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How the Consumer Crunch Is Affecting Retailers

Motley Fool - Wed Sep 6, 7:51PM CDT

In this podcast, Motley Fool analysts Jason Moser and Bill Mann and host Dylan Lewis discuss:

  • Troubling signs on consumer savings rates dropping and more people dipping into their 401(k) accounts.
  • 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.
  • Two stocks worth watching: Take-Two Interactive and Samsara.

Motley Fool contributor 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 them. 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.

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 Sep. 01, 2023

Dylan Lewis: The consumer crunch is coming even for pet spend. We dig into all the retail results. Motley Fool Money starts now. It's the Motley Fool 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.

Bill Mann: Thanks for having me back.

Dylan Lewis: 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 LendingClub 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?

Jason Moser: It's not getting better. 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, and that's really where this breaks out, because why you see that 61% number, and you can see it ebb and flow between 58 and 63%, whatever, but if you look at this, and you're going to break it down by annual income, 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, they are living paycheck to paycheck, 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 reported living paycheck to paycheck.

That actually still seems pretty high as well, and we've seen over this last couple of years, those higher-income earners are making trade-offs 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 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 backup.

Dylan Lewis: 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.

Bill Mann: Definitely inflation, but one of the things that I think about and I track a lot is the personal savings rate. During 2020 I think that you can have a long conversation about whether the government made the right move. But I think that their heads were in the right place in terms of stopping student loan payments and things of that nature. The savings rate in 2020 went as high as 30%, and this last month, it was below 4%. 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. 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.

Dylan Lewis: 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?

Bill Mann: 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. There are standards, so it's very concerning to me. 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're robbing your future at this point. 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 so many Americans find themselves in such a level of distress that they have to borrow from their futures.

Dylan Lewis: Bill, that's a perfect tease for our C-segment interview later in the show. We're going to have Matt Frankel on 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 materialized. 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.

Bill Mann: Their earnings came out this week, and they missed on nearly every single measure. Their earnings per store were basically flat, and that is something that you haven't really seen. Here's a quiz actually. There are 13,500 McDonald's in the United States of America. How many Dollar General's are there?

Dylan Lewis: Because you asked the question, I feel like I have to say more, but my instinct would be less.

Bill Mann: More, 19,000 Dollar General stores.

Dylan Lewis: I like that we hedged that. I went low because one of us was going to be right, Jason.

Jason Moser: It's in honor of the late Bob Barker.

Dylan Lewis: Yes. Exactly.

Bill Mann: But you know the move, If I ask you a question, the answer is absurd. [laughs]

Dylan Lewis: You're bringing this up, Bill, because this is a massive retailer.

Bill Mann: It's a massive retailer, and I don't think people realize the reach and the breadth of Dollar General. Their earnings, I think, had some really interesting things to them, and so the stock at this point is as down from its peak as it has ever been, nearly 50%. It's been cut in half. They said that their gross profit had declined primarily due to inventory mark ups and increased shrink, which is theft.

Dylan Lewis: We did see that pop up a lot this retail earnings seasons.

Bill Mann: People are going into the stores and not paying for the stuff. I'm always reminded, something that I learned from Django Unchained, 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. If you think about Dollar General, what they have done is they've gone and bought closeouts stuff, so you never really know the next time you go in what's going to be there.

Dylan Lewis: 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 there 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 need to keep an eye on, but it's in a little bit in the distant future.

Bill Mann: All of these things are related. Now Dollar General is very much part of the trade down that Jason suggested, 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. I think that's going to be a really hard lift at a period of time in which people are becoming more desperate with their financial situations.

Dylan Lewis: We also, sticking with the retail theme, got an update from Big Lots this week. Jason, it seems like a lot of the forces we were just talking about Dollar General are very much in play with the Big Lots story.

