Company Notes Digest 11.21.14

Each week I read dozens of transcripts from earnings calls and presentations as part of my investment process. Below are some of the most important quotes about the economy and industry trends from the transcripts that I read this week. Full notes can be found here.

The Macro Outlook:

Apparel may not be doing well…

“It is obvious that the environment surrounding apparel retailing over the past year has been challenging. Many brands have struggled. A few have delivered fair results, and very, very few have shown strength.’ ($URBN)

…but home improvement is leading the pack

“We had positive comps in all 12 product categories…Sales across the country were balanced…in fact, all 14 regions had positive comps.” ($LOW)

“We saw growth in ticket and transaction in the third quarter and we were particularly pleased with the strong transaction growth as each month in the quarter had positive comp transactions.” ($HD)

Lowes’ surveys show consumer confidence in housing at pre recession highs

“the results of our third quarter consumer sentiment survey…[revealed that] confidence in both local and national housing markets increased to pre-recession highs this quarter.” ($LOW)

Some analysts even asked for comparisons to 2005

Analyst question: “When you look at your business versus 2005 during the last peak period of time, how different do you see the store?” ($LOW)

Most companies are saying that November has started strong

“We’ve seen good traction as we’ve turned the corner into the month of November from October.” ($URBN)

“It came back very strong opening November.” ($TJX)

“we’re off to a great start. In fact, we’re very impressed with our results thus far” ($LOW)

“frankly our momentum continues in the fourth quarter.” ($DLTR)

This holiday season will be even more competitive than last year

“There is no question the holiday season will be even more competitive than last year.” ($WSM)

“The promotional environment is very intense. It is certainly not less intense. I’m not sure, if anything it’s probably a little bit more intense than last year.” ($BBY)

But consumers seem to be ready to get into the holiday spirit

“I’d say the thing that I’m really noticing is that people have been ready for Christmas earlier this year. And we’ve seen really nice response to our guests already’ ($WSM)

And retailers are better prepared

“week two and week three of December last year were quite extraordinarily bad, candidly not just for us, this was industry-wide. If you remember, you had a bit of a perfect storm last year…there were so many unique factors that it’s going to be hard to replicate the kind of drama that we had last year.” ($BBY)

Lower oil prices may boost consumption, but they may not impact costs quite yet

“Certainly there would like to be some benefits if we continue to see fuel prices come down, but we haven’t reached the threshold where fuel surcharges begin to come out of our contracts” ($TGT)

At least in the near term, other logistics issues will offset gains from lower fuel prices

“work the team has done to manage some of the port issues out west…that will probably be more of a drag than any fuel savings we will see.’ ($TGT)

“in the guidance standpoint, we still expect headwinds from freight are going to continue to be there.” ($DLTR)

“The bigger concern is obviously, if this West Coast port slowdown continues or deteriorates…[it] isn’t good for anybody.’ ($WSM)

Construction isn’t booming enough to be the top of the cycle yet

“I don’t think it’s an end-of-cycle conversation. So I don’t believe that we’re at that stage where everybody says okay, we’re at the end of the cycle and now we’re going to have a prolonged downturn. Generally, when our businesses are booming the cycles already over. And we’re not anywhere near that blooming stage yet.” ($JEC)

Chemicals companies have been slow to green-light big capital projects

“moving on to the chemicals business, lots of FEED and pre-FEED activity out there…But, everybody remains very measured in releasing these projects…We’ve got a number of customers who are talking about those kinds of things happening in the next two or three months, but frankly I’ve heard that story before.” ($JEC)

There have been some big awards for building buildings

“our buildings list is growing globally, we’ve seen significant awards, we have had some since the quarter closed we had some major awards in the Middle East in the buildings and infrastructure space. ($JEC)

Indonesia may have a more capital friendly government coming into power

“I was just at APEC last week which has always great insight into what’s going on in Asia Pacific region and the new Indonesia President Joko Widodo was there…the early signs are is that he is bringing a new philosophy into the government of Indonesia.” ($FCX)

Financials:

Mortgage originators don’t want to be forever accountable for the risk that they’re underwriting

“I do think that there are borrowers who are otherwise credit eligible and underwritable who are not getting credit as a result of that uncertainty, because originators don’t want to take lifetime default risk’ ($WFC)

Consumer:

The retail business is a moving target

“in the retail business, the competitive environment changes on an ongoing basis. And that’s actually what’s really fun about the retail business.’ ($HD)

Fast fashion is both a supply chain and a pricing concept

“If you are talking about fast fashion as a supply chain discipline…we are in the process of adapting to that change. We have significantly decreased the number of weeks between when we start to put our fashion to bed and deliver it. So I believe very much in fast fashion, but when you start talking about fast fashion as a price point, that’s where you lose me. We think that our customer is much more driven by style, fashion, and brand equity than they are by price point. And I think this is a split that is not as well-recognized in the investment community as it should be.’ ($URBN)

The golf business has been tough recently, but Dicks thinks it bottoms next year

“I think the manufacturers are much more disciplined, the retailers are much more disciplined and I think the golf business is going to be an okay business…we’ll hit bottom here in the next quarter probably and we think that we’ll see increased profitability going into next year.” ($DKS)

Bacon demand is relatively inelastic

“As the supply of hogs tightened this past year it demonstrated the relative inelasticity of certain type of our pork bellies [ph] for bacon.” ($TSN)

Millenials eat more chicken

“there is the generational issue that we are beginning to see in the marketplace with Millennials entering the marketplace and they index quite high versus chicken and so we think that is also going to be driving consumer demand for chicken out front.” ($TSN)

As baby boomers get older they’ll be paying people to do things they used to do themselves

“I think you also see services growing as a result of you have an aging population and I know for myself where I used to love to do things. I actually have Home Depot services do things now that I would have done previously.” ($HD)

Technology:

There has been a huge amount of demand for an iconic phone launch, but supply has been uneven

“Prior to this iconic launch, we saw continued pent-up demand…at the launch we did quite well but then supply was uneven during the quarter. So that’s a positive followed by a negative.” ($BBY)

Consumers are adopting installment pricing plans, leading to higher ASPs for phones

“the adoption of installment billing plans continued to accelerate throughout the quarter. Within these plans, we saw higher average phone prices and higher attach rates of services and phone accessories.” ($BBY)

A couple of companies mentioned shifting ad budgets towards digital

“In the United States and Marmaxx, we’re doing a little bit more social media. So we’re changing it up a bit.” ($TJX)

“In marketing, we continued to shift marketing dollars away from TV and print to digital media and display campaigns” ($BBY)

Materials, Industrials, Energy:

Activity in oil sands has definitely slowed due to oil prices

“we’re seeing real weakness in the oil sands just because of where oil prices are…it’s a very difficult market for us right now.” ($JEC)

There are still lots of reasons to be bullish about copper

“We are so optimistic about the long term future of copper prices…supply is constrained by geologic reasons, by environmental reasons, community issues, government issues and…the price outlook is so strong…You just can’t turn to spigot on; you have a do a hell of a lot of work to identify what the resources, how you will mine it, how do you get water or power, other facilities there.” ($FCX)

Miscellaneous Nuggets of Wisdom:

You should try to keep the talent that you acquire

“[we] do a better job of getting value out of our acquisitions. And the reason we do that is we keep the talent.” ($EMC)

Different industries speak different languages

“there are three things that are important as we go to market. One is obviously to speak the language of industry. We think that’s very important, because when you speak to a bank, you need to understand the language of the bank, what the customer challenges are, and what the opportunities are, and how you can apply the customer success platform to that business problem.” ($CRM)

Full transcripts can be found at www.seekingalpha.com


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