Mary Long (3:00)

I'm going to back you up on the FLX pronunciation. I got to imagine it's Flex as well. The only other thing that came to my mind was Flex. But knowing that it's not a DVD brand and instead Athleisure, I'm thinking that Flex is probably right on the money. Let's spotlight Dicks in particular for a moment. This stock has returned over 80% in the past three years. If you zoom out a little bit more over the past five, that number is closer to 540%. It's vastly outperformed the sector and the likes of Target. Also Kohl's, which we're talking about a bit as well. Their current CEO, Lauren Hobart, took the helm in 2021. What is she getting right? What is Dick's more broadly getting right to have amassed these. These impressive returns over the past several years?

Kristin Garra (3:46)

Yeah, like I said, Dick's offerings are considerably more experiential than others. The products themselves, of course, but that they're really leaning into that with their store concepts as well. They are scaling a store concept called House of Sport, which includes experience features in the store like a rock climbing wall, golf simulators, indoor tracks, things like that. And that takes a really big swing at attracting in more regular visits, especially from kids and teens, I would think. When I was a kid in Houston, there was a store kind of like this that had a racquetball court inside, even though I think it was a mattress store. But I always, as a kid was pestering my family to go there.

Kirsten Garra (4:25)

Right.

Kristin Garra (4:25)

And so I think that's one of the things that attracts from a younger audience. And then back in 2016, they acquired a company called Gamechanger, which is a tech app for streaming youth sports live on its own. They kind of expect that to add about 100 million in sales in 2024. And it's been growing in a range of 30 to 40% annually. Youth sports is massive, and this kind of tech is a relatively untapped area for that field. So the kind of on top of the Actual revenue that's layered on there. I think the complementary nature of that business in connecting with kids and kids sports is a nice addition to what they're doing in stores.

Mary Long (5:07)

Ahead of dropping its results this morning, Kohl's announced just the other day that it's going through a bit of a CEO change. So it's hired Ashley Buchanan as their incoming CEO. He used to run the art store Michaels and he'll be stepping up to the helm in early 2025. Buchanan will be the third CEO at this company since 2018. The picture at Kohl's is not particularly rosy. Again mentioned that the company reported earnings this morning. As a part of that, they announced revenues down about 9% year over year, its 11th consecutive quarter of comparable sales declining. They've got about 6 and a half billion dollars in long term debt. Kind of makes sense to me why, why leadership's passing, passing the buck to somebody else over here. If you were tasked to come on in and help out Mr. Buchanan in writing Cole's ship, where would you start? What are the problems that they're facing and what might management actually do to kind of turn this company around?

Kristin Garra (6:00)

There are some financial levers that come to mind, but to be honest, they all kind of sound like moves. To have a more graceful end of life to a brand and protect cash flow for as long as possible for shareholders. Classic moves like really focusing attention for operational efficiency. So shutting down underperforming stores, really reassessing SKU count or like how many products are offered within the store, the variety, and maybe cutting the bottom third or so. Really, however, many products are consistently underperforming and simply don't deserve shelf space. And then I think there's a little bit of a treasure hunt capacity to Kohl's as well. But maybe introducing that in a different way that doesn't rely on so many of these different products. I don't know, maybe that's unfair, Maybe that doesn't have to necessarily be the path of Kohl's from here, but it is what comes to mind. Not every brand can go on to do a turnaround, so that's one option ahead of it. And to be clear, it's not necessarily always the worst thing in the world. If you can gracefully bow out over time and provide steady, slightly dwindling cash flows again at the right value, that's fine, it could be a good investment. But to go the other direction completely and say, hey, we're still here, we can be a brand with staying power, I think the company needs to make a big move toward attracting a younger audience, which they have also identified as a goal for themselves. So I think, you know, get on TikTok. I mean, Kohl's is already on TikTok, but not very successfully. Coles Cash was a huge deal when first introduced many years ago. Reintroduce that to a younger audience in a new way. Maybe connect it to the idea of girl math that people on TikTok love that. I mean, I don't know. This is just another example of me, Mary, coming on the podcast and giving basic advice like it's easy to pull off. Just connect with the younger generation. It's definitely not easy, but. But re energizing the brand with the rising generation of consumers is probably the best path to grow again if they can achieve that.

Mary Long (8:01)

Kristen, do not sell yourself short. I think that the girl bath Kohl's cash pipeline connection is an awesome one. That's really, really clever. And hopefully someone from Kohl's is listening and they. They take that idea and put that into practice.

Kristin Garra (8:15)

There you go. That one's for free.