Jason Moser: No question about it. The consumer focus much more on the necessities, not the discretionary. A lot of the language in this call was really concerning. The numbers were concerning. It really made that initial reaction to the stock was confounding, [laughs] up 30% and shares are down 55% year-to-date. You take that wondering what [inaudible]

Bill Mann: There's nothing as powerful as low expectations. [laughs]

Jason Moser: They were not good results. You're talking about comp sales down 14.6%, earnings loss of $3.24, and that was attributed all to this challenging environment. 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 out of Big Lots wheelhouse. 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, "We've been playing defense as the consumer environment quickly and sharply deteriorated." 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, they're in a real predicament.

Dylan Lewis: Bill, anything on the Big Lots earnings?

Bill Mann: Can I mentioned some good news here?

Dylan Lewis: We need some hits.

Jason Moser: Were so down.

Dylan Lewis: [inaudible] we're allowed to talk about happy things.

Bill Mann: I don't know what happened to us. We were giggling before the show, and all of a suddenly, we started, like, it's terrible. Keep in mind that these companies are basically at the tail end of the inventory chain. 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. I suspect that they are going to start to see some good pricing available to them for things that they've traditionally been able to sell at a tremendous margin. 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.

Jason Moser: 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 maintained their full-year outlook in this dour economic picture. What's going on with the earning story there?

Bill Mann: You know when you've got $1 store versus $5 store, that's a pretty big difference. You're at a different set of the market. Yeah, it was 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. 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.

Jason Moser: That's 10 times more expensive than Dollar.

Bill Mann: Exactly. [laughs]

Dylan Lewis: They're finding upside. Is that what you're saying though?

Bill Mann: They are finding upside by sticking to their knitting. It's a much smaller store with a much smaller footprint than Dollar General. 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 or for worse, right now, it's benefiting them.

Dylan Lewis: 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 Fool Money.

Welcome back to Motley Fool 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?

Jason Moser: I saw some good news, and I saw some bad news. Let's start with the good news. Why not? You look at the results, net sales up 14.3% to almost $2.8 billion. 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. 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. We're seeing the thesis play out here. There is a resilience in pet spending. Now the flip side of that is, and management noted this in the call, that pet household formation remains relatively muted. I think that's what the market really ultimately focused in on here. 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. [laughs] We all know how the market loves uncertainty.

Dylan Lewis: Jason, can you help me unpack pet household formation?

Bill Mann: I had the same question.

Jason Moser: [inaudible] I think that speaks to all of the growth that we saw on that formation over the last three years. 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 slowed down. We've seen unfortunately some folks giving those pets back away, which we hate to see that kind of stuff, but ultimately, that growth we saw on that formation over the last three years really has slowed down considerably, understandably so.

Bill Mann: I want to ask you about the average spend per customer because $535. You have dogs, and I have 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 [inaudible] .

Jason Moser: I think that's the key. My pet spending, for example, we got three dogs and a cat. It's going to be relatively predictable because I'm not adding another animal, I don't think. At some point or another, yeah, if you want to really juice that, you got to keep on growing your users. You got to grow your customer base in 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. They're doing a great job of retaining them. Clearly as these autosales and the revenue growth shows, but you can only expect that net sales per active customer to go so far.

Dylan Lewis: One place we are not seeing the spending cutback hit, Lululemon. 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?

Bill Mann: Big Yoga is killing it.

Dylan Lewis: [LAUGHTER] Absolutely. We just had such a dour session. This is what we should have led with.

Bill Mann: 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?

Dylan Lewis: Lululemon.

Bill Mann: Lululemon had a 61% revenue spike in China, which is bonkers because, Lululemon, 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. Lululemon comes along, and Big Yoga is just doing great. 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.

Dylan Lewis: 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 Lululemon and core customer being different than some of the other retailers we talked about before?

