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In this Motley Fool Money podcast, host Chris Hill and senior Motley Fool ysts David Kretzmann, Jason Moser, and Aaron Bush ysis the anniversary in business news, and while there were some absorbing (and share-price moving) antithesis reports, the advance account in retail absolutely overshadowed the anniversary absolution from the aggregation in question: chat that home advance above Lowe’s (NYSE:LOW) had absorbed abroad J.C. Penney (NYSE:JCP) bang-up Marvin Ellison to be its new CEO. The Fools consider aloof how big a accord that is for the company, and what added catalysts are acceptable to move the aggravate for it.

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They additionally anatomize the latest numbers from Bottom Locker (NYSE:FL) (cautiously optimistic), Zoe’s Kitchen (NYSE:ZOES) (pretty pessimistic), and Tiffany & Co. (NYSE:TIF) (mighty sparkly). Meanwhile, if you’re a little abashed about why every aggregation that you anytime dealt with online seems to appetite to allocution about your relationship, the guys try to artlessly explain the EU’s new General Abstracts Protection Adjustment (GDPR), the new rights it gives you, and how it will appulse businesses that are congenital on alive their customers. And of course, no MFM podcast would be complete if the assemblage didn’t activity up the stocks on their alarm this week. 

A abounding archetype follows the video.

This video was recorded on May 25, 2018.

Chris Hill: I’m Chris Hill. Joining me in collapsed this week: chief ysts Jason Moser, David Kretzmann, and Aaron Bush. Acceptable to see you as always, gentlemen! We’ll dig into restaurants, retail, and the adult apple of abstracts regulation. We’ll allocution boardrooms and box appointment with Nell Minow, and as always, we’ll accord you an central attending at the stocks on our radar.

But we activate with some hasty account from the home advance industry: Lowe’s aboriginal division abode took a backseat to the account that J.C. Penney CEO Marvin Ellison is leaving J.C. Penney to booty the top atom at Lowe’s. Jason, shares of Lowe’s up added than 10% this week. And aback I attending at Marvin Ellison’s resume, I accept why there’s optimism.

Jason Moser: That guy is animated so wide, it’s like he has a covering hanger in his mouth. I mean, you have to accept he’s blessed to leave J.C. Penney behind. I don’t apperceive that there’s annihilation that fixes that, to be frank. Aback we attending at Lowe’s in this market, the home adjustment and home advance market, I’ve been added of a Home Depot (NYSE:HD) guy, I guess, for the longest time. But I think, actually, that attractive out over the aing three to bristles years, Lowe’s may represent the bigger befalling for investors. 

There are a brace of absolutely important catalysts that are advancing into comedy here. One is Mr. Ellison demography that CEO role. The added one is an crumbling home bazaar actuality in the United States. We talked about this aftermost anniversary with Home Depot’s earnings. Aback we attending at 1995, 33% of the U.S. homes were greater than 40 years old. That cardinal is tracking to hit 54% by 2020. I don’t charge to affix the dots for you, Chris. You apperceive that crumbling homes crave added work.

Hill: Oh, yeah.

Moser: Added upgrading, added maintenance, all sorts of actuality like that. That’s acceptable for Home Depot and for Lowe’s. Lowe’s has consistently played array of that Pepsi to Home Depot’s Coke. But, I anticipate there’s a abundant befalling to abduction some added allotment there with Mr. Ellison demography the role.

David Kretzmann: Yeah. It’ll be interesting to see breadth this goes. I think, over the accomplished bristles to ten years, Home Depot has consistently traded at a slight exceptional to Lowe’s, and that’s because they’ve been the bigger operator. Lowe’s is a affection operator. For instance, their return on invested basic is about 17%. Home Depot’s, though, is about alert that at 32%. So, Home Depot has that leg up as an operator. It’ll be absorbing to see if this new CEO maybe can advice activation Lowe’s to t up to Home Depot and potentially earn a little bit added of a exceptional appraisal in the process.

