Motley Fool Money - Different Customers, Different Retail Results

Episode Date: September 1, 2023

The outlook for major retailers depends a lot on whether their core customers are feeling the pinch.  (00:38) Jason Moser and Bill Mann discuss: - Troubling signs on consumer savings rates dropping and more people dipping into their 401ks. - How the consumer crunch is affecting retailers like Dollar General, Big Lots, Five Below and Chewy.. - Why Lululemon is bucking the trend, and Salesforce is cruising despite tighter budgets in enterprise software too.   (19:06) Certified Financial Planner Matt Frankel talks about how student loan borrowers can prepare for payments to begin again in October and the new programs in place to help borrowers.  - You can find the Department of Education’s website and resources here. - And here’s the White House’s fact sheet on the SAVE plan (30:34) Jason and Bill break down two stocks on their radar: TakeTwo Interactive and Samsara.  Stocks discussed: DG, BIG, FIVE, CHWY, LULU, CRM, TTWO, IOT Host: Dylan Lewis Guests: Bill MAnn, Jason Moser Engineer: Rick Engdahl Learn more about your ad choices. Visit megaphone.fm/adchoices

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What? Oh boy. Fantastic. You guys go hard, man. Daredevil Born Again, official podcast Tuesdays, and stream season two of Marvel Television's Daredevil Born Again on Disney Plus. The consumer crunch is coming, even for pet spend. We dig into all the retail results.

Motleyful Money starts now. That's why they call it money. The best thing. Cool global headquarters. This is Motley Fool Money Radio Show. It's the Motleyful Money Radio Show. I'm Dylan Lewis. Joining me in studio, Motley Fool Senior Analysts, Bill Mann and Jason Moser.

Guys, great to have you both here. Thanks for having me back. We've got Back to School lesson on student loans and stocks on our radar, but we're going to kick off today checking in on the health of the consumer. Jason, we have a report from Lending Club showing 61% of Americans are living paycheck to paycheck. This is something you've been tracking over time. Where are we on the alarm meter here? I mean, well, it's not getting better. I mean, you'd like to see this number a lot lower.

Right now it is still precariously high. I think it's something to keep an eye on. I think it's something that really matters more for the lower income earners, right? And that's really where this breaks out because while you see that, you know, that 61% number, you can see it kind of ebb and flow between 58, 63%, or whatever. But if you look at this sort of break it down by annual income, right, you've got 78% of consumers earning less than $50,000 a year. And 65% of those earning between $50,000 and $100,000 a year,

their living paycheck to paycheck, right? So considerably higher than that 61% number. Whereas if you look at those earning $100,000 or more, only 44% of that demographic are actually. actually reported living paycheck to paycheck. Now, that actually still seems pretty high as well. And we've seen over this last couple of years, right, those higher income earners are making tradeoffs and shopping at places where they might not normally shop. We saw Walmart, with a lot of commentary over the last several quarters, bringing in some of those of those higher

income earners. It's absolutely concerning, particularly when you look at those lower income families, because that's not something that's poised to get much better anytime soon, particularly, as we know, those student loan payments are getting ready to start back up. Bill, this to me seems like we're seeing the downstream data of a lot of the upstream macro factors we've been watching for a while, namely inflation, as Jason was talking about. Definitely inflation, but one of the things that I think about and I track a lot is the personal savings rate. And during 2020, and, you know, I think that you can have a long conversation about whether

the government made the right move. But I think that they absolutely, their heads were in the right place in terms of, in terms of stop student loan payments and things of that nature. The savings rate in 2020 went as high as 30 percent, and this last month it was below 4 percent. And in an inflationary environment, you have to wonder whether people writ large have been encouraged to spend money thinking that the status quo was going to remain in place, that we are lucky at this point that we still do have a relatively low unemployment rate. So there are people who are living paycheck to paycheck, but at least most people have a paycheck. But I'm really starting to get concerned. We're seeing that savings rate dip, and we're also seeing