Jason Moser: I think so. Just to piggyback on Bill's Big Yoga because, number one, I love that Big Yoga, but one of the reasons why the Lululemon continues to succeed is their ability to have expanded so far beyond just yoga. We're talking like golf, tennis, dance. They are really growing their offerings and building out more things for more customers. That was the big question mark with this company for so long is, like, how big is that audience? Is it just really a niche play? Now what we're seeing is they're becoming more things to more people, which is what we want to see. Into your point there on the spending and the consumer, it is a higher price point. We know they're not going to conceal a lot on pricing. When we go back to 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 Lululemon's favor, even when times are a little bit harder.

Dylan Lewis: If you're tired of the retail beat, don't worry. [laughs] 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 a similar narrative with enterprise spend that we've been seeing with consumer spend, a little bit tighter. People may be not as willing to spend on new projects or new software systems, it doesn't seem to be biting Salesforce too much.

Jason Moser: It's not. 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 the defensive posture we see from a lot of their smaller competitors. They built such a strong portfolio of offerings that cover the CRM spectrum, customer relationship management. You got DataCloud, Tableau, Slack, MuleSoft, and all of these businesses really feed off of one another and add to the Salesforce story. They continue to loft up these good growth numbers, and revenue was 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 count down. Go figure. With tech companies, [laughs] that's not supposed to happen.

Dylan Lewis: Not always the story.

Bill Mann: Stop the presses. [laughs]

Dylan Lewis: Bill, you dug into the results a little bit. What did you say?

Bill Mann: I think one of the more interesting things about Salesforce is the big joke about Salesforce because nobody really knows what they do because they do everything. [laughs] 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 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.

Dylan Lewis: One data 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 are doing something right.

Bill Mann: Same with Lululemon.

Dylan Lewis: Bill Mann, Jason Moser, 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 and listen to Motley Fool Money. Welcome back to Motley Fool 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 interests. 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.

Matt Frankel: Hey, Dylan. Student loans were a complicated topic before all the recent news, and others have a whole lot more to unpack. I'm glad to be here.

Dylan Lewis: 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.

Matt Frankel: 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 onto their servicer, they haven't researched the latest repayment plans and kept up with Public Service Loan Forgiveness and things like that. It is something people need to keep in mind, but it doesn't need to be the panic scramble-to-fit student loans in your budget that you might think.

Dylan Lewis: 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 of steps for getting started getting reacquainted with what you have in your loans?

Matt Frankel: One, figure out who your loan servicer is so you can log on. A lot of people don't realize this. The three biggest student loan servicers all exited the business during the payment pause. There's a very high chance that your student loan servicer is not who it was last time you made a student loan payment. That's number one. You could 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 1 step that will alleviate a lot of people's uncertainty about what's going on with student loans.

Dylan Lewis: 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, OK, this is what my monthly payment is. This isn't what I've got in my current monthly budget. How do I try to square these numbers up?

Matt Frankel: Two things. One, there is what the Biden administration is calling the repayment on-ramp. It's essentially a twelve-month forbearance period that anyone can take advantage of, if they want to. It'll last through the end of September 2024. Any missed 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 1. Number 2, the SAVE plan. The new repayment plan is designed to replace the most popular existing income-driven repayment plan. 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 it 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 is going to be looking at, and the percentage of that that you're going to be required to pay is a lot less. The SAVE plan is they're 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.

Dylan Lewis: If folks are interested in the SAVE plan, where should they go for more information on that, Matt?

Matt Frankel: At FedLoan, the 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 [inaudible] long that cover really the broad strokes of it. But check out the Department of Education's website. The SAVE plan, every federal student loan borrower could benefit from it.

Dylan Lewis: 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?

Matt Frankel: First of all, if you were among that 800,000 people or or thereabouts, you probably would have already heard. What's happening, this is 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 setup to forgive any remaining balance after either 20 or 25 years 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-year, 25-year were counted. For example, if you consolidated your loans like I did, because when i graduated college, I had 12 separate student loans. Each semester is a different one. Sometimes you are subsidized and are unsubsidized. If you consolidate it, under the previous rules, that reset the clock, so they're going back and making this onetime adjustment. Unless you've 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. It's estimated that most borrowers are going to get at least three years closer to student loan forgiveness than they were before. It adds up to a lot. Thirty-nine billion dollars 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 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 than I'd like to admit, but it's going to move me a few years closer to forgiveness than I otherwise would have been. 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. 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 timetable.

