Company Notes Digest 8.29.14

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

The Macro Outlook

Many retailers still sound cautious

“We have a backdrop of a consumer environment that’s a bit fragile” ($BBY)

But back to school has been strong

“we are having a very good back to school right now. Our back to school categories, we’re up 4.5% right now. In fact this week which is the first of two really intense weeks, we are actually up over 7% in the categories that are related to back to school.” ($DG)

“I would say that back-to-school so far is in-line with our expectations. There is potentially I think in retail in general, a more positive environment but we’re not just going to take a couple or three weeks as a source of excitement. ” ($BBY)

The mixed signals may boil down to a class divide

The low and middle income consumer is struggling

“You’ve heard other retailers say this, low and middle end consumers are continuing to struggle. They have changed their buying habits. Data now suggests that out of necessity, many folks have reduced their overall consumption and absolute unit growth across Nielsen measured channel data supports this. While our customer always finds a way to work through difficult time, she is struggling to overcome the sustained nature of the headwind she is facing.” ($DG)

Conditions are favorable for Tiffany’s customers though. The only weakness was in entry level jewelry.

“of course, conditions in the U.S. are favorable for many of our customers…We were pleased to experience healthy unit growth in the statement, fine and solitaire jewelry category as well as in our engagement jewelry and wedding band category…However, continued softness in silver jewelry unit sale in particular entry level sales under $500.” ($TIF)

All eyes are now turning to the second half

Williams Sonoma expects a strong holiday season

“Based on the trends we are seeing, we believe our holiday decorating and gifting season from Halloween to Thanksgiving to Christmas will be successful.” ($WSM)

Best Buy is not as optimistic

“absent any changes in these declining industry trends and with limited visibility to new product launch quantities. We continue to expect comparable sales to decline in the low single digits in both the third and fourth quarter.” ($BBY)

The holidays may be buoyed by the fact that the consumer is focused on events

“the activity in the consumer is more focused around certain specific events. And I think Labor Day and we are prepared for a pretty intense Labor Day but then we think things will probably settle down for a period of time. We are ready to go for Black Friday. We’ve got our Christmas plan in place and I see no deviation from what we have laid out.” ($DG)

Will the environment be so promotional that retailers will still struggle anyways though?

“We are pleased that we were able to deliver these results against a more promotional backdrop…the customer was reacting better to deeper promotions this quarter…The promotional environment I was referring to, I think, is touching every brand in the marketplace, including all of ours.” ($WSM)

Dollar General thinks it’s going to be competitive in the back half, but not irrational

“as we move through the back half of the year, I think the competitive environment will be heightened, but I don’t think it’s going to irrational.” ($DG)

Here’s a curveball to keep an eye on: retailers are trying to manage inventory around the risk of a west coast port strike

“The other thing I’d like to throw out there, I’m sure you guys are aware there’s an import strike scare out there. And we made a conscious decision to bring some of our holiday merchandise in a little sooner.” ($DG)

“we don’t anticipate the same transportation savings in the second half of the year as we shift the deliveries to ensure that product keeps flowing regardless of what happens to the West Coast labor negotiations. While we have diverted shipments to East Coast ports, we have also increased our use of air shipments on a temporary basis.” ($EXPR)

If European data has looked weak recently, just remember that summer may not be the best time to judge the region’s economy

“I would caution you to not necessarily look at August as a indicator of what volumes are in Europe because a lot of August means shut down in Europe where countries are operating on 20% of available staff because of the tail end of the vacation season.” ($TECD)

National Bank of Greece was upbeat about the Greek economy

“in Q2 the economy exited recession…This abundance of positive evidence from the real economy indicating that the real economy is recovering and on track to meet its program target, is also confirmed by the markets. Indeed the Greek 10-year government bond spread over bonds is at four years low and Greek banks have successfully issued episode of corporate bonds.” ($NBG)

The Japanese economy may be recovering from its sales tax increase more slowly than expected

“After experiencing a surge in spending in the first quarter as Japanese consumers purchased in advance of a consumption tax increase on April 1…following a substantial sales decline in April, we saw a decelerating rate of sales decline in each months of the second quarter. However, the return to monthly sales growth is taking longer than we expected.” ($TIF)