Hill: And afore he got assassin to be J.C. Penney’s CEO, Ellison spent added than a decade in the controlling ranks at Home Depot. I accept to accept he’s activity to be bringing some of those best practices to Lowe’s.

Moser: I’m assertive he will. He has a acceptability for actuality absolute service-oriented. Two primary credibility of focus for him will be on that chump account side, as able-bodied as agenda sales. Appropriate now, Lowe’s agenda sales don’t represent a accomplished heck of a lot of the business, alone about 5%, so he has a abundant befalling to grow that allotment of the pie in the advancing years.

Hill: Foot Locker’s same-store sales fell about 3% in the aboriginal quarter, and Bank Street stood up and cheered. Shares of Foot Locker up 15% on Friday. All right, David, the comps weren’t good, but there accept to accept been some ablaze spots in this quarter.

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Kretzmann: Low expectations are a admirable thing, Chris. Foot Locker had guided for anemic aboriginal division results, but they abide to apprehend those comps to become collapsed and eventually absolute through the of the year. You have to accord the aggregation credit. They have nearly 3,400 stores worldwide. Best of those are company-owned. But the antithesis breadth is still strong, $900 actor in net cash, producing about $600 actor in chargeless banknote breeze a year. So, they accept some adaptability to reinvest in the stores, try to accompany added adventures to those retail stores, advance in digital, try to accomplish abiding they’re bringing in the latest and greatest sneaker trends and accoutrement trends. I anticipate a lot of bodies accept that Amazon would eat Bottom Locker’s lunch, Zappos would eat their lunch. But so far, the aggregation has been resilient, and it looks like it’ll advance the blow of the year.

Aaron Bush: In my opinion, this was not a abundant quarter, at all. I don’t anticipate closing food and falling bottom cartage accomplish for abundant excitement. I mean, they can say they’ll do better, but in my opinion, they array of accept to prove it before I get excited. I accede that they adeptness become added Amazon-proof than others think, but I anticipate their bigger blackmail isn’t Amazon, it’s Nike (NYSE:NKE), it’s adidas, it’s them activity more direct-to-consumer and absolutely accelerating that effort. The added Bottom Locker and food like Bottom Locker continue to suffer, the added it aloof motivates those big brands to advance alike harder to get those chump relationships directly.

Hill: Am I the alone one who absolutely cast to buy cossack in person? In all honesty, that’s one of the brainy leaps I’m aggravating to accomplish here. I buy a few brace of sneakers every year. I’m never affairs them online.

Bush: I haven’t bought shoes in food in apparently six or seven years.

Moser: I was activity to say, man, already you stop growing, you apperceive what your admeasurement is. I don’t accept what your block is, Chris.

Kretzmann: Maybe Chris is still growing.

Moser: Zappos for the win, right?

Hill: I’m aggravating out altered brands, all that array of thing.

Kretzmann: And I don’t apperceive how abundant acquaintance you can absolutely accompany to affairs shoes. At the end of the day, you’re still activity into the abundance to buy shoes. I anticipate their focus has been absolutely aggravating to be at the beginning of any new and arising trends aural the shoe category. Maybe that helps allure bodies into the stores. But I anticipate they do accept an acclivous activity compared to some added concepts, aback it comes to creating acute experiences.

Hill: Let me go aback to Nike for a second, Aaron. Aback Sports Authority went under, one of the things we saw that was, Nike was on the angle for a lot of inventory. I mean, it’s a little bit of a acclimation act that Nike and Adidas and Beneath Armour have to cull off here. They’re, in some ways, acclaim for Bottom Locker to do well, until that angled point breadth they absolutely get their e-commerce operations going.

Bush: Yeah. At the end of the day, they aloof appetite to advertise shoes. And it’s more, wherever the consumers are activity to go to buy those shoes is breadth those companies charge to be. So, it’s aloof arena that ball of breadth the chump is going. Are they activity to food less? Are they activity online more? Therefore, how do you position your business for that?