Mary Long (8:17)

Let's turn all of this retail talk into a Black Friday story, since that is right around the corner. As the listener is going to be bomb with sales and flashy offers over the next few days and into the weekend, is there a way to evaluate those sales through the eyes of an investor rather than purely a consumer? Are there any companies or products in particular that you'll kind of be keeping an eye on to see how is X company going to push this off the shelf? Or what is pushing this company, this product mean for Y company?

Kristin Garra (8:47)

No, honestly, I don't know. I don't know which way to look anymore. Around this time of year. What was once Black Friday, a concentrated day of sales that actually mattered, if a little dangerous. That gave rise to the idea of Cyber Monday, to the point that we now call the whole weekend from Thanksgiving Thursday to Cyber Monday, the Cyber 5. This year, a lot of sales actually began on the Thursday before Thanksgiving, leading to the name the Cyber Dozen. And I just feel like if I'm a proxy for the average consumer, which maybe I'm not, it's all too much. I think at this point, offering a sale on the business perspective is just table stakes. It's not a marketing move to get more attention than another company. You just have to. It's the time of year where you capture the purchasers who are always going to just hold out for a deal for your product. As an investor, if I'm watching for anything it's really broad trends in the kinds of products or services rising in popularity. Like were AI infused things big this year? I don't expect that they will be. Did smart glasses really pick up an interest? I think they might. Did the beauty industry see its biggest shift yet towards skincare and less from cosmetics? Who knows. But if that happened, it would be an important broad trend. Right? So I would steer investors toward thinking about really bigger picture questions about categories themselves and starting there, rather than overinflating the meaning of any one day for individual retailers or products.

Mary Long (10:20)

Let's pivot stories. Yesterday, Macy's dropped preliminary results to get a little bit ahead of a pretty big blunder. Somebody somewhere at the company lost track of about $150 million. We're not going to dive into this. Ricky and J. Mo covered this on yesterday's show, but mentioning it here because even without this accounting misstep is probably an understatement. But we'll go with misstep. Macy's still would have been in the news this week because it's the company behind Thanksgiving Day Parade, which will take place on Thursday. Kristen, you and I were talking about this episode beforehand and you brought up the great idea of what if we had our own version of the Macy's Thanksgiving Day Parade about stocks that deserve a float in a Thanksgiving Day parade? You can take this in any direction you want, so I'll kick it to you first. What company do you think deserves its own float in a Thanksgiving Day parade?

Kristin Garra (11:11)

Well, I think top of mind for me is Lemonade, the AI powered insurance company. What's wild to me is that if we did this show a month ago, end of October, Lemonade was mostly flat at that time. And this is ticker lmnd, by the way, it was mostly flat at that time. It is now in the month of November and year to date, more than 200% as we record this. And that is that's so that's basically all in November. Lemonade really making a last minute plea to make it into this Thanksgiving Day imaginary float lineup. But here's what happened with the company recently. It started with Lemonade reporting third quarter earnings October 31st and they reported revenue 8% ahead of forecast. So Wall street generally likes a surprise beat and that comes from an increase in both total customers and premium per customer. So it's always nice to see a company growing in multiple dimensions. Maybe most importantly, we have to talk about the company's gross loss ratio, which is down 10% year over year to 73% and this ratio defines how much of all of the premiums it collects as an insurance company. It then has to pay out to policyholders. So the lower, the better. It's a bit like the inverse of gross margin, if it's easier to think of it that way. And so for context, this 73% gross loss ratio is suddenly within Lemonade's ideal target range. That has all been boosted a little bit further by Lemonade's Investor Day, which happened on November 19. And leadership raised its guidance at that event to a 30% annually, compounding revenue up from 20%. And in particular, I think what this stems from is that they framed their growth going forward as how they will 10x their enforce premiums. And investors love the idea of a 10X. So here we are, up 200% in a month.

Mary Long (13:00)

So let's take off the investing analyst hat and put on the creative director hat. Congrats. Lemonade has a spot in this parade of stocks. What's the float itself going to look like?

Kristin Garra (13:13)

Well, Mary, it's a. It's a glass of lemonade. Did you expect anything else? But to. To further encapsulate the business a little more, I think it's a glass of lemonade that at the start of the parade, this is going to be full of theatrics. At the start of the parade, it is fully shrouded by fog machines. You barely even know what it is, except that there's this big pink and yellow sign that says it's lemonade. And that's it. That's really all you have to go on. But as the parade progresses, the fog slowly lets up and you start to see a little more detail. And what do you know? With more time to scale the business or to scale the parade route, you see less fog, less uncertainty, and it really does start to look like the lemonade you were told to expect all along. And potentially by the end of the parade, you can see the full glass of lemonade as afloat, unobscured by any fog. And you see shareholders are actually swimming in it. But that's if the float makes it to the end, of course. I'd say you and I are maybe like a third of the way down the parade route where we are seeing it now. It's still fairly obscured what this float might be, but there's definitely a clear outline at this point, a clearer outline that this could indeed be Lemonade, as leadership has been telling us all along. Oh, and Beyonce is the performer on this float? Naturally.