Financials

Bank profitability is still depressed thanks to macro uncertainty

“As I look ahead, I am struck by how much uncertainty we still face. Recent political events are creating headwinds for banks all over the world, interest rates are dropped back down, and expectations for our normalization in rates have been pushed further into the future, and along with them the revenue upside we will reap as a result of our deposit-rich balance sheet” ($TD)

There may be some green shoots in the mortgage market

“On mortgages, it’s tough. It feels like fits and starts. The growth has improved a bit but originations are up 15% versus last quarter but they are down 70% versus last year. So that gives you a sense. My sense on mortgages is that there are some positive signs emerging, you’re seeing pending home sales up, applications are up, the percentage of people who say they want to purchase a home is up. And if you look at the estimates from Fannie and Freddie and the Mortgage Bankers Association, they are up quite strongly, sort of 13% to 25% for purchase volumes, but they are quite pessimistic on refis.” ($TD)

Consumer

Stores are billboards for e-commerce

“What we find is [a new store is] a pretty good billboard for the DSW brand and it increases awareness and it typically creates a lift in our dotcom business from customers who live in that vicinity.” ($DSW)

Consumers want comfy shoes

“So as we saw at the last two shoe shows, I think comfort has infiltrated every single category. The vendors, smart-fully so, are putting it into dress, sandals, casual shoes. It is pervasive across the industry and frankly that’s what gets me really excited because customers have been asking for it for a long time” ($DSW)

And flavored whiskey too

“in 2013, in the U.S. the flavored whiskeys accounted for about 45% of the American whiskey volume growth.Looking at what drove that was definitely demographics played a major role in that with increased interest from women and minorities based on their changing taste profiles and preferences, as well as convenience.” ($BF.B)

American Whiskey has had a 40 year secular decline in consumption

“Let’s go back to 1970s and look at how many cases of American whiskey were sold at that time, it’s about 100 million cases. That’s when the consumption of American whiskey actually peaked.We’ll fast forward it to today where there is a 40-year secular decline in the category. It was roughly cut in half, so it’s about 50 million cases.” ($BF.B)

Technology

Smartphone sales are slow at Best Buy

“We’re also seeing ongoing softness in the mobile phone category ahead of highly anticipated new product launches…penetration of smartphones in the country has really reached very high level” ($BBY)

Best Buy is hopeful that Ultra HD TVs will take their place

“What’s very exciting about Ultra-High Definition TV compared to 3D a few years ago is that the customer benefits is immediately tangible and meaningful in the form of improved image quality” ($BBY)

Tablet sales are slow at the enterprise

“The tablet — an interesting data point, tablets were down 2% but ASPs were up and that was primarily driven around a mix change.” ($TECD)

It’s pretty clear that there are some things tablets do well and other things that a PC is better for

“the penetration of tablets has really grown and the performance and capability of the tablet is now very clear. It does some things well. There’s other things that it doesn’t do as well, that the PC is optimized to perform.” ($TECD)

There are drivers of PC demand beyond just the XP refresh

“there are other growth factors in the PC market. Employment clearly grew over the last few quarters and that drives PC purchases, as does just the aging of he fleet that was installed’ ($TECD)

A server refresh cycle may be on its way

“The server cycle is kind of yet to be seen. The Windows Server update really will start to come into fruition in the middle part of next year. Customers and enterprises will start the planning process now…server refreshes that we believe will happen in the latter part of this year and early next year” ($TECD)

A key to getting software into the enterprise is to partner with the big systems integrators

“I would say 24 months we’ve seen big investments from the large SIs, historically we had small boutique system integrators who’ve been terrific partners from really from day one, be the majority of the implementations. But last few years starting with Deloitte, followed by Accenture, then IBM, now Price Waterhouse, now HP, now CSC, we really have most of the key SIs building out fairly large practices in Workday.” ($WDAY)

Over the last few years, the systems integrators have gotten much better at integrating cloud solutions into companies with legacy systems

“the systems integrators have all over the last couple years gotten much, much better not taking the legacy system out and putting in the cloud system and automating the old processes but actually using Workday or salesforce or any of these cloud solutions to transform the business” ($WDAY)

Companies without legacy systems are definitely choosing cloud solutions

“If companies are starting with a Greenfield, they are going to choose cloud versus on premise and for all of the people that are on premise they are increasingly switching to cloud. The functionality is there, the scalability is there, the functionality is now ahead of where the legacy systems sit.’ ($WDAY)

Materials, Industrials, Energy

Have gold prices come down enough to stoke jewelry demand?

