In this episode of MarketFoolery, Chris Hill chats with Motley Fool analyst Bill Barker about the latest headlines from Wall Street. They discuss the stock moves of  a data analytics software company. They talk about holiday shopping and the apparel retail space and much more.

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This video was recorded on October 6, 2020.

Chris Hill: It's Tuesday, October 6th. Welcome to MarketFoolery. I'm Chris Hill, with me today, he's in a good mood because the Yankees won last night, it's Bill Barker. Thanks for being here.

Bill Barker: Thanks for having me. That's true, I'm in a good mood.

Hill: [laughs] We're going to look at the retail landscape, we're going to talk about capital allocation; at least how one company is executing their capital allocation strategy. But we're going to start with the stock of the day.

Shares of Alteryx (NYSE:AYX) are up more than 25% this morning. The data analytics software company increased revenue guidance for the third quarter. They are also shuffling some positions in the boardroom, but I'm assuming this is about the increased guidance.

Barker: Yeah, I believe that's the case. And although it is up 25% today, it really collapsed about 30% last month. So, it had pulled back on, not really decreased guidance, just had said that the second quarter, although it beat estimates, was not really beating, sort of, the whisper numbers. And they didn't see things going on for the second half of the year improving over, sort of, where they were. Now they're, kind of, correcting that. And the stock is making up about half of what it lost following the second quarter earnings report. So, it's been a very volatile stock. It's doing OK compared to a lot of other software performers. It does not stand out, it's up a bit this year but nothing close to the better performers.

Hill: I was looking at a one-year chart of Alteryx, and reminded of the comment you made from time-to-time, which is, this is a stock [laughs] that has visited lots of interesting places in the past 12 months. Although, you zoom that out, the five-year chart of Alteryx is not only impressive, it's certainly more stable. It's one of those things, if you've been a longtime shareholder of this company and you've got the stomach to deal with a stock that, in less than a year, can hit $80/share, get up to $180, as you said, drop 30%, it's back up I think in the mid-$140s right now. This is not a company I follow closely, so is this a business that has all of a sudden gotten lumpier [laughs] in their revenue stream or is this just, sort of like, look, there's a global pandemic on and this is just how 2020 has gotten, not just for Alteryx but for a lot of businesses?

Barker: I would say more of the latter. It's doing in a quarter, about what it was doing in terms of revenue two-and-a-half years ago. So, 2017 total sales were, I think, around $130 million, $140 million. This is doing that around that in a quarter now. So, yeah, as you point out correctly, the longer term is the up and to the right chart that you like to see, and over the last year a lot of peaks-and-valleys, but it's doing well, it's growing north of 20% a year. And I think that is continuing to have a good long-term story.

It's hard to value things growing as fast as a company like this is. A little bit of a hiccup and you've got a lot of people sitting on a lot of profits, maybe they're not long-term shareholders, and 30% of them get out in a day, as may have happened with their most recent earnings report. So, today's return to the story that the earnings and revenue stories are good and are looking a little bit better than they were two months ago.

Hill: You can add Dollar Tree (NASDAQ:DLTR) to the list of retailers gearing up for the holidays. Dollar Tree says it plans to hire 25,000 seasonal workers, most of whom are going to be in distribution centers, as Dollar Tree, like a lot of retailers, has seen a surge in online sales. The Wall Street Journal had a pretty in-depth story today about the changing landscape and I want to get to a couple of different parts of it, but certainly what we're seeing with Dollar Tree and their announcement. Because in terms of just raw numbers, this is what Dollar Tree announced last year, you know, around 25,000 seasonal workers. But they're clearly moving more of them into their online operations, that's something we've seen, sort of, across the board this year.

Barker: Yeah, there's a lot going on here, you know, it's doing catchup on its online sales. That said, it's got a full online offering. And it's featuring, if you go to it, featuring its Christmas goods right now here in the first week of October, which is another indication that it is going to be a long holiday season. Just as you may have seen on your infrequent trips to the grocery store, the Halloween candy was out nice and early this year, I don't know, July maybe, certainly --

Hill: August.

Barker: You know, definitely August, maybe July in some places, where they like candy even more than others. So, long seasons, long holiday seasons, and it's going to be largely online. If you're not prepared for an online delivery system, you're going to be in trouble, a lot of retailers are already in a lot of trouble.

Hill: So, to go back to that journal story -- and I'll put the link out in the MarketFoolery Twitter feed -- one of the things that caught my eye was, when they break out retail by category, apparel is far-and-away [laughs] as bad as everyone thinks it is. I mean, we knew it was really challenged, but to see it in chart form is to see that this is by far the worst retail category. And good luck to anyone who wants to go bottom-feeding with apparel stocks and try and look for value there, because it is really ugly for that industry.

Barker: Yeah. What have you bought since all this kicked in apparel-wise, you personally?

Hill: In terms of clothes?

Barker: Yeah.

Hill: I don't think I -- you know ...

Barker: This is the problem.

Hill: Yeah. It was a specialty retailer; I mentioned this on the Fool Live video stream last week. Producer Dan Boyd has a podcast and they have a swag shop and I bought a shirt from that. I don't think that shows up in, like, the National Retail Federation numbers. I don't know [laughs] that they're including Dan and his buddy Campbell's podcast and their swag shop in there. But that's pretty much the only apparel I've bought recently.