increasingly more Americans dipping into their 401Ks. Reports from Vanguard, Bank of America, and Fidelity, all indicating hardship withdrawals on 401Ks are increasing. Bill, what do you make of the spike that we're seeing? Yeah, and keep in mind, when they say hardship withdrawals, there are standards that you have to meet to make a withdrawal from your 401k. You can't just show up and say, things aren't good. You know, like, there are, there are standards. So it's very concerning to me. And we have seen a huge amount of people who make $50,000 and below who are 50 and above who have so little already set aside for retirement. And you are, you're robbing your future at this point. And I, it concerns me particularly as we're coming into a period of time in which people are going to have to start

to pay off their student loans again, which is a trillion dollar issue, that we find ourselves, so many Americans find themselves in such a level of distress that they have to borrow from their futures. Bill, that's a perfect tease for our C-Sgment interview later in the show. We're going to have Matt Frank Lawn talking about the resumption of student loan payments. I want to take what we just talked about here with Consumer Health and then look a little bit at some of the retailer earnings because I think we're seeing a lot of these trends materialize. Bill, you zoomed in on results from Dollar General. This is generally a provider out in the retail space that we think of as a very well-run business, and it seems like they too are getting

bitten by a lot of what we're seeing here. Yeah, so their earnings came out this week, and they missed on nearly every single measure, and their earnings per store were basically flat, and that is something that you haven't really seen, you know, and so here's a quiz, actually. There are 13,500 McDonald's in the United States of America. How many dollar generals are there? Because you ask the question, I feel like I have to say more, but my instinct would be less. More. $19,000 general stores.

I like that we hedged that. I went low-b-high, because one of us was going to be right, Jason. It was in honor of the late Bob Barker. Yes, exactly. Look, you know the move, right? If I ask you a question, the answer is absurd. And you're bringing this up, Bill, because this is a massive reason. retailer. It's a massive retailer, and I don't think people realize the reach and the breadth of

dollar general. And so their earnings, I think, had some real, really interesting things to them. And so the stock at this point is down as down from its peak as it has ever been, nearly 50 percent. It's been cut in half. And they said that their gross profit had declined primarily due to inventory markups and increased shrink. which is theft. Yeah. We've been seeing that pop up a lot this retail earning season. Yeah, people going into the stores

and not paying for the stuff. But I'm always reminded something that I learned from Django Unchanged, which is the second thing they mentioned is the most important one, which is that a greater proportion of their sales are coming from the consumables category.

So if you think about a dollar general, what they have done is they've gone and bought close-out stuff. So you never really know the next time you go in what's going to be. there. I think one of the things that's interesting with Dollar General, they noted in the call, was in addition to a lot of the other macro factors we talked about that are swirling, they said food stamp

recipients are going to be receiving about $100 less in benefits per month on average starting in the spring of 2024. That's as we see some of the pandemic relief programs phase out. That is one of those things we kind of need to keep an eye on, but it's in a little bit in the distant future. Yeah, I mean, all of these things are related. Now, Dollar General is very much part of the trade down. that Jason suggested, you know, why you're seeing great results from Walmart because people who didn't shop at Walmart now are feeling enough of a pinch. Dollar General is definitely one click down from that. And I think that's why the consumables issue is so interesting. They are trying to make themselves a much more predictable shopping experience when that's not what they've been

in the past. And I think that's going to be a really, really hard lift at a period of time in which people are becoming more and more desperate with their financial situations. We also, sticking with the retail theme, got an update from Big Lots this week. Jason, seems like a lot of the forces we were just talking about, Dollar General, very much in play with the Big Lots story. No question about it. I mean, the consumer focused much more on the necessities, not the discretionary. A lot of the language in this call was really concerning, and the numbers were concerning, it really made the reaction, that initial reaction to the stock was confounding.

It made it up 30 percent. And shares are down 55% a year to date. So you sort of take that in wonder, what the world is wonderful. There's nothing as powerful as low expectations. Well, these were, they were not good results, right? I mean, we're talking about Com sales down 14.6%. Earnings loss of $3.24. And that was attributed all to this challenging environment, right?

They're talking about the core lower income consumer remaining under significant pressure has limited capacity for higher ticket discretionary purchases. And that just plays right. right out of Big Lots wheelhouse, right? They're just not going to be able to really succeed in this type of environment. They noted in the call, too. This is really concerning. For the past one and a half years, they said, and I quote,

we've been playing defense as the consumer environment quickly and sharply deteriorated. And I think it's fair to assume that things are going to get worse before they get better, which means these companies, Dollar General, Big Lots, and their ilk are just going to be, they're in a real predicament. Bill, anything on the Big Lots earnings? Can I mention some good news here? Oh, yeah. Come on, we need some big names.

