3M at Bernstein Conference Notes

Global growth basically on same path as 1Q but US doing slightly better, Europe not as well

“I said at our earnings call that I thought — we thought that second quarter will be very similar relative to growth to the first quarter. And I think that’s still true. But I see some slight changes in the different areas of the world. I see a slight improvement in United States versus the first quarter. And I see — I do not see as much acceleration in West Europe that I thought would count. And I see Asia grow sideways versus first quarter, which is good. Asia did good for us. And I see Latin American, maybe slightly down, basically driven by Brazil.

Mexico is doing fantastically, doing very, very well. Brazil have not been able as of yet to pull out of the challenge they have had for the last, maybe now 12 to 15 months or so. But I’m convinced it will’

People were careful with inventories in the US

“I think in United States, what we saw first quarter, one thing we saw was our sales into the channel was less than that sellout. So, we had a better sellout than we had sell in. That’s indicating that they were very careful with inventories. So, we had 2% sell in, but I think sellout was 6%.”

Wells Fargo at Bernstein Conference Notes

It feels like the first quarter was an anomaly to us

“if you look at what’s happened so far this year, surely, the first quarter was an anomaly, at least the reported number of two tenths of a percent growth, it sure felt and it feels stronger to us the math. And people talked about why there are – I mean not sure whether had that big of an issue on the first quarter, surely it was an issue. But I think the port strike on the West Coast had a bigger issue. I think the way you add up the beans, I think there is some internal discussion going on about that part of it. And the CapEx being reduced in the energy sector and not yet being spent by the consumer probably also had an impact.”

Still looking for 2% growth

“The way business feels to us and the way our internal team looks at, it would not surprise us if we had second, third, and fourth quarter have numbers that would make the year equal to 2:2, 2:3, 2:4 in that range.”

There are some areas of strength

There are some particular areas of strength in the economy, autos and everything that supports autos, commercial real estate, distribution, technology, and something that we know quite a lot about housing, and housing is an area, I would say we are cautiously optimistic about. ”

Policy changes at GSEs have helped open up mortgage markets

“Household formation last year was the highest in 10 years. We’ve had some policy changes at the GSEs where we know now more about when risk transfers, so the credit boxes opened up a bit for that reason, unemployment is down, wages starting to improve a bit”

Lack of inventory is a bigger issue

“this idea about lack in inventory is becoming a bigger issue in more places.”

It’s a long life cycle to develop land and that pipeline stopped in the recession

“The life cycle of building a home is not the cost or time you use, put the sticks up or you build. You have to get convince a farmer, if it’s a raw land, the sell the land and him to get it plotted and then you have to get it improved with sewer, and streets and so forth then you have to find build it once or build on it or and then you build it so. It’s a fairly long life cycle and a lot of that didn’t happen, lot of that stopped, as a result of lot of foreclosures on the market. So getting the inventory flow working again takes some time.”

We’ll probably get one rate increase and then it will be very data dependent

“if I were a betting person, which I’m not, I would guess we’ll see, one move this year and may be later this year, probably 25 basis points till September, if I had to be a betting person. Then I think unlike in past times, I think it will be then very data dependent. You have to see the CPI and inflation, pushing against, because, I think, there’s going to – and really the difference between zero and twenty five; it is not that big a deal.”

It’s hard for me to see how the long end of the curve breaks out

“you look at slowing in China, you look at negative interest rates,…you look at the stimulus that is going on, it’s hard me for you to see how that side of the curve breaks out”

Checking accounts are the lead product

“checking account is the lead product for consumers. If a consumer has a mortgage at brand x and they have a credit card at brand y and if they have a checking account at Wells Fargo. If you ask them where they bank? They’ll say Wells Fargo. It is the lead product.”

We’re happy to let competitors shut down branches, but we wont

“there is a lot of discussion about today, is the branch dead, should we just bury it, get rid of it. How important is technology, should we’d be moving our customers into more technology and away from human interaction. And we tell our competitors, yes, I think that’s a great strategy. For us we would never do that. And meaning that, we want customers to choose how they want to access us and do business with us….75% of our customers’ millennials included visiting our branches once every six months.”

People like to know that there is a physical place that they can go

“It’s an enormous reminder of strength, security, a place to go in and for whatever reason you can energize to the Apple store, people like to know that there is a place to go, see the merchandize.’

There are cranes all over the country

“if you look around the country there are cranes up everywhere. I was with one of the U.S. senator from New York who said, I think, the straight 2.5 million people are going to moving to New York in the next 10 years. It’s some unbelievably big number and I like to build housing for these people. So you are seeing that around the country the urban core being developed largely for rentals, you’re seen office buildings drop, industrial building drop, so you’re have seen that happen. So we’re seeing growth in that area.”

Credit demand is increasingly going for more commercial purposes

“One thing I’d share with the audience is that, a lot of the usage of commercial credit in the past three or four years has been for whatever it called financial engineering reasons. I don’t mean that in a negative sense. But it was to buy out a partner, to leverage something, to buy back stock or whatever. I’m starting to see more of the discussion and some more of the dollar today used for what I would call commercial purposes, buy a piece of equipment, add a lien on to this, maybe a different product, and so forth.”

Investing a lot in the payments business

“Another area we’re investing a lot is in the payments business. There’s a lot of change going on there that right now, and in many respects this country is behind a lot of other countries in payments, because we’re tethered to legacy systems.”

“this idea of real time payments, digitizing the enterprise, having real time cash letters as opposed to batch processing, mining or data using it to help customer succeed financially is a big spend for us.”