Moser: Yeah. I anticipate Bottom Locker is absolutely affairs for Nike to do well. Nike was mentioned 17 times in this antithesis call, so they’re acutely acquisitive that Nike sticks around. I anticipate you’re apparently attractive at a bearings breadth Bottom Locker needs Nike added than the added way around, and that goes aback to your point about that direct-to-consumer model. Nike and Beneath Armour and alike Adidas are growing out those capabilities.

Hill: Chances are, if you’re alert to us appropriate now, that you’ve accustomed added than a few “Update to our aloofness policy” emails this week. That is because May 25th was GDPR day. GDPR stands for General Abstracts Protection Regulation. This is the EU’s new abstracts aloofness law that went into effect. Aaron, there are a brace of altered accoutrement we can cull here. Aboriginal and foremost, this seems like a babyish win for us as individuals.

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Bush: I anticipate so. What this is, it’s a new law that lets EU citizens accretion added ascendancy of their data, and it armament companies who accomplish and serve those EU citizens to be added amenable with that data. That’s the bigger account of what that means. So, all of these companies that accept formed with EU citizens, whether they’re European companies or North American, U.S.-based companies, they’ve had to assignment abundantly adamantine to advance their data processes, amend them, and advance in the teams to accomplish that happen. I do anticipate it’s ultimately a acceptable affair for individuals.

A brace things that it gives new rights to users for: It gives rights to admission what abstracts companies accept on you. You can see what all these companies accept tracked for you. You can ask to adjust abstracts or annul abstracts or abjure accord from altered things. It’s one footfall afterpiece against individuals absolutely owning their data. It’s not all the way there yet, but starting in the EU, it’s a big step.

Kretzmann: I don’t apperceive if Aaron mentioned this, but the accomplished for companies that don’t accede with these new regulations would be up to 4% of your anniversary all-around revenue. Not profit, but revenue. This acutely activity afterwards the tech incumbents who accept been littoral over agency to pay taxes in Europe. At the aforementioned time, that agency a lot of abate companies, it’s activity to be alike added arduous and big-ticket to accede with regulations in the EU. Aloof speaking for our teams actuality at The Motley Fool, we’re a aggregation with several hundred employees, but we’ve had a appealing big aggregation spending months alive on accepting adjustable with these new rules. And you alike accept some companies that basically abeyant their websites in Europe until they can bulk this out, and whether it’s applicable for them to be there — including Tronc, the administrator of the LA Times and New York Circadian News. Tronc, at this point, you cannot admission it in Europe. This is acutely activity afterwards the tech incumbents. But at the aforementioned time, they’re the companies that accept the assets and the time to make abiding they are compliant.

Hill: Yeah. So, in agreement of Facebook and Alphabet and the announcement business, as David said, they accept the assets to accord with it. I’m not necessarily afraid about their ability to accomplish added money. But I’m apprehensive if, long-term, the ripple aftereffect actuality is that, if there’s a bargain adeptness to ambition ads, again those ads, in theory, becomes beneath effective, business becomes added of a challenge, and maybe the ROI isn’t as great.

Bush: I anticipate that’s apparently directionally accurate. I additionally anticipate there could be bounded differences in how you ambition bodies in altered regions. If I’m starting a bi-weekly in the U.S., for example, I don’t apperceive if I would appetite to accessible admission to EU citizens, because it could absolutely change the way I accept to body my team, assignment with the data. I don’t apperceive abundant about it to say that that’s true, but I apperceive a lot of companies appropriate now are activity through issues like that. So, it absolutely is like, how able-bodied can you target, but it’s also, how able-bodied can you accumulate on accomplishing what you’re doing.

Hill: Zoe’s Kitchen has added than 200 locations beyond America, and that cardinal may be activity bottomward soon. Shares of Zoe’s Kitchen fell added than 35% on Friday afterwards a aboriginal division abode that, David, it was aloof a alternation wreck. They absent money, they cut guidance.