We're so down already. We're allowed to talk about happy things. I don't know what's happened to us. We were giggling before the show, and all of a sudden, we started like, it's terrible. Keep in mind that these companies are basically at the tail end of the inventory chain. And one thing that we know from 2021 and 2022 is that inventories at stores across the board has been a mess.

Supply chains have been a mess. And I suspect that they are going to start to see some good pricing available to them for things that they have traditionally been able to sell at a tremendous margin. So I suspect that the front end of the business is going to be better. But it doesn't really help on the consumer side. But there is good news there. Bill, I'm going to take your cue here and wrap us up with discount retailers that have some good news. Five below also reported this week. and they maintain their full year outlook in this dower economic picture.

What's going on with the earning story there? Well, you know, when you've got a dollar store versus a $5 store, that's a pretty big difference, right? You've got a, you're at a different set of the market. Yeah, it was good news from them. And I think a lot of it has to do in the fact that just as I was saying with Dollar General, how they're trying to get more into consumables, five below has remained a treasure hunt type store. Like, you have no expectation the next time you go in that the thing you see is going to be there the next time. So they haven't really moved away from that.

I also thought it was interesting that they're rolling out a perhaps a 10 below, which is the next, I guess. That's 10 times more expensive. Exactly. They're finding upside, is what you're saying, Bill. They are finding upside by sticking to their knitting. It's a much smaller store with a much smaller footprint than Dollar General. And so I don't know that Five Below feels the same level of, I don't know if you'd call it social obligation, but the places where you tend to find Dollar Generals are very small towns where it is the store of choice.

And that's not where Five Below is. And for better and for worse right now, it's benefiting them. All right. Coming up after the break, we've got updates on three heavily followed Fool stocks, including Jason's radar stock from last week. Stay right here. You're listening to Motley Full Money. Welcome back to Motley Full Money. I'm Dylan Lewis, joined in studio by Bill Mann and Jason Moser.

We're going to continue the retail theme, gentlemen. Jason, last week you gave us a woof-woof and said you were watching Chewy earnings. Shares fell 10% after the pet supply company reported. What did you see in the results? Well, I saw some good news and I saw some bad news. And let's start with the good news. Why not? Look at the results. I mean, net sales up 14.3% to almost $2.8 billion. So clearly the growth is there. You look at the metrics that matter with a business like this, and I think most of that you look at things like Autoship and the net sales per active customer. Those metrics are really strong, right?

The Autoship continues to make up an overwhelming majority of the sales. 76% of total sales for the quarter. That was up from 73% a year ago. Net sales per active customer up to $535 from $462 a year ago. So we're seeing, you know, what we're seeing the thesis play out here, right? there is a resilience in pet spending. Now, the flip side to that is, and management noted this in the call, pet household formation remains relatively muted.

And I think that's what the market really ultimately sort of focused in on here. And that's why the stock took a little bit of a hit, because they said in light of recent trends, we're now expecting a wider range of outcomes. That's code for uncertainty. And we all know how the market loves uncertainty, right? Jason, can you only unpack pet household formation? I had the same question.

So I think that sort of speaks to all of the growth that we saw on that formation over the last three years, right? When we were all stuck at home and we didn't have anything to do, people were adopting pets left and right. We pulled a lot of that growth forward. And now what we're seeing is this additional bringing of more pets in that's just kind of slowed down. We've seen, unfortunately, some folks kind of giving those pets back away, which we hate to see that kind of stuff. But ultimately, that growth we saw in that formation over the last. three years really has slowed down considerably so. I want to ask you about the the average spend per customer because $535, I mean, you have dogs and I have a dog, that seems like a lot.

And it seems like a place where I'm not sure that they can really expect that to continue. They have to, as you said, depend more on additional customers coming in the front. I think that's the key. You know what I mean? My pet spending for, For example, we've got three dogs and a cat. It's going to be relatively predictable because I'm not adding to another animal, I don't think. So at some point or another, yeah, if you want to really juice that, you've got to keep on growing your users. You've got to grow your customer base. And somewhere around 20 million or so now, they've done a great job.

