by the way

kind of sad uh I hate to say this But uh

do you see why how she has this

transparent backpack right here? A lot

of these companies are getting into

transparent backpacks because they're

worried about workers stealing.

Isn't it Isn't it like this picture is

actually really sad if you think about

it? It's built into an article of uh you

know a a well first of all I mean let's

just be frank a uh a race that has been

horribly discriminated against uh for

you know hundreds of years or

potentially even thousands of years. Uh

and then you're working a job that's

going to get replaced by a robot. So

you're not building any like what skill

set are you building in this job? You

know you're taking this job because you

have to pay the damn bills. You know

maybe you're a mom. You got to feed your

freaking kids, right? So, you're not

building any skills. You're getting a a

paycheck just to try to try to get by.

And then like the definition of like

corporate power is you don't even get a

nice backpack. You have to use a

transparent backpack to show that you're

not stealing from the company. You know,

it's

it sucks. Uh and and this is

unfortunately one of the the the big

downsides of capitalism is these are

going to take a lot of jobs. Uh and now

in the future it does lead typically to

greater per capita income, right?

Generally wealth across the nation goes

up through a capitalistic structure, but

there's just going to be a lot of pain

in between. And that pain shows up in

consumer stocks. that pain shows up in

the crisis that we're seeing with

Chipotle. Uh, and

>> why not advertise these things that you

told us here? I feel like nobody else

knows about this.

>> We'll we'll try a little advertising and

see how it goes.

>> Congratulations, man. You have done so

much. People love you. People look up to

you.

>> Kevin Praath there, financial analyst

and YouTuber. Meet Kevin. Always great

to get your take.