“And we’re pleased that fashion jewelry unit sales are benefiting from strength in gold jewelry.” ($TIF)

Miscellaneous Nuggets of Wisdom

You have to be able to balance the near term and the long term at the same time

“Our team’s skill in balancing near-term market realities with the commitment to our strategic vision is a defining characteristic of the organization.” ($WSM)

In a promotional environment, find a way to differentiate your product

“our long-term perspective on it is that is why we’re so aggressive on driving operational improvements and investing in our supply chain…I think at the end of the day, the customer does like a sale, but when you’re buying furniture, you want quality.” ($WSM)

You have to be able to adapt to change

“One of the most enduring lessons of my career has been that good management teams leading sound business models adapt” ($TD)

transcripts via Factset and www.seekingalpha.com

Brown Forman 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Whiskey consumption has been in long term secular decline

“let’s go back to 1970s and look at how many cases of American whiskey were sold at that time, it’s about 100 million cases. That’s when the consumption of American whiskey actually peaked.

We’ll fast forward it to today where there is a 40-year secular decline in the category. It was roughly cut in half, so it’s about 50 million cases. If you look at the U.S. population of legal drinking age at that time, it’s grown about 50%, meaning the per capita consumption of American whiskey has fallen by almost 70% over that period. So, we were witnessing an inflection point in the U.S. American whiskey around 2010 where we really saw consumer interest in the category reignited.”

craft distilling and changing taste profiles have helped spur demand

“when we look at what we think is the cause of this renewed demand, of course, there is multiple factors, but I’m just going to mention a few. One, is the rise of craft distilling, which is led by our own Woodford Reserve, the consumer interest in heritage and authenticity, and what appears to be vodka fatigue.

I’m going to focus on another factor I’m calling a fourth factor today, which is the important as the flavored whiskey. So, in 2013, in the U.S. the flavored whiskeys accounted for about 45% of the American whiskey volume growth.

Looking at what drove that was definitely demographics played a major role in that with increased interest from women and minorities based on their changing taste profiles and preferences, as well as convenience.

I can speak to this. I have a couple of millennial kids myself, but I know I probably taught them to like things that tasted differently, but millennials definitely have grown up with many different flavor offerings whether it’s cereals or soda or water or juices. So they now expect to have all kinds of choices and tastes and they want great tasting things.”

We have one of the highest tax rates of our competitors

“I think we have the highest tax rate of all of our competitors’ business and something that we’ve been very, very focused on and looking for smart ways to reduce our tax rate. And, of course, one of the biggest ways is to continue to grow your business outside the U.S. like we have been”

Marijuana legalization is a threat

“you occasionally have things like a U.S. consideration of the legalization of marijuana becomes a big threat. You try to assess and look at and think about long term. “

Express 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Management Change

“The last topic I want to touch on before turning the call over to David is my decision to retire. Last month we announced that I will retire from my role as Chief Executive Officer on January 30, the last business day of our current fiscal year. ”

Weak performance

“Traffic and transactions reached down during the quarter and our net sales of $481 million were 2% below last year’s second quarter. Comparable sales were down 5%. Our gross margin came at 28.3% declining 280 points driven primarily by buying occupancy de-leverage. ”

Transportation costs will go up as they manage risk around port strike

“we don’t anticipate the same transportation savings in the second half of the year as we shift the deliveries to ensure that product keeps flowing regardless of what happens to the West Coast labor negotiations. While we have diverted shipments to East Coast ports, we have also increased our use of air shipments on a temporary basis.”