Again, they benefited from these last several years of bringing a lot of new customers in. And they're doing a great job of retaining them, clearly, as these auto sales and the revenue growth shows. But, yeah, you can only expect that net sales per active customer to go so far. One place we are not seeing the spending cutback hit, Lulu Lemon. The athletic apparel company raised full year guidance on the top and bottom line after reporting an 18% increase this quarter. Bill, what is Lulu doing right? Big yoga is killing it.

Yeah, absolutely. We just had such a dour section. This is what we should have led with. You know how everyone else in the world is talking about the slowdown in China, the economic issues in China? You know who's not talking about that at all? Lulu Lemon. Lululemon had a 61% revenue spike in China, which is bonkers.

Because Lulu Lemon, we think of it here as being a luxury company. It's truly luxury in China. And the luxury companies in China have across the board seen absolutely horrible results. So Lululemon comes along and Big Yoga is just doing great. And so I don't really know what it is. They don't have a different product mix in China. it's just something that continues to capture the minds of their target market. Jason, we were talking a little bit about some of the trends we're seeing in different portions of the consumer market.

Is this just audience for Lulu Lemon and Core Customer being different than some of the other retailers we talked about before? I think so. And I really, just to piggyback on Bill's Big Yoga, because it's number one, I love that big yoga. But the other thing, one of the reasons why I think Lulu Lemon continues to succeed is their ability to have experience. expanded so far beyond just yoga. I mean, this is, we're talking like golf, tennis, dance. I mean, they are really growing their offerings and building out more things for more customers. That's ultimately, that was the big question mark with this company for so long is like, how big is that audience? Is this just really a niche play? Well, now what we're seeing is they're just,

they're becoming more things to more people, which is, which is what we want to see. And to your point there on the spending the consumer, I mean, it is, it is a higher price point. We know they're not going to concede a lot on pricing. And so when we go back to, you know, those living on paycheck to paycheck, and we refer to that number of those earning $100,000 or more, only 44% are reported living paycheck to paycheck. That absolutely plays into Lulu Lemon's favor, even when times are a little bit harder. If you're tired of the retail beat, don't worry. We're going to wrap up our earnings conversation with a tech company. Jason, we saw earnings from Salesforce this week. And generally, we've been seeing.

seeing a similar narrative with enterprise spend that we've been seeing with consumer spend, a little bit tighter, people maybe not as willing to spend on new projects or new software systems, doesn't seem to be biting Salesforce too much. It's not. Now, I will say they did note in the call, as we've seen with a lot of these enterprise software companies, they are still seeing elongated sales cycles as well. But I think that Salesforce's market leading position really allows them to play a little bit more offense as opposed to sort of the defensive posture we've seen from a lot of their smaller competitors. They, built such a strong portfolio of offerings that cover the CRM spectrum, right? Customer relationship

management. You've got Data Cloud, Tablo, Slack, Mulesoft, and all of these businesses really feed off of one another and add to the Salesforce story. And so, you know, they continue to loft up these good growth numbers of revenue is up 11% for the quarter. They are really executing on the share buyback program, which is historically something they had never done before. So I think that's adding a little optimism as well. They bought that $8 billion worth of stock over the last 12 months, which is actually bringing the share account down. Go figure with tech companies that's not supposed to happen. Not always the story. Yeah. Stop the presses. Bill, you dug into the results a little bit. What did you see? Well, I think one of the more

interesting things about Salesforce is the big joke about Salesforce is nobody really knows what they do because they kind of do everything. But Salesforce has had an opportunity and what they have done in the past is that they've bought a huge amount of companies. They have grown very quickly, as Jason and said through acquisition of other companies, it's really interesting to me as depressed as the pricing has become for a lot of these smaller tech companies that we haven't seen more activity out of Salesforce.

One day to point with Salesforce, and I'll let you go in the last five years, the number of $10 million plus customers has tripled. So they're doing something right. Same with Lulu Lemon. All right, Bill Mann, Jason Moser. Fellows, we're going to see you guys a little bit later in the show. Up next, we've got an update on the student loan payment story.