Dylan Lewis: 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, easier way to think about it.

Matt Frankel: It will be a nice 45th or so birthday present to be eventually when my loans do get forgiven.

Dylan Lewis: 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 there are 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?

Matt Frankel: You're absolutely correct. This is going to be 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 it, 98% of people have not been making student loan payments during the pause, even though they can chip away at their balance interest-free, if they wanted to, so it is going to be a financial shock for a lot of people to fit this into their budget. I get it 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, in the scheme of things, a relatively small sum of money we're talking about, compared to total gross domestic product, things like that, it is going to be a big factor because it's that part of the spending that is really discretionary, and retailers that sell discretionary things could definitely feel sting. We could see an uptick in other loan defaults people have trouble making your 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.

Dylan Lewis: I know one of the other factors that's 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 [inaudible] have to spend it but don't necessarily have the cash, has already been put on credit cards. It seems like we're looking at a very tight picture of the consumer, in general.

Matt Frankel: Take advantage of that on-ramp, in the meantime, if you need to. If you can make your student loan payment, by all means, do it. But when you think about it this way, you mentioned the high credit card debt recently surpassed the trillion dollars, for the first time. The average credit card interest rate has gone up to 24 percent. 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 would be better to knock out debt that is sitting there at 24% interest or whatever, in the meantime, and give yourself a few months. While 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. If you can take that, put all your efforts to getting rid of your credit card debt. It can make fitting your student loan payment in your budget a lot easier a few months down the road.

Dylan Lewis: It's hard to beat a guaranteed rate of return of 24%, Matt.

Matt Frankel: Right. [Laughs] You can 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.

Dylan Lewis: No, I can't claim anything close to that, Matt.

Matt Frankel: I've had one or two years like.

Dylan Lewis: 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?

Matt Frankel: 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. Get in touch with your servicer. If you're worried about it, and find out your options.

Dylan Lewis: You can catch this week's radio show in our podcast feed. We've got links to the resources Matt referenced in the episode description. If you're catching us on the radio, you can find Motley Fool Money daily on Apple, Spotify, and wherever you listen to podcasts. Coming up after the break, Bill Mann and Jason Moser return 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 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.

Bill Mann: I love me a frivolous lawsuit. [laughs] We are the dumbest country. The American eater is undefeated.

Dylan Lewis: Absolutely.

Bill Mann: 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 Burger King should do, say, "You know what, 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 OK for you?"

Dylan Lewis: For those reasons, Bill, I take the other side of this one, and I should note here, McDonald's and Wendy's faced similar lawsuits last year. I think that the crux of this issue is what we see in the ads is not edible.

Bill Mann: I think that they should be thanked for making these things smaller.

Dylan Lewis: There may be a point there. I get your point there.

Bill Mann: It is a public service.

Jason Moser: Taco Bell is facing the same thing here now, so this is not some one-off. Clearly, there is something here, but we've been knowing about this since we were kids. This is nothing new. Clearly, the lawsuit, this is just somebody trying to make a point. This isn't something that just happened. I have been dealing with this all my life, Dylan.

Dylan Lewis: 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.

Jason Moser: Listen, I give Burger King and McDonald's and Taco Bell all the room in the world to keep advertising and do whatever you can to bring it into traffic in the door. Because if you think about the millions and millions of customers they serve every year, this is a drop in the bucket, somebody looking for some easy money, I think, but what do I know?

Bill Mann: Sure. I think what may be coming next would be, for example, it's going to be a class action on Tinder profiles because those are 20 years old, and that's false advertising at this point. In some ways, I think it's an abuse of the court system. There's really nothing to be gained from this.

Jason Moser: It reminds me of the Netflix special. It was that documentary on the Pepsi [inaudible] .