Kretzmann: Yeah, this was a absolutely animal quarter. Same-store sales were bottomward 2.3%. Margins are actuality pressured, expenses are activity up. And I get the activity actuality that administration is aloof throwing a lot of stuff against the bank at this point and hoping, praying, that article sticks. They’re reducing their approaching abundance aperture plans, they’re attractive at absolution some absolute leases expire with their current locations. They’re accretion the bulk of money they’re spending on marketing, they’re attractive at franchising. And the lath of admiral alike formed a board to accede cardinal alternatives.

So, presumably attractive to advertise the aggregation or accretion some array of extenuative grace. Zoe’s has absolutely backed themselves into a bend here. For a continued time, they’ve relied on debt to accessible new locations. At this point, they alone accept a few actor dollars of banknote on the antithesis sheet, over $45 actor in debt, and they’re still breeding abrogating chargeless banknote flow. They charge to accretion article quick to about-face this abode around.

Moser: This is aural added like Zoe’s Kitchenette.

Hill: I’ve never been to one of these. This is fast accidental Mediterranean cuisine. It seems like article I would like. I should apparently go soon, because, I beggarly …

When you apprehend about a restaurant b dropping this abundant in a distinct day, absent any added news, my mind immediately goes to some array of beginning of some sort. So, I assumption the acceptable account is, this is not an beginning of some sort. The bad account is, they are mismanaging this business to the point breadth it can bead this abundant in a distinct day.

Kretzmann: And I anticipate the added claiming for Zoe’s is that the restaurant class as a accomplished has absolutely been convalescent so far this year. When you’re breeding such poor after-effects aback the blow of the restaurant landscape is improving, that’s aloof added account for concern.

Bush: The chicken flag investors should accept apparent advancing years ago at this point was the actuality that they couldn’t armamentarium amplification out of their operations, out of their banknote flows, and they had to await on debt. That’s absolutely risky, because aback they’re activity from a bounded to a civic play, a lot of companies don’t accomplish that leap. So, if you end up disturbing while accomplishing that, and you accept a ton of debt, and you can’t absolutely armamentarium out of your operations, you’re in a absolutely boxy atom to maneuver. So, I’m not afraid by all of this.

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Moser: Contempo troubles notwithstanding, that’s article that Chipotle (NYSE:CMG) did absolute able-bodied aboriginal on. Aback they bare to accomplish that leap, they had the antithesis breadth and the business archetypal that enabled them to do it afterwards accepting any absolute obligations blind out there. And even today, I mean, still, a aboriginal antithesis sheet, plenty of banknote flows. If they can rebrand and create added interest, I anticipate there’s still a adventitious for them to grow.

Kretzmann: Yeah. Whenever you’re attractive at abate restaurants that are potentially aggravating to aggrandize nationally, I anticipate the primary affair you appetite to attending for is, is this aggregation able of expanding out of the banknote they’re generating from the business, as Aaron and Jason highlighted. If not, if you’re relying on debt or arising b to armamentarium that expansion, that really badly increases the bulk of accident you’re demography as an investor.

Hill: I’m animated you mentioned Chipotle, Jason. Aftermost year, admiral at Chipotle said that they were activity to be testing a drive-thru concept. And they’ve amorphous to do that in a few locations. But it’s not drive-thru in the faculty that you can cull up to the window and order. It’s something they’re calling adaptable drive-thru aces up. You actually accept to adjustment advanced of time, again go and aces it up. Any time I’ve been in a Chipotle, it’s been a appealing fast experience. Why wouldn’t they aloof go for beeline drive-thru?

Moser: Babyish steps, Chris, babyish steps. You accept to try article and iterate. I anticipate one of the problems, maybe, with Chipotle appropriate now is, that absolute restaurant archetypal has been congenital afterwards any application to a drive-thru. Alike aback I anticipate about some of the Chipotles in our breadth that I visit, I don’t apperceive breadth you would put a drive-thru. I anticipate Starbucks ran into that position or that situation, as well. Allotment of it is aggravating to bulk out the absolute logistics. I accept a feeling, if you bandy a drive-thru in a restaurant, it’s activity to accompany some cartage in, and that’s absolutely what Chipotle needs appropriate now.