Stay tuned. You're listening to Motleyful Money. Welcome back to Motleyful Money. I'm Dylan Lewis. In March of 2020, the government paused student loan payments and interest accumulation, providing pandemic relief for more than 40 million borrowers. That pause is ending this fall, and while borrowers won't need to start making payments until the beginning of October, if you have student loans, now is a good time to check in and prepare for the payments to resume. Certified Financial Planner and Fool contributor, Matt Frankel,

join me to talk through how to get up to speed on your loan and the new programs in place to help out borrowers. This September is back to school and back to student loan interest. Motley Fool contributor and CFP, Matt Frankel, joins me to talk through the X's and O's of student loan repayments. Matt, thanks for being on. Hey, Dylan, student loans were a complicated topic before all the recent news, so now there's a whole lot more to unpack, and I'm glad to be here.

Yeah, I think it's one of those things that people have said, you know what, I'm just going to put this one on the back burner for a little while and wait for things to get figured out. We are coming up on the date where student loan interest resumes on 9-1. Payments resume on 10-1, but I think this is probably something that needs to come back to the forefront of people's minds. Yeah, a lot of people haven't thought of student loans in the past three and a half years. Not only have they not made any payments, they haven't logged on to their servicer. They haven't, you know, researched the latest repayment plans and kept up with public service. loan forgiveness and things like that.

So it is something people need to keep in mind, but it doesn't need to be the kind of panic, scramble to fit student loans in your budget that you might think. Yeah, so if you're someone who has student loans and has not been paying attention as we've been in that student loan payment pause, what would you advise the first couple steps

for getting started, getting reacquainted with what you have in your loans? Well, one, figure out who your loan servicer is so you could log on. A lot of people don't realize this. the three biggest student loan servicers all exited the business during the payment pause. So there's a very, very high chance that your student loan servicer is not who it was last time you made a student loan payment. So that's number one.

You can do that on the Department of Education's website. That's the first step to being able to log in to see what you owe, to see what repayment plan you're enrolled in. We'll talk about the new repayment plan, I'm sure, in a little bit. But that's the big number one step that will alleviate a lot of people's kind of unsurbed. about what's going on with student loans. Okay, so you get back into the system. You know who your provider is and you're logged in. Matt, what about when people are seeing the sticker shock of,

okay, this is what my monthly payment is? This isn't what I've gotten my current monthly budget. How do I try to square these numbers up? Well, two things. So one, there is what the Biden administration is calling the repayment on ramp. It's essentially a 12-month forbearance period that anyone can take advantage. of if they want to. It lasts through the end of September 2024. Any miss payments within that first

12-month period, they won't be reported to credit bureaus, they won't be sent to collections, your loans won't be put into default. You'll still be accumulating interest, but if you need that extra time, it's there, which is number one. And number two, the save plan, the new repayment plan, is designed to replace the most popular existing income-driven repayment plan. And it reduces required payments for borrowers significantly across the board. And it does it in two big ways. It reduces the amount of discretionary income you're required to pay on undergraduate loans from 10% to 5%, so cuts it in half. And it decreases what is considered discretionary income in the first place. It raises the threshold to anything above 150% of the poverty line,

all the way up to 225% of the federal poverty line. So there's a smaller portion of income that the government's going to be looking at and the percentage of that that you're going to be required to pay is a lot less. So the save plan is there, enrolling it if you are not automatically enrolled already because of your current plan. So don't panic. There are some ways to potentially help fit that payment into your budget and help the timetable work a little better for you. If folks are interested in the save plan, where should they go for more information on that, Matt? At Fed Loan, the government's federal or federal student loan webpage, It's run by the Department of Education.