Tech Data 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Strong IT demand environment

“Tech Data delivered an outstanding quarter in Q2 of fiscal 2015 and improved IT demand environment together with strong execution by our teams in both regions, produced record Q2 sales and earnings per share, results that exceeded our expectations.’

US driven by PC business

“On a product level, the region’s growth was driven by strong sales of broadline products, mainly PCs and good performance in our advanced infrastructure solutions or AIS division. For the first six months of fiscal ’15, Americas sales grew 6% from the prior year to $5.2 billion”

Optimistic demand environment will continue, but margins may not be sustainable

“While we remain cautiously optimistic that the current demand environment will continue, the margin opportunity presented to us in Q2 is not assured to be sustainable during the second half, therefore we will take our usual conservative approach to plan for more normalized margins and if demand tries to exceed our expectations, we will once again have an opportunity to over achiev”

Color on geographies/products

“from a end market perspective SMB was strong in the U.S. Education and healthcare were both up double digits. From geographic perspective in Europe, Italy, Iberia, the Nordics, Switzerland, Germany were all up double digits. So they were both vertical strength and geographic strength in the quarter as reported. Couple of the highlights from the product perspective, software was up 5% worldwide. The tablet — an interesting data point, tablets were down 2% but ASPs were up and that was primarily driven around a mix change.”

Ya, PCs have benefitted from XP, but there’s other things at work too

“on the PC, clearly the conversion away from XP has benefited the whole ecosystem. And we’ve all been able to take advantage of that transformation. But, I think you also have to factor in that there are other growth factors in the PC market. Employment clearly grew over the last few quarters and that drives PC purchases, as does just the ageing of he fleet that was installed, clearly over the last years or so PC demand was down, that fleet aged and now with some renewed confidence in the strength of the economies, as well as enhancements in growth and in employment, that’s driven the PC market very nicely.”

Tablets are good at some things, PCs better for others

“I think the other factor that’s come into play in the PC space is the penetration of tablets has really grown and the performance and capability of the tablet is now very clear. It does some things well. There’s other things that it doesn’t do as well, that the PC is optimized to perform.”

Server refreshes likely over next 12 months

“The server cycle is kind of yet to be seen. The Windows Server update really will start to come into fruition in the middle part of next year. Customers and enterprises will start the planning process now…server refreshes that we believe will happen in the latter part of this year and early next year”

IT distributors have to adapt to a constantly changing environment

“That’s the process of running an IT distribution business when the technology is constantly changing you have to optimize. You have to take the opportunity to match up your resources, you skills and your investment streams with the real opportunities that exist.”

Europe shuts down in August

“I would caution you to not necessarily look at August as a indicator of what volumes are in Europe because a lot of August means shut down in Europe where countries are operating on 20% of available staff because of the tail end of the vacation season.’

National Bank of Greece 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Greek recession ends

“in Q2 the economy exits recession recording the first positive sign, it’s up 0.5% Q-on-Q in seasonally adjusted terms and this marks the effective end of recession following 18 consecutive quarters of sharp contraction.”

Markets confirm recovery

“This abundance of positive evidence from the real economy indicating that the real economy is recovering and on track to meet its program target, is also confirmed by the markets. Indeed the Greek 10-year government bond spread over bonds is at four years low and Greek banks have successfully issued episode of corporate bonds.”

Dollar General 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Consumer still cautious

“Our second quarter same-store sales began very strong, with a year-over-year increase in May of more 3.5%. However, this growth moderated as we moved through June and July, given the competitive environment in a consumer who although resilient in the face of economic uncertainty, remains cautious with their spending. ”

low and middle end is continuing to struggle

“You’ve heard other retailers say this, low and middle end consumers are continuing to struggle. They have changed their buying habits. Data now suggests that out of necessity, many folks have reduced their overall consumption and absolute unit growth across Nielsen measured channel data supports this. While our customer always finds a way to work through difficult time, she is struggling to overcome the sustained nature of the headwind she is facing.”