Mary Long (14:31)

Duh, duh. There's a really beautiful metaphor, I think in there that we could pull on about seeing the glass half empty. Going to, seeing that to be full.

Kristin Garra (14:39)

Oh, how did I miss that?

Mary Long (14:41)

I think that was kind of woven in to everything that you described. You were just being far more subtle about it and I had to draw that out.

Kristin Garra (14:47)

That was absolutely intended. Thank you for making that so clear.

Mary Long (14:51)

I promised you that I would bring a stock to our parade as well. This one I don't own, but it's gotten on my radar just even within the past few days. I was in Phoenix this past weekend staying with some friends who work at Dutch Bros. Coffee. They began as Bro Ristas like when they were 15 and worked their way up and now are kind of in the corporate side of this company. And this friend mentioned that she couldn't imagine a better company to work for. That made my attention perk up real fast. Not only was she raving about the coffee and the actual products, but just like corporate culture and how they care about their employees. And so that got my attention. Put this stock on my radar. And then a quick look into the business itself also got me pretty excited. They've got strong unit economics and store level performance. They're cranking out about $2 million per location in average unit volumes. If you're listening and thinking what the heck does that mean, we can explain it a bit by comparing it to Chipotle, which is often widely regarded as one of the most efficient players in the fast casual business. And as a point of comparison, Chipotle has average unit volumes of just over $3 million. So for a much smaller operation, Dutch Bros. Has pretty good numbers there. They're mostly on the west coast, but they're expanding. So my whole argument would be that a spot in the Macy's Thanksgiving Day stock parade would be a great play in their national expansion plan. You've got Beyonce performing on the lemonade float. I would be hiring Sabrina Carpenter to sing no other than espresso on the Dutch Bros.

Kristin Garra (16:22)

Float.

Mary Long (16:23)

I don't know. Sounds like we've got a pretty exciting parade ahead of us.

Kristin Garra (16:26)

Kirsten, that's going to be a great day.

Mary Long (16:28)

It's going to be a great day. And with that, we'll wrap it up. Kirsten Guerra, thanks so much for joining us on Motley Fool Money. Happy, happy Thanksgiving to you. I look forward to seeing the rest of our stock parade take place.

Kristin Garra (16:40)

Yeah, maybe it will grow next year. Happy Thanksgiving to you, Mary, and to all of our listeners.

Mary Long (16:51)

What stocks would you want to see in a Thanksgiving Day parade. And what would your float for those stocks look like? Let us know@podcastsool.com that's podcasts with an S@fool.com okay, up next, Robert Brokamp wraps up his conversation with Christine Benz. She's Morningstar's Director of Personal Finance and the author of how to 20 lessons for a Happy Success, Successful and Wealthy Retirement. We played part one of their conversation on last Tuesday's show. Today we're planned the rest where Bro and Christine discuss some of the non financial ingredients for a successful retirement.

Robert Brokamp (17:35)

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Christine Benz (18:41)

You mentioned Roth conversions contributing to Roths. It's one of the big decisions, right? Are you going to go with traditional account? Are you going to go with the Roth? If you have traditional money, do you convert to a Roth? How do you think through that decision, particularly now when tax rates are historically on the lower side, right?

Kirsten Garra (18:59)

If you talk to Ed Slott, who's a tax expert, he would be like all Roth all the time, basically because of the secularly low tax rates that we have today. I do think it's pretty individual specific. I often talk to groups of new employees at Morningstar, really smart people from good colleges, and my guess is that we probably aren't paying them as much as they will eventually earn in their careers. And their tax rate in retirement may in fact be higher than it is today. So for them, you know, it's an easy answer. Go Roth for the late career saver who perhaps has not yet saved that much for retirement. The Roth contributions aren't necessarily a slam dunk that you may be in a higher tax bracket today than you will be in retirement. So you're better off taking that tax break, making the traditional tax deferred contributions, receiving that deduction on your pre tax contributions. So it's individual specific. But one thing I would say for a lot of people in my age cohort, many of us started our our careers where the traditional tax deferred accounts were the only game in town. Right. And until very recently, all of our matching contributions were going into traditional tax deferred accounts. That was the only option for company retirement plans. So many of us have built up very substantial traditional tax deferred balances. And even if we are in our peak earnings years where that tax break on our contributions might be valuable, tax diversification is a valuable tool too. So in retirement, if you have some assets that are Roth that can come out tax free, there's something to be said for that. So I've actually probably running counter to what might make sense from a math standpoint. I've actually been fully funding Roth contributions to my company retirement plan and also doing after tax contributions, which I won't bore you with the details of that, but I just want that tax diversification and the opportunity to have some tax free withdrawals in retirement. And you get that with Roth accounts.