The White House has actually put out some great fact sheets that are like a page or too long that they cover really the broad strokes of it. But yeah, check out the Department of Education's website. The Save Plan is virtually every federal student loan borrower could benefit from it. In better news for some student loan borrowers, just under a million borrowers will have their debt discharged this month. Matt, what are the details on that? Yeah, so first of all, if you were among that 800,000, people are thereabouts, you would have already heard. What's happening, this has to do with loan forgiveness programs, specifically the ones related to income-driven repayment plans like

the Save Plan. Basically, income-driven repayment plans are set up to forgive any remaining balance after either 20 or 25 years of in-repayment, depending on whether the borrower has undergraduate or graduate school loans. The problem was in the past not all the payments that were supposed to count toward that 20 or 25 years were counted. For example, if you consolidated your loans like I did, because when I graduated college, I had like 12 separate student loans. Each semester is a different one. And sometimes you have subsidized and unsubsidized. So if you consolidated it, under the previous rules, it reset the clock. So they're going back and making this one-time adjustment. Unless you got your student loans more than 20 years ago,

you are probably not one of the initial 800,000 people. But they're making this one-time adjustment to everyone's account, and it's estimated that most borrowers are going to get at least three years closer to student loan forgiveness than they were before. So a lot of people, it adds up to a lot. $39 billion of debt is immediately going to be discharged. Some people are even going to get a refund if it turns out that they were paying for longer than they were supposed to.

If they were paying for 22 years while they were supposed to be paying for 20, anything they paid in that last few years, they can get a refund for. But it will move a lot of borrowers. I'm not at that 20-year point yet. I'm not quite there. I'm a little closer that I'd like to admit, but it's going to move me a few years closer to forgiveness than I otherwise would have been. And over the next several months, they're doing this in stages based on how long you've had your student loans for. Everyone should see a little bit more payment credit added to their student loans. And by the way, this COVID repayment pause counts. That's three and a half years.

you weren't making payments, that counts toward your forgiveness time table. Matt, I wouldn't think of it as aging. I would just think of it as being closer to forgiveness date. It's a nicer, it's a nicer, easier way to think about it. It'll be a nice, like, you know, 45th or so birthday present to me eventually when my loans do get forgiven. There you go. There's the sunny side of it. We've been taking primarily the borrower angle in this discussion, but there's a pretty big macro story with this, and it's one we've been following for a little while. the idea that the resumption of student loan payments means that they're going to be less consumer dollars out there. Budgets might be a little bit tighter.

What are you watching and paying attention to to get a sense of the health of the consumer with this? Yeah, so you're absolutely correct. This is going to be a nice hit to the consumer, not a nice hit, a pretty big hit to the consumer. The average student loan payment is a little under $400 per month for federal student loan borrowers. and that's a payment that most people have not put in their budget. If you're curious, about 98% of people have not been making student loan payments during the pause, even though they could chip away at their balance interest free if they wanted to. So it is going to be kind of a financial shock for a lot of people to fit this into their budget.

Like I mentioned, that on-ramp is there to help. But this is something that could have big economic consequences, because that $400 a month is not going to come out of somebody's housing budget or somebody's car payment budget, that's going to come from discretionary income. That's going to come out of money that they would take to the store and spend and stimulate the economy. So although it is a relatively, in the scheme of things, a relatively small sum of money we're talking about compared to like total gross domestic product, things like that, it is going

to be kind of a big factor because it's that part of spending that is really discretionary. and retailers that sell discretionary things could definitely feel a sting. And we could see an uptick in other kind of loan defaults of people have trouble making their other loan payments. But for the most part, it's a discretionary part of the budget that people just aren't used to paying. So that's going to have to come from somewhere. Yeah. And I know one of the other factors that's kind of swirling with this story, Matt, is we've seen credit card balances rising a little bit as well. And so some of that discretionary or even just kind of month, month.

month, have to spend it, but don't necessarily have the cash, has already been put on credit card. So it seems like we're kind of looking at a very tight picture of the consumer in general. Yeah, and take advantage of that on-ramp in the meantime, if you need to. If you can make your student loan payments, by all means, do it. But when you think about it this way, you mentioned the high credit card debt. It recently surpassed a trillion dollars for the first time. The average credit card interest rate has gone up to 24%. So if you have credit card debt and you're trying to figure out what to do with paying your student loans while you're still paying credit cards, that could be a situation where that payment on-ramp could make sense. Yes, interest is

building on your student loans, but it could be better to knock out debt that is sitting there at 24% interest or whatever in the meantime and give yourself a few months. Well, meanwhile, your student loans are only accumulating at 5% or 6% or something like that. The math works out in situations like that with the on-ramp. And if you can take that, put all your effort into getting rid of your credit card that it can make fitting your student loan payment and your budget a lot easier a few months down the road. It's hard to be to guarantee you'd rate of return of 24%, Matt. Right. So, I mean, you could argue that's the best investment you can make. I don't know about you. I'm not a good enough investor where I can consistently make 24% returns. Maybe you are,

