Motley Fool Money: "Don’t Call It a Comeback"

Date: December 10, 2025
Host: Travis Hoyam
Guests: John Quast, Rachel Warren

Episode Overview

This episode dives into the concept of potential comebacks for major stocks that have recently struggled. The discussion centers on three well-known companies—Chipotle, Target, and Crocs—whose shares have fallen in 2025, prompting the hosts to analyze whether these declines are temporary setbacks or indicative of deeper issues. The team provides a long-term investing perspective on each company’s current struggles, financial health, and comeback potential.

Segment 1: Chipotle – Can Growth Outpace Headwinds?

[00:05–08:00]

Key Discussion Points

• Stock Decline & Financials:

  • Chipotle’s stock has fallen 51% from its 2024 highs.
  • Same-store sales turned negative; restaurant-level margins fell, though still strong.
  • Trades at 30x earnings (down from a recent peak of 70).

• Operational Trends:

  • Opened 200 new locations in 3 quarters; average unit volumes (AUVs) down 3%.
  • Concerns over whether new stores can match the performance of older, established units.
  • Expansion plans include 3,000 more locations, adding to the current base of nearly 4,000.

• Broader Industry Shifts:

  • Not unique to Chipotle—fast casual sector showing similar patterns.
  • A shift in consumer dining habits: Casual dining improving; fast casual growth moderating.

• Macro & Demographic Factors:

  • ~40% of sales come from households earning under $100k, a group hit by inflation.
  • Chipotle opted for restraint in price hikes, sacrificing some margin to maintain affordability amidst economic pressure.

• Growth Catalysts:

  • Menu innovation and limited time offers are increasing guest engagement.
  • Digital sales and planned international expansion (Europe, Middle East, Asia) are tailwinds.
  • Financial strength: $1.8B in cash, no debt (beyond lease liabilities), and $1.8B in authorized share buybacks.

Notable Quotes

• John Quast [01:16]:
  "Average unit volumes have dropped about 3% over that time. And that's actually pretty rare for Chipotle... those next 3,000 locations—are they going to be as high volume, as high quality as the last 4,000? That's really the question."

• Rachel Warren [04:29]:
  "About 40% of Chipotle sales come from households earning under $100,000 annually... this is also a demographic that's facing inflationary pressures, economic pressures. We're seeing that cohort tend to reduce dining frequency."

• Travis Hoyam [06:45]:
  "Chipotle has never been a particularly cheap stock... there's not really this moment where you could have bought Chipotle at 10 times earnings or 12 times earnings. It has always traded for a pretty high price-to-earnings multiple."

• John Quast [07:40]:
  "To quote the great Warren Buffett, growth is a component of value."

Segment 2: Target – Cheap For a Reason?

[08:40–14:46]

Key Discussion Points

• Performance & Valuation:

  • Target stock down 46% over five years; now trades for just 11x earnings.
  • Financially robust: A credit rating, ~$5B in cash, and 53 consecutive years of dividend increases.

• Operational Challenges:

  • Recent business and stock stagnation, performance below that of rivals like Walmart.
  • Headwinds include consumer backlash over policies, struggles to retain nondiscretionary spend, and market share loss.

• Turnaround Efforts:

  • Incoming CEO Mike Fiddelke (promotion from within) set to assume role in February 2026.
  • Multi-year plan to refresh private labels, expand key categories (toys, sporting goods), and invest in AI-powered personalized shopping tools/store remodels.

• Market Perception:

  • The market remains skeptical: unusually high 5% dividend yield signals doubts about future profitability and dividend sustainability.
  • Question of whether new leadership and strategies are truly new, or just "doubling down" on past approaches.

Notable Quotes

• Rachel Warren [09:07]:
  "Target's performance as a business financially the last few years has certainly been nothing to write home about... I don't think this is a value trap. This is still a company that maintains very robust fundamentals."

• John Quast [12:27]:
  "When you have a dividend king such as Target having an all-time high dividend yield of about 5%, the market is saying we don't buy this—we do not believe that this company is going to continue to grow profits and continue to increase that dividend."

• John Quast [13:00]:
  "When I hear about remodeling, when I hear about private label... it's not like they're launching a new private label. This is doubling down on what's not working. When you promote the CEO to CEO, you're doubling down on it."