11k stores

“At the end of the second quarter we had 11,535 stores with 85.2 million square feet of selling space in 40 States”

Back to school has been strong

“I would like throw out back to school for us, we are having a very good back to school right now. Our back to school categories, we’re up 4.5% right now. In fact this week which is the first of two really intense weeks, we are actually up over 7% in the categories that are related to back to school. And I relate that to the fact that the environment has cooled down and everyday low price has a lot more value right now.”

Rural/urban stores tend to work out to the same margin

“Our rural stores tend to do very well. They operate at a lower volume rate than the urban stores and they tend to have a lower expense structure than the urban stores. Both stores tend to carry about the same margin in all honesty.”

Back half will be competitive but not irrational

“as we move through the back half of the year, I think the competitive environment will be heightened, but I don’t think it’s going to irrational.”

The consumer is focused on events

” think the activity in the consumer is more focused around certain specific events. And I think Labor Day and we are prepared for a pretty intense Labor Day but then we think things will probably settle down for a period of time. We are ready to go for Black Friday. We’ve got our Christmas plan in place and I see no deviation from what we have laid out.’

Concerns about dockworkers strike

“The other thing I’d like to throw out there, I’m sure you guys are aware there’s an import strike scare out there. And we made a conscious decision to bring some of our holiday merchandise in a little sooner.”

Toronto Dominion 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

So much uncertainty

“As I look ahead, I am struck by how much uncertainty we still face. Recent political events are creating headwinds for banks all over the world, interest rates are dropped back down, and expectations for our normalization in rates have been pushed further into the future, and along with them the revenue upside we will reap as a result of our deposit-rich balance sheet”

Good management teams leading sound business models adapt

“One of the most enduring lessons of my career has been that good management teams leading sound business models adapt.”

Management change

“As you know, I am here until the end of the fiscal year. This is my last quarterly call. So I’m going to take this opportunity to say my own thank yous.”

Some positive signs in mortgages

“On mortgages, it’s tough. It feels like fits and starts. The growth has improved a bit but originations are up 15% versus last quarter but they are down 70% versus last year. So that gives you a sense. My sense on mortgages is that there are some positive signs emerging, you’re seeing pending home sales up, applications are up, the percentage of people who say they want to purchase a home is up. And if you look at the estimates from Fannie and Freddie and the Mortgage Bankers Association, they are up quite strongly, sort of 13% to 25% for purchase volumes, but they are quite pessimistic on refis.”

Williams Sonoma 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

balance near term market realities with commitment to strategic vision

“We are pleased that we were able to deliver these results against a more promotional backdrop. Our team’s skill in balancing near-term market realities with the commitment to our strategic vision is a defining characteristic of the organization.”

Expect a strong holiday season

“Based on the trends we are seeing, we believe our holiday decorating and gifting season from Halloween to Thanksgiving to Christmas will be successful. We are prepared to offer our customers the best quality, design and price in our category and continue to work diligently on operational improvements that will further differentiate us from the competition.”

Different promotions hit different margin lines

“because we’re 50% effectively e-commerce and 50% retail, we have a choice we can make, an operational decision. Do we get the sale by having a deeper promotion? Do we get the sale by offering free ship, for example? Those 2 hit gross margin. Do we get the sale by more e-mails, more catalogs, more paid search? That hits SG&A. ”

The customer was reacting to deeper promotions

“the customer was reacting better to deeper promotions this quarter.”

promotional environment out there

“The promotional environment I was referring to, I think, is touching every brand in the marketplace, including all of ours. The outdoor categories were most specifically promotional. You saw a lot of people come out of the gate on sale. And also in the kitchen, Williams-Sonoma Kitchen business, the outdoor product was much more promotional than we expected. ”

fight promotions by driving operational improvements and investing in supply chain

“it’s a reality of the marketplace that we have been talking about for a long time. And our long-term perspective on it is that is why we’re so aggressive on driving operational improvements and investing in our supply chain because we still see great opportunity to reduce our costs and efficiencies in those areas, and mostly because those areas are the most important areas that touch the customer. I think at the end of the day, the customer does like a sale, but when you’re buying furniture, you want quality. And you want to know that you’ve got the design you wanted and that you have incredible service. And for me, the service piece is key to why we continue to outperform. We’re obsessed with it, both online and offline, and we worked really diligently to create that really high-touch experience in all of our channels. “

Workday 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Not sharing customer counts any more

“Due to the increasing size of our business and the diverse mix of very large to medium-sized customers, we decided that we will no longer share specific customer counts on a quarterly basis.”