and you'll be retiring in five years if you could do that. No, I can't claim anything close to that, Matt. I've had one or two years like that. Matt, as we wrap, anything else people need to keep in mind as they're paying attention to the student loan story, either as a borrower or as an investor. Take advantage of the flexibility of student loan debt. It's literally the most flexible type of consumer debt there is in terms of being able to lower your payments, pause your payments. It's really easy to get a student loan forbearance or a deferral in most cases. If you need one, it's there. The on-ramp is there.

The save plan is there. There's a lot of flexibility there. touch with your servicer if you're worried about it and find out your option. So be true to your school. If you're catching this week's radio show in our podcast feed, we've got links to the resources Matt referenced in the episode description. And if you're catching us on the radio, you can find Motleyful Money daily on Apple, Spotify, and wherever you listen to podcast.

Coming up after the break, Bill Mann and Jason Moza returned with a couple stocks on their radar. Stay right here. You're listening to Motley Full Money. As always, people on the program may have interests in the stocks they talk about, and the Motley Fool may have formal recommendations. recommendations for or against, so don't buy or sell anything based solely on what you hear. I'm Dylan Lewis, joined again by Bill Mann and Jason Moser.

Burger King is feeling the heat this week. A judge ruled the company can face a class action lawsuit after customers have alleged the chain made whoppers appear twice as large as they actually are in advertisements, while the actual burgers served to customers are 35% smaller than those marketed. Bill, in prepping the show, you said that you had some flame broiled fire-hot takes on this one. And I cannot wait to hear that. I love me a frivolous lawsuit. We are the dumbest country.

The American Eater is undefeated. Absolutely. The people who have put forth the suit, and I do actually agree that this is a reasonable class action suit, because false advertising is in fact a form of fraud. But it's the dumbest form of fraud. Here's what I think that Burger King should do. Say, you know what? Okay, not only did we get that wrong,

But I think that you should taste one of the burgers that we use for the marketing shoots because it's got glycerin on it and the mayonnaise is actually Elmer's glue. And so it doesn't taste the same either. Is that okay for you? So for those reasons, Bill, I take the other side of this one. And I should note, I should note here, McDonald's and Wendy's faced similar lawsuits last year. And I think at the crux of this issue is what we see in the ads is not edible. I think that they should be thanked for making these things smaller. There may be a point there.

It's a public service. Taco Bell is facing the same thing here now, so this is not some sort of one-off. I mean, clearly there is something here, but I mean, we've been knowing about this since we were kids. I mean, this is nothing new. So clearly, I mean, the lawsuit, this is just somebody trying to make a point, right? I mean, it's not, this isn't something that just happened. I've been dealing with this all my life, Dylan. Is this status quo worth defending, though, Jason and Bill?

I feel like this is something where, like, I don't know that we need to plant our flag on false advertising. You know, listen, I give Burger King and McDonald's and Taco Belt all the room in the world to keep advertising and do whatever you can to bring out of traffic in the door. Because you think about the millions and millions of customers they serve every year. I mean, this is just, this is a drop in the bucket. Somebody looking for some easy money, I think. Well, you know, what do I know?

Sure. I think what may be coming next would be, for example, you know, there's going to be a class action on, you know, on Tinder profiles because, you know, those are 20 years old. and that's false advertising at this point. And yeah, it's in some ways, I think it's an abuse of the court system. I mean, there's really nothing to be gained from this. Well, it reminds me of the, what was it, the Netflix special, it was that documentary on the Pepsi. The Pepsi challenge.

Yeah, dude, where's my jet? Yeah. Right? Where you collect enough points and then you could win this jet. Now, clearly the jet was never something that was going to be offered. But you could even see the sort of the timeline of how Pepsi's marketing, went through this, they're like, man, maybe we ought to adjust this commercial a little bit, add a statement down at the bottom just to say, jet is not real or this offer is not real.