• Rachel Warren [14:30]:
  "How they execute is key though. And this is a stock I'm watching with, I think, a fair amount of caution—like a lot of investors right now."

Segment 3: Crocs – “The Clearest Path Toward a Comeback”

[15:59–21:20]

Key Discussion Points

• Recent Performance:

  • Crocs stock down 23% in the last year, trading at just 7x forward earnings.
  • Issues stemming from the 2022 acquisition of "Hey Dude": overestimated growth, overfilled wholesale channels, inventory bloat, and a significant goodwill impairment.

• Financial Moves:

  • Crocs took on debt for the Hey Dude buy; it’s been paying that down.
  • Despite headwinds, margins remain strong and the core Crocs brand is growing internationally.
  • The company is returning value to shareholders: shares outstanding down 16% over three years.

• Fashion & Brand Staying Power:

  • Company has repeatedly bounced back from past near-collapse (notably after 2008).
  • Success attributed to high-profile collaborations (from designers to celebrities to food brands) and resonance with Gen Z (e.g., #1 footwear brand on TikTok Shop).
  • Domestic growth paused, but China and Western Europe are fueling double-digit international expansion.

• Industry Challenges:

  • Tariffs impacting margins; North American sales decline partially offset by global growth.
  • Ongoing efforts to manage capital structure and remain relevant in the fashion cycle.

Notable Quotes

• John Quast [16:29]:
  "Of these three companies that we're talking about, I believe that Crocs has the clearest path towards a comeback because it also has the clearest explanation of what has gone wrong."

• Rachel Warren [18:34]:
  "Crocs, I mean, they have had their fair share of rebrands over the years... they nearly went bankrupt following the 2008 financial crisis. They successfully restructured their operations... began what they called their 'chic comeback era' around 2016."

• Rachel Warren [20:04]:
  "While we've seen a decline in North American sales, Crocs has seen really strong double digit growth in some of their newer international markets—China, Western Europe—that's partially offsetting some of the domestic softness."

• John Quast [21:09]:
  "No, I do not personally own any Crocs shoes. However, there are several pairs of Croc shoes in the Quast household."

Final Thoughts & Takeaways

Chipotle:

• Still strong financially and globally ambitious, but growth is slowing. Short-term headwinds appear cyclical rather than structural, but valuation remains a key concern for long-term investors.

Target:

• Fundamentals are solid, but market skepticism is justified given tepid recent performance and leadership continuity. Dividend is attractive, but investors should demand evidence of operational turnaround before expecting a lasting rebound.

Crocs:

• Despite hiccups tied to recent acquisitions, the company is nimble and has managed multiple successful turnarounds—especially impressive international growth and a strong digital/social presence, making it the panel’s top “comeback” pick.

Memorable Moments and Humor

• On Crocs as a comeback king:
  John: "I believe Crocs does have a comeback in store. And I think it's a market beater over the next five years." [17:16]

• Crocs in the real world:
  Travis: "Every time I write something about Crocs, I always hear, 'You know what? Kids aren't wearing Crocs anymore.' And then I look at the kids walking to the elementary school near me and everybody's wearing Crocs." [18:10]

• Fashion collaborations:
  Rachel: "They did collabs with celebrities like Justin Bieber and Post Malone... they've also done collaborations with various food brands. I think there was a KFC pair of Crocs, guys." [19:05]

Timestamps for Key Segments

• [00:05] – Introduction: Comebacks for once-beloved stocks
• [01:16] – Chipotle’s falling margins and same-store sales
• [04:29] – Chipotle’s customer base and inflation’s impact
• [06:45] – Chipotle, valuation, and growth prospects
• [08:40] – Target’s slump, financial health, and dividend
• [11:32] – Skepticism over Target’s leadership change
• [12:27] – Why Target’s dividend is so high (and risky)
• [16:29] – Crocs and the “Hey Dude” misstep
• [18:34] – The branding and resilience of Crocs
• [20:04] – International growth at Crocs
• [21:09] – Who in the panel really owns Crocs (stock or shoes)

Tone and Style:
Candid, analytical, with characteristic Foolish optimism balanced by healthy skepticism.

Bottom Line:
All three stocks are battered, but only Crocs wins a clear vote of confidence for a comeback—though with fashion, as always, buyers beware!