Unum and BofA are both new customers

“Unum, a Fortune 500 company and leading provider of financial protection benefits throughout the workplace selected Workday for both HR and finance. In the second quarter, we welcomed two more extremely notable Fortune 500 financial services companies. The one we can mention is Bank of America, one of the nation’s leading financial institutions and our new largest customer to date.”

Big systems integrators are building large practices in workday

“I would say 24 months we’ve seen big investments from the large SIs, historically we had small boutique system integrators who’ve been terrific partners from really from day one, be the majority of the implementations. But last few years starting with Deloitte, followed by Accenture, then IBM, now Price Waterhouse, now HP, now CSC, we really have most of the key SIs building out fairly large practices in Workday.”

Getting comfortable moving up market

“I’d characterize where we are today is that we’ve gotten very good at selling to medium size companies. And if you look at our customer list, medium size meaning 3,000, 4,000, 5,000 to 10,000 employees. And where the next push is to go above that size. But very comfortable now with medium size companies and I wouldn’t have said that 12 months ago. We were definitely dealing with smaller companies, but like Netflix going live and Lifetime Fitness with 18,000 employees being life across all of our products, we’re just gaining confidence and continuing to move up market.”

Greenfield is all cloud

“n the world of HR, and the same with whole troupe in the world CRM, the market has flipped. It’s hit a tipping point where, if companies are starting with a Greenfield, they are going to choose cloud versus on premise and for all of the people that are on premise they are increasingly switching to cloud. The functionality is there, the scalability is there, the functionality is now ahead of where the legacy systems sit. And added to that the systems integrators have all over the last couple years gotten much, much better not taking the legacy system out and putting in the cloud system and automating the old processes but actually using Workday or salesforce or any of these cloud solutions to transform the business”

HP and BAC show we can scale up to any size

“HP set a new benchmark in terms of size company that can go live on Workday. So that’s definitely with Bank of America now is HP there’s not really any corporate entity out there that we see that we couldn’t scale to meet their needs.”

95% customer satisfaction

“I also think it’s the customer satisfaction where we’re running at north of 95% customer satisfaction as much as level our sales people are customers are best sales people and they talk with each other.”

A CFO is typically a conservative buyer

“showing a CFO who’s typically a conservative buyer, a new way of running their financial systems, not just a new technology platform. And so, we’re getting better and better at selling to them and marketing to them.”

Tiffany’s 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Strength in high end jewelry, weakness in entry level

“We were pleased to experience healthy unit growth in the statement, fine and solitaire jewelry category as well as in our engagement jewelry and wedding band category. And we’re pleased that fashion jewelry unit sales are benefiting from strength in gold jewelry.

However, continued softness in silver jewelry unit sale in particular entry level sales under $500 was the reason why we had no growth in total jewelry units in the Americas.”

Strong tourist sales and conditions strong for our customers in NA

“we benefited from foreign tourist spending that is likely tied to growing brand awareness globally and perhaps some currency fluctuation too. And of course, conditions in the U.S. are favorable for many of our customers.”

Japanese sales recovering more slowly than expected

“Now let’s turn to Japan where sales have been volatile to say the least in the first half of this year. As I alluded to in the overview after experiencing a surge in spending in the first quarter as Japanese consumers purchased in advance of a consumption tax increase on April 1. We anticipated a significant demand to offset in the second quarter, which occurred as we expected. The good news is that following a substantial sales decline in April, we saw a decelerating rate of sales decline in each months of the second quarter. However, the return to monthly sales growth is taking longer than we expected. Department stores in Japan have reported that they have also been experiencing sequentially smaller rates of sales declines in jewelry sales in the past several months.”