Now, the guy that took that to court ultimately ended up losing and he didn't get his jet. But you can see how this stuff plays out. You have to be very thoughtful when it comes to these marketing campaigns. For what it's worth, if I am working as an advertiser, either in-house or consulting for a fast food business, I am looking at this and saying, ripe opportunity for a commercial campaign where we show the food as it actually is and make it as appetizing as possible. Do you remember the Domino's campaign probably 10 years ago where they came out and they actually said, yes, our pizza is bad?

And then look at the stock from there. And it was incredible. Because you know why? They said, hey, we have the self-awareness. Our pizza sucks. You know what? We're going to make it better. And they did.

And look what happened. Yep. I'm just saying, if there's anyone who works in the fast food industry that's listening to the show, free marketing idea right there for you. All right. Let's get over to stocks on our radar. Our man behind the glass, Rick is going to hit you with a question. Bill, you're up first. What are you looking at this week?

I am super interested in Take 2 Interactive. And Take 2 Interactive Video Game Company, they've got all sorts of titles. They've got NBA. They've got WWE. They have a new game coming out. And it's one of the Dana White titles, you know, he owns Slap Fight. And so they have a video game coming out called Power Slap. Is Slap Fight just for the listeners out there? Is this exactly what it sounds like, Bill?

Right, these are not confusing words. These are not code for something else. It's literally, I slap you, you slap me, and we go until someone doesn't want to be slapped anymore. In a video game. Well, yes, but that's live. But they're bringing it out of a video game. It's such, it is such a low input, like idea and concept.

I cannot wait to see what this video game looks like. Rick, with that compelling pitch, a question about Take2 Interactive. Yeah, I actually owned Take 2. I became very interested right around December of 2020. And let me tell you, the view from the peak of that stock chart is glorious. Yes. How much longer until I get that view again? You know, it's funny because video game companies like Take 2 Interactive,

their budget for each video game is manifold higher than the development of a Hollywood. would, you know, a blockbuster movie. They're called the AAA rated games. I look at, I look at a company like Take 2 interactive and full disclosure, I am a shareholder as well. And I think, I think very highly of this company. Obviously during 2020, everyone thought that their kids were going to be playing NBA 2K forever. And, you know, that wasn't the case. They eventually got to go back outside. But these are companies with such powerful titles, such powerful franchises that I expect that you will be very happy with your holding of Take 2 Interactive over the longer term.

But since you did ask me a number, I'm going to just say seven. There we go. Seven. I'm going to hold you to that. Jason, what is on your radar this week? Yeah, just keeping an eye on a company that I've recommended called Samsara, not a very familiar name. I think for most ticker is IOT.

And as you may guess, this is a company capitalizing on the Internet of Things that we've heard so much about over the last several years. Earnings, as I said, came out Thursday after the market closed, and clearly the market seemed to be very happy with the results. As a reminder, this is a company. They help enterprise customers connect their buildings, equipment, cars,

other facilities, and ultimately helps them work better, work more together, ensure more safety, save money, be more efficient, all of that great stuff. But for the quarter revenue of $219.3 million was up 43% from a year ago, annualized recurring revenue,

$930 million now, up 40% from a year ago, and now 1,515 customers with annual recurring revenue of over $100,000. That's up 53% from a year ago. So a company with an extremely rule breaker-ish valuation, but they do seem to be breaking a lot of rules and winning a lot along the way. Rick, a question about Samsara. Based on my extensive research, I find that Samsara is really good at a thing called telematics. Yes, yes, yes. Telematics, which, and I had to look that up, and apparently telematics is a portmanteau of telecom and informatics. I'm sorry, I'm stuck here.

What the heck is telematics? Telematics is just exactly what I said. What the heck is a portmanteau? Telephones, information, Maddo. It's all together. It's just fancy stuff. You know, my high school French is paying off. Portmanteau. You never thought, but there it is.

Rick, thank you for your question. Which one's going on your watch list this week? Well, I love me a good portmanteau, so I'm going to go with telematics. That's awesome. Jason Bozer, Bill Mann, thanks for being here. Rick, thanks for weighing in on our radar stocks. That's going to do it for this week's Motley Full Money radio show. The show is mixed by Rick Engdahl. I'm Dylan Lewis. Thanks for listening. Catch you next time.