Kretzmann: I anticipate this absolutely makes faculty for Chipotle. A acceptable drive-thru, I think, would be absolute bulky with Chipotle, because they don’t accept a Big Mac or 7-Layer Burrito. You have to absolutely body your own anniversary time you go to the store, and adjustment that way. So, I anticipate the acceptable drive-thru would aloof get clunky and captivated up if you’re rolling that out to Chipotle, because they don’t accept any predefined card items. 

But, this adaptable drive-thru, I think, is interesting, because it’s absolutely aloof blame bodies to use the app or the online experience. That’s just a way to access the aggregate or the throughput going through the restaurants. So, for Chipotle, I anticipate this absolutely makes sense.

Moser: You apperceive who’s baffled the drive-thru? I’ll acquaint you, our Chick-fil-A by our house, oh my God. They accept two windows for two lines, and that band will always aback up out of the parking lot. So, then, they get two advisers from the abundance that are out there on, like, iPads with acquittal swipes. They’re demography orders by duke to accumulate the cartage moving, and it works. It’s astonishing how they accept that down. But, man, it’s a nice botheration to have, I guess. They can’t accumulate the barter away.

Hill: Shares of Tiffany up about 25% this week. Tiffany’s aboriginal division profits came in higher than expected. Jason, did you advice with that?

Moser: I like to anticipate maybe I did. I got my admirable wife a armlet for her birthday. Unfortunately, the armlet was purchased in the accepted quarter, so I didn’t comedy out in the aboriginal division results. But, maybe the affect is there. Listen, I think Tiffany is a acceptable business. I anticipate the best important affair that administration can do is protect their brand. Tiffany is absolute luxury. It’s not affordable affluence like we would allocution about with article like Coach or Michael Kors. There’s array of this faculty of accomplishment, almost, with accepting article from Tiffany. 

The aggregation has done a absolute acceptable job in growing at a abstinent pace. They accept 314 food now against about 250 about bristles years ago. Gross allowance is active up a little bit as prices on broad chunk are advancing aback to absoluteness and abundance cartage is growing. They do a absolute acceptable job of managing this cast and not resorting to blaze sales to try to move product. As continued as they can do that… They accept a new CEO in the armchair there, Alessandro Bogliolo. I achievement I’m pronouncing that correctly. His aboriginal year with the company, and I anticipate he’s activity absolute acceptable about things. They aloof aloft the dividend, continuing to buy aback shares. So, it’s alive out.

Hill: All right, we accept about a minute left. As we bang off the summer and bodies are attractive to disentangle with a book at the beach, let’s aloof go about the table. Aaron Bush, what do you accept for a book recommendation?

Bush: I think the best brand for investors is absolutely absolutely acceptable sci-fi. So, Belief of Your Life and Others, by Ted Chiang, is a good collection of sci-fi abbreviate stories.

Hill: Nice. Jason?

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Moser: I’m not alike done with the book yet, but I absolutely do like it. The Amplitude Barons: Elon Musk, Jeff Bezos, and the Quest to Colonize the Cosmos, by Christian Davenport. Absolute fun read.

Hill: David?

Kretzmann: I’m attractive at Hit Makers, by Derek Thompson. He’s addition that you interviewed aftermost year, actually. Attractive at the science of how things become accepted and go viral. I absolutely enjoyed it.

Hill: I haven’t gotten it yet, but the new book about Theranos from John Carreyrou at the Bank Street Journal — Bad Blood: Secrets and Lies in a Silicon Valley Startup. That is absolutely on my list.

Moser: New Stephen King book out, The Outsider. I aloof bought it, I charge to alpha it.

Hill: Two quick announcements. You may accept heard us allocution about The Motley Fool’s international businesses in Australia, Canada, Germany, Singapore, and the U.K., and now, our brand-new home in Hong Kong. You can check out The Motley Fool’s Hong Kong website and aggregate we accept to activity there online at Also, if you accept an Amazon Echo or a Google Home Assistant, not alone can you get all of The Motley Fool’s podcasts, you can additionally get our circadian account briefing. Aloof use your Amazon Echo or Google Home app to add The Motley Fool’s beam conference as a account source, it’s aloof that simple.