Dylan Lewis: Pepsi challenge.

Jason Moser: Dude, Where's My Jet, 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 timeline of how Pepsi's marketing went through this. They're, like, maybe we got 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.

Dylan Lewis: For what it's worth, if I am working as an advertiser, either in-house or consulting for a fast food business, I'm looking at this and saying, " [inaudible] opportunity for a commercial campaign where we show the food as it actually is and make it as appetizing as possible."

Bill Mann: Do you remember the Domino's campaign probably 10 years ago where they came out, and they actually said, yes, our pizza is bad?

Jason Moser: Then look at the stock from there.

Bill Mann: It was incredible.

Jason Moser: 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. They did, and look what happened.

Dylan Lewis: 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. 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?

Bill Mann: I am super interested in Take-Two Interactive, and Take-Two 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. It's one of the Dana White titles. He owns Slap Fight, and so they have a video game coming out called Power Slap.

Dylan Lewis: Is Slap Fight just for the listeners out there? Is this exactly what it sounds like though?

Bill Mann: 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.

Dylan Lewis: In a video game?

Bill Mann: Yes, but that's live. It is such a low-input idea and concept. I cannot wait to see what this video game looks like.

Dylan Lewis: Rick, with that compelling pitch, a question about Take-Two Interactive.

Rick Engdahl: Yeah, I actually own Take-Two. I became very interested right around December of 2020. Let me tell you the view from the peak of that stock chart is glorious.

Bill Mann: Yes.

Rick Engdahl: How much longer till I get that view again?

Bill Mann: It's funny because video game companies like Take-Two Interactive, their budget for each video game is manifold higher than the development of a Hollywood blockbuster movie. They're called the AAA rated games. I look at a company like Take-Two Interactive in full disclosure, I am a shareholder as well, and I think very highly of this company. Obviously during 2020, everyone thought that their kids were going to be playing NBA 2K forever, and 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-Two Interactive over the longer term. But since you did ask me a number, I'm going to just say seven.

Dylan Lewis: There we go, seven. I'm going to hold you to that. Jason, what is on your radar this week?

Jason Moser: Just keeping an eye on the company that I've ever recommended called Samsara, not a very familiar name I think for most. Ticker is IOT. 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 markets seem to be very happy with the results. As a reminder, 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, it 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.

Dylan Lewis: Rick, a question about Samsara.

Rick Engdahl: Based on my extensive research, I find that Samsara is really good at a thing called Telematics.

Jason Moser: Yes.

Rick Engdahl: I had to look that up. Apparently, telematics is a portmanteau of telecom and informatics. Sorry, I'm stuck here. What the heck is telematics?

Jason Moser: Telematics is just exactly what it is.

Bill Mann: What the heck is a portmanteau?

Jason Moser: Telephone, information, matics, it's all together. It's just fancy stuff.

Dylan Lewis: My high school French is paying off, portmanteau, you never thought, but there it is. Rick, thank you for your question. Which one's on your watch list this week?

Rick Engdahl: I love me a good portmanteau, so I'm going to go with telematics.

Dylan Lewis: That's awesome. Jason Moser, 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 Fool Money radio show. The show is mixed by Rick Engdahl. I'm Dylan Lewis. Thanks for listening. Catch you next time.

Bank of America is an advertising partner of The Ascent, a Motley Fool company. Bill Mann has positions in Domino's Pizza and Take-Two Interactive Software. Dylan Lewis has positions in Salesforce and Spotify Technology. Jason Moser has positions in Apple and Chewy. Matthew Frankel, CFP® has positions in Bank of America. The Motley Fool has positions in and recommends Apple, Bank of America, Chewy, Domino's Pizza, Lululemon Athletica, Netflix, Salesforce, Spotify Technology, Take-Two Interactive Software, and Walmart. The Motley Fool recommends Big Lots, Five Below, Samsara, and World Wrestling Entertainment. The Motley Fool has a disclosure policy.

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