Christine Benz (21:06)

Yeah. Part of the math is if you think you're going to be in a higher tax bracket in the future, the Roth makes sense. That's, you know, that's partially just making an estimate of how much money you'll have in retirement. It's partially also trying to look to the future and say where tax rates will be again. Talking about like what I would write in the early 2000s after like the Bush tax cuts and then we had some wars and the recession and Social Security is underfunded. I would write back then, enjoy these tax rates now because taxes have to go up in the future. And here we are, we're probably going to get another tax cut here soon. So do you even try to project that anymore or do you think we should just assume tax rates are going to stay low forever? Even though I don't know as a country how that math works out, I.

Kirsten Garra (21:51)

Think we have to work with the tax rules that we have. So we do have, you know, tax rates set to expire at the end of 2025. The Trump tax package was set to sunset. I think there's a general perception that it will be renewed for 2026 and beyond. So I think we have to deal with the tax laws that we have today rather than thinking too much about how things might change. And you're absolutely right, Robert, that it seems like the general mood in Washington for the past couple of decades has been tax rates nice and low. And this seems true really for both parties. As far as I can tell, in.

Christine Benz (22:31)

Your book, you cover a lot of non financial aspects of retirement planning. In fact, you wrote, the more I've learned about retirement planning, the more I've come to understand that whether, when and how to retire is less than 50% related to money. So what else should people be thinking about when it comes to retirement planning?

Kirsten Garra (22:50)

I have to say I was guilty of this. You know, I toil on a lot of retirement income research and my articles are talking about the financial aspects of retirement. And that when I thought about some of my favorite conversations that I've had for the podcast that I work on, which is called the Longview, I realized that many of them were actually non financial conversations. So I think I had been underrating the importance of things like identity, that many of us have some sense of identity conferred by our jobs. When we walk away from that, we lose a little bit of that. And this is particularly true for people in kind of high status professions, you know, doctors and attorneys and so forth. But even for regular folks like me, I think, you know, when I, if I retire fully, when I retire, I'll kind of be walking around like, don't you know who I was? You know, there's a sense that what you do for your job is who you are. And so there's that. There is the relationships that we get through our colleagues, real friendships that we have with colleagues. If we haven't built out a social network apart from work, that's a risk you might overrate the extent to which you will stay in touch with those colleagues when you're no longer there sitting alongside them or seeing them on zoom meetings or whatever. So identity relationships. And then perhaps most important is purpose. That work gives us a sense, you know, of the fact that we're contributing to the conversation, we're adding value to the world that we live in. If you haven't taken steps to kind of replace that purpose in retirement, you may feel kind of a sense of loss there as well. So I love the idea of people in sort of the 10 year Runway leading up to retirement taking a step back and thinking about the whole picture. So certainly, you know, run the financial calculators, do your spreadsheets on what your budget will look like in retirement, retirement, do all that stuff, but also give due weight to the, to the non financial Side of the ledger.

Christine Benz (24:56)

I'm one of those people who will often say, I don't know if I'll ever retire, but there are days when, like, work is so busy and then I come home and then there's the kids and, like, everyone wants something from you. I'm like, ah, maybe retire would be nice. But then I think the only thing worse than everyone wanting something from you is no one wanting anything from you. And I think that's sort of the whole point. You're sort of getting to, like. You don't want to feel irrelevant. You don't want to feel like there aren't people who are looking forward to spending time with you and working you. You want to have some sort of project intellectual stimulation. I thought one of the interesting points made by someone in your book, Jordan Grummet, and I don't know if I'm remind if I'm pronouncing his name correctly.

Kirsten Garra (25:38)

Yes, you are.

Christine Benz (25:39)

Yes. He wrote. He's a hospice doctor. He wrote a book about, you know, what people tell him toward the end of their lives. And he made the distinction between the big P purpose and the small P purpose. And if you think of the big P purpose, it's often like, I need to change the world. And that actually causes a lot of anxiety where it's the small P purpose that we should be looking for because it's really. We're doing it for our own satisfaction. There is still consequence for people, but it's really what brings us happiness.