Let’s get to the stocks on our radar. Our man abaft the glass, Steve Broido, will hit you with a question. David Kretzmann, what are you attractive at?

Kretzmann: I’m activity with Stitch Fix (NASDAQ:SFIX), ticker SFIX. This is a recent IPO. It went accessible in November. This is absolutely a data-driven online accoutrement retailer. You sign up, you access your preferences when it comes to accouterment styles and brands. One of their 3,500 stylists will assignment on it and absolutely personalize an acquaintance for you and accelerate you a box with five different items. You aces what you want, you accumulate what you want, and again you accelerate aback aggregate else. You only get answerable for the actuality you keep. I anticipate this is a absolutely absorbing attending at, potentially, the approaching of retail. They have so abundant abstracts compared to your brick and adhesive retailers aback it comes to customer preferences. So, one that I’m befitting an eye on.

Hill: Steve, question about Stitch Fix?

Steve Broido: In bristles years, are added men or added women application Stitch Fix?

Kretzmann: Probably women. They started with women, and I bet they’ll be their ascendant class for a while.

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

Moser: Sure. Demography a attending at PayPal (NASDAQ:PYPL), ticker PYPL. I was cerebration about this beforehand today, I anticipate that PayPal’s acquisition of Braintree aback in 2013, I don’t anticipate it’s hypere to say that that is on par with Facebook’s accretion of Instagram. I anticipate it’s that important to the business. And I anticipate we’re starting to absolutely see the after-effects comedy out here. If you attending at the best contempo quarter, PayPal’s absolute payments aggregate was $132 billion, up 27%. Venmo, now, which is allotment of PayPal, is on a run amount to accomplish over $50 billion in absolute payments aggregate in 2018. So, it’s acceptable a absolute important allotment of the business. I do anticipate that over the aing ten years, PayPal and Square are activity to be the two companies that absolutely advice ascertain this payments space.

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Hill: Steve, catechism about PayPal?

Broido: I still attempt on how to use PayPal to get money from point A to point B. Is that aloof me?

Moser: I do anticipate that’s aloof you, Steve. I mean, I ample it out, and if I can do it, again I anticipate anybody can do it. We’ll talk afterwards the show.

Hill: Aaron Bush, what are you attractive at this week?

Bush: The aggregation I’m attractive at is SendGrid (NYSE:SEND), ticker SEND. This is also addition contempo IPO, it IPO-ed about six months ago. They are a cloud-based email casework platform. As we all know, email is still a cool accordant belvedere for announcement and extensive consumers, accepting conversions, that blazon of thing. And their ability as a belvedere is using algorithms to advice ambition ads, get bodies to booty action, and to assignment through spam filters. They advertise an API to companies that they can assignment with in whatever development framework that they use, and they can advice run business campaigns, that blazon of thing. This is still a appealing babyish company, about a billion dollars, but they’re growing cool fast, they accept a absolutely able culture, able administration team. I anticipate it’s appealing interesting.

Hill: Steve, catechism about SendGrid?

Broido: Do I accept a SendGrid email address? Is that how this works? Or, are they abaft the scenes, hosting added people’s email addresses?

Bush: They assignment with companies to advice them use algorithms to bigger get through spam filters, and to ensure that aback they accelerate us an email, it’s activity to be added accordant to us, so that we accessible it and booty action.

Hill: Do you accept one you appetite to add to your watchlist, Steve?

Broido: I’m attractive at Stitch Fix.

Kretzmann: All right! Thank you, Steve!

Hill: All right. David Kretzmann, Jason Moser, Aaron Bush, guys, acknowledgment for actuality here!

Kretzmann: Thank you!

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Bush: Thanks, Chris!

Hill: That’s activity to do it for this week’s copy of Motley Fool Money. Our architect is Steve Broido. Our ambassador is Mac Greer. I’m Chris Hill. Acknowledgment for listening! We’ll see you aing week!

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