Barker: Yeah, people aren't dressing up to go to an office, they're not dressing up to, you know, go to a vacation, they're in their house, they only have to look good, if at all, from the neck up in most cases. And so, on top of that you've got teenagers, in particular, who have less disposable income than I think they've had in three decades maybe. And they had a lion's share of the jobs that, you know like, waiters and waitresses and Summer jobs that just weren't there, that would have put money in their pockets, and they are a big chunk of that retail apparel channel. So, you know, the office retail is just gone, and teenagers don't have the money and the malls were closed. And maybe Christmas can help a little bit, but I think that's one of the channels that's going to continue to be highly challenged before any return to normalcy.

Hill: And yet, we are seeing -- you step outside of the apparel category -- we're also seeing retailers in different categories really boost their profit marginsȘ eBay, Dollar General, Lowe's, O'Reilly Automotive, I mean, these are just, sort of, second quarter year-over-year, they've seen a big boost to their profit margin. So, you know, it's not dire for retail as a category, it's just I think more important than ever before that investors do their homework.

Barker: Yeah, you've got a lot of money saved from travel not taken and from office space not expanded or improved, so there are a lot of places where even if you have a sales that weren't meeting your goals or weren't growing the way you'd like them to, there are still a lot of costs that have been taken out. And you know it's not been -- and the first step of this story, it was the government that filled in the hole caused by a lot of the lost wages where you see the market, every day some of its action being ascribed to whether there is another package that is going to come out of Congress or not. And it's the hole that was filled by the government, may be filled again in terms of discretionary income that retail depends on. And so, if the employers are not required to pay as many people as they used to, but people have as much money in their pockets as they may have had.

In some cases, and this has been blowing out of proportion, but in some cases, people getting more money from the government package than they were getting from their own jobs, that has translated into a fair increase in savings for certain portions of the economy that may be available for retail sales. But absent a package where the government does what it did before or close to it, I would expect those margins to not keep improving.

Hill: The advertising industry is expected to see a year-over-year decline, but don't blame Mondelez. The Chief Financial Officer for Mondelez has apparently started moving some money around, money that would have gone to things like executive travel, consulting, and real estate is now going to go to marketing. For the first time ever, Mondelez is going to spend more on digital marketing than television advertising. This is, of course, the parent company of such delicious items as Oreos and RITZ Crackers and Cadbury chocolate.

This was an interesting story for me to read, in part because it just got me [laughs] thinking about how other -- I have to imagine many other CFOs are going through a similar exercise, not all of them are going to put it into advertising, but this -- you know, we say all the time that one of the things you want to look for when you're looking at the management of a company you're thinking about buying shares of is, well, how are they when it comes to spending money, whether its acquisitions or investments in their own business or something else altogether. It will be interesting to see how Mondelez's capital allocation shifting pays off for them.

Barker: Yeah. Historically, you've attacked them for their allocation toward increasing the number of Oreos variations that they sell. So, maybe they've maxed out on that by now. But advertising, online advertising, as you mentioned, has been a growing channel. People who are watching TV are doing it more and more in streaming form, less and less in live coverage. Maybe they're watching some political coverage right now, I don't know if that's a great place to advertise Oreos or not. But I think that Mondelez does more of its sales abroad than here by a large margin. So, it's suffering in terms of its emerging market sales, developed market sales are still OK. But it probably wants to expand in the emerging markets channels and at the same time defend what it's got here.

More advertising, less travel, that's going to put them in more people's minds. You know, it's a fair fight, I think people are eating a little bit poorly at the moment as a whole, some people may have found that they have some discipline, a lot of people are giving themselves a little bit more latitude to have more snacks, so that's not a bad equation for Mondelez.

Hill: No. My favorite statistic I've seen so far about Halloween this year is that sales of Halloween-themed chocolate is up 25%, but the percentage of Americans, in a survey, who said they were going to be giving out Halloween candy is 14% lower than it was a year ago. So, again, rising sales of Halloween chocolate, but we're not going to be giving it out. I have to assume that ties neatly into your narrative of, yeah, not only are we not eating better, we're eating worse; and pass the bag of Halloween-themed Snickers.

Barker: Sure, it could be that, it could be some very diligent research for next year, that people want to just go through all the Halloween choices there are knowing that next year is going to be huge, or hoping, right; we don't know much of anything anymore. But hoping that next Halloween is going to be a blowout, you're going to have to really be prepared, you got to nail the candy, so why not try it all right now?

Hill: You're saying that it's a nationwide sampling that's going on?

Barker: In my house. [laughs] I am possibly projecting.

Hill: [laughs] No, I like that.

Barker: I'm trying to drag the rest of the country down with me.

Hill: You know what, it hadn't even occurred to me to use the time between now and Halloween as essentially a testing ground for Halloween 2021, but I'm going to try that strategy in my own house; I'll let you know how it goes.

Barker: Yeah, this is your chance to try all those Oreos flavors you've skipped up till now.

Hill: No, no, no, candy, not Oreos.

Barker: Okay. I mean, some people give, like, Oreo snack packs at Halloween.

Hill: Yeah, that's ...

Barker: It's a little bit -- like, it's not like an apple, it's better than that.

Hill: No, yeah, it's not like, you know, organic fruit snacks or something like that. Like, don't be that house.

Barker: Yeah, here is some dried broccoli, you know?

Hill: Bill Barker, always good talking to you, thanks for being here.

Barker: Thanks for having me.

Hill: 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.

That's going to do it for this edition of MarketFoolery. The show is mixed by Dan Boyd, I'm Chris Hill, thanks for listening, we'll see you tomorrow.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.