Kirsten Garra (26:06)

Yeah, I love that section. I remember I told my husband, I'm gonna make Jordan's chapter the last. And my husband knows Jordan. He was like a hospice doctor. Seriously, the last chapter of your. But I find it really uplifting in part because he's reassuring about that, that he calls it purpose anxiety, that people think, oh, you know, I need to write a novel or start a foundation or something really dramatic. That's big P purpose. But his point is like, a set of small P purposes. Whether it's like gardening or being a terrific or grandparent or like, pursuing some hobby that you've been a little bit interested in, cultivating a suite of those things is just fine, too. And when we think about, you know, our older individuals in our lives, probably our parents, we probably call upon those things like, oh, you know, dad loved to garden and go to the opera and played the opera for us and all that stuff. Those are beautiful memories and very much a part of legacy, as much as some of those big P purpose achievements might be.

Christine Benz (27:13)

And of course we get some of that from work. I'm going to read a line from your book here. You wrote, the more I've worked on retirement, the more I've concluded that many people should continue working in some capacity if they can, and not just for financial reasons. So in your opinion, is retirement good for people?

Kirsten Garra (27:30)

Laura Carstensen, who's a researcher at Stanford, head of the Stanford center on Longevity, actually makes the provocative point in the book that maybe it's not that provocative, that work is good for people and it doesn't need to be paid work. But, you know, getting back to this idea of purpose, she just thinks that the way we work in this country is all wrong, that people show up in retirement, they're so burned out. They haven't been able to visualize anything about what retirement might look like beyond like Netflix and just leisure activities, which is great. We all look forward to having more of that stuff. But the point is that if you have some pursuits, and again, they may be paid, maybe unpaid, those are the things that will give you something to relax from. It's all about balance. That ideally you would want some things that confer purpose, get you out in the world, get you mixing and mingling with other people. And then you would just have that pure relaxation stuff, whether it's call for travel or, you know, reading or whatever is in that category for you.

Christine Benz (28:37)

Now, Jordan may have made this point, and it's a point often made by Carl Richards too, another financial writer about it can be just like what you subtract from your life, getting rid of the things that drain you so that you could focus on the things that you really derive value from.

Kirsten Garra (28:54)

Yeah, I love that idea. I've been encouraging people to use what I call the Sunday night calendar test, where you take a look at what's coming up for the week ahead and kind of make some mental notes on that. You know, for me, one thing I love is when I see that wide open day, actually, where I know that's going to be kind of a writing researching day, not a lot of meetings. And so sort of take mental notes of those things that you would perhaps like to continue doing longer and those things that you want to pull back from. And if you're, if you're in good standing with your employer in the years leading up to retirement, I think this kind of can be an active sort of process, an active kind of discussion slash negotiation where you are saying, well, I want to keep doing this set of things and I want to do less of X, Y and z. I think that's a valuable exercise. The challenging part is that some of the things that we've gotten good at probably are the things that our employers most want us to continue doing, but they may not be the things that we love. So it's not always going to line up perfectly where your employer is, like, go, go, go, you know, and it's letting you shed all of all the things that you don't love as much. But I think it's a way to kind of ease into retirement so that by the time you hit retirement age, you're doing a more agreeable set of tasks. And some people might listen to this and be like, you're nuts. I hate everything I'm doing, and I know people like this. In which case, the healthiest, best thing is, okay, so let's think about what you will do instead of that. Because encouraging you to keep doing something that you are not enjoying in any way, shape, or form, form isn't good for anyone.

Christine Benz (30:40)

Now, the evidence on whether retirement is good for us is very mixed. There are plenty of studies that find that people who retired die sooner, suffer some sort of cognitive and physical decline, sooner become depressed. But there are other studies that find actually no people are happier. And I think it does depend on what you're retiring from and what you're retiring to, because there are some jobs that are very arduous, physically demanding, or frankly, just kind of boring. And certainly being able to retire from.

Kirsten Garra (31:03)

Those is pretty good, 100%. And, you know, the data on happiness in retirement, it's hopelessly polluted by kind of wealth and health that we do see a tight connection. The healthier and wealthier in our population tend to be able to work longer. They're the ones who are expressing a lot of life satisfaction. They have more longevity on their side, too. So it's really hard to disentangle. Healthier people are able to work longer, and so they're able to stay healthier longer. So it's. It's really hard to disentangle.

Mary Long (31:43)

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 stocks based solely on what you hear. All personal finance content follows motley f editorial standards and are not approved by advertisers. Motley fool only picks products that it would personally recommend to friends like you. I'm Mary Long. Thanks for listening. We'll see you tomorrow.

Christine Benz (32:10)

Fools.