We should never go back to policy of promoting home ownership for everyone

“as people get more comfortable in their jobs and their income and as a rental rates increase, it’s going to become more compelling to own a home. Not for everyone, we should never go back of what we did in the early 2000s as an industry or as a government to promote housing for everyone ownership because it’s not for everyone.”

Buffett knows us better than we know ourselves

“He is a couple – a couple of things about him, he is very long-term in his thinking and he knows us as well or better than we know ourselves. He reads everything that we produce, I called him one day on something or he called me…he said you know I was reading your 10-Q this weekend. Just a second, what the – and I said you’re on the Page 37 and I know that you are doing something well, a VNI [ph] a variable investment.

I said wow, don’t you watch football on Saturdays? And then I said nice that’s so here you have this guy who is incredibly detailed and understands the issues, but yet when you talk with him, he is talking about the morale of the team and what you are seeing in this industry, how do you think about this five and ten and 20 years forward. It’s just one of the great privileges I’ve to”

Company Notes Digest 5.29.15

Each week I read dozens of transcripts from earnings calls and presentations as part of my investment process. Below is a weekly post which contains some of the most important quotes about the economy and industry trends from those transcripts. Click here to receive these posts weekly via email.

The Macro Outlook:

In the first quarter, US companies benefitted from low expectations, but results were generally just so-so

“while, results were admittedly far from robust, they did exceed our expectations…Net worldwide sales declined 5% in the first quarter, which was better than the 10% decline we had expected” —Tiffany & Co (Jewelry)

“our view, the results were impressive in light of the weak conditions plaguing the global agricultural sector…Net sales and revenues were down 18%” —John Deere (Ag Equipment)

Still, many companies have a right to be proud of the results they posted in a difficult environment

“crop receipts for 2015 are forecast to be about 23% lower than 2012’s record. John Deere expects to be solidly profitable in 2015…Such an achievement says a lot about the progress we’ve made establishing a wider range of revenue sources and a more durable business model.” —Deere (Ag Equipment)

There are signs that foreign currency fluctuations are having real impacts on demand

Weak tourist spending is equivalent to lost exports

“you can almost trace it back to when the euro started its precipitous decline. All of a sudden the tourism really dropped for us.” —Michael Kors (Apparel/Accessories)

Weak international bidding for US scrap metal has effects on used car prices

“We believe the cause of this lower ASP or average selling price is due primarily to lower scrap prices and softer international bidding. The lower scrap prices affect many of the lower end vehicles that we sell. The lower scrap price is caused by weakening global demand and a strong U.S. dollar. The softer international bidding primarily affects the higher end units that we sell and is primarily caused by a stronger U.S. dollar.” —Copart (Salvaged vehicle sales)

For now, many companies have mitigated the impacts of currency with financial hedges, but those hedges will roll off over the next couple of quarters

“we are exposed to transaction risk as our international businesses purchase goods and services in U.S. dollars. While we partially hedge purchases through forward contracts, many of our favorable contracts will be expiring in the early part of the fiscal year, resulting in higher cost of goods.” —Michael Kors (Apparel/Accessories)

On the plus side, housing markets seem very healthy

High-end home builder, Toll Brothers, is seeing pent up demand released around the country

“Pent-up demand is releasing in many markets…We are encouraged by the demand we’re seeing released around different pockets of the country. And hopefully that continues and we will also contribute to margin expansion around the rest of the country in 2016” —Toll Brothers (Homebuilder)

Homebuyers aren’t focused on rates right now

“right now buyers don’t talk about rates, it’s not an issue, they have been sitting at this number for so long, so we don’t see it as an issue right now for our business.’ —Toll Brothers (Homebuilders)

They are also confident that they can resell existing homes

“We don’t hear as much about the concern of selling the existing home as we heard few years ago. To Bob stats, the stronger the resale market becomes the higher price of the houses become, the more comfortable people are in moving up and that is evolving.” —Toll Brothers (Homebuilders)

Amazingly, energy-linked economies aren’t exhibiting notable weakness

“Texas which for Toll is primarily Dallas and Houston, continues to perform well.” —Toll Brothers (Homebuilder)

“we’re tracking Alberta very closely. It’s very heightened alert but what we’re seeing is very little if any change in the core credit metrics that would say that any, in fact that has not driven any increase in the reserves for those areas on the consumer credit side.” —Toronto Dominion (Bank)

Some US consumer segments still don’t seem healthy though, especially for the middle and lower classes

Used car dealer America’s Car Mart saw delinquencies tick higher last quarter

“our accounts over 30 days past due are at 5.8% compared to 4.4% at the end of last fiscal year which tells us we are going to have to really work hard to minimize the effect of these higher delinquencies as we roll into 2016.” —America’s Car Mart (Used Car Dealer)

Trade-down categories did better than trade-up categories at Autozone

“our failure categories continued to do well, outpacing both maintenance and discretionary categories. This was…a little unique considering we were hoping the lower gas prices at the pump, coupled with the spring season, would lead to accelerating growth.” —Autozone (Auto Parts Retailer)

Tiffany’s weakest category was entry level silver jewelry

“we continue to experience weakness in silver jewelry sales before $500.” —Tiffany & Co (Jewelry)

International:

In the old days economic nationalism would have been accomplished through legislation (rather than currencies). That could always happen again.

“domestic payment schemes through regulation, nationalism, nationalistic chauvinism, I worry about that, because it’s not just a domestic schemes. If every country said, you’re going have to process everything on soil, everything on soil. Then, one of my biggest advantages is my global technology…If I had to change that and make centers in every country, my cost of operation would change ” —Mastercard (Payment Processing)

Starbucks holds an annual meeting for employees’ parents in China in order to keep them happy with their kids’ career decisions

“over the last four years we have done something in China that I don’t think has been done before and that is I go to China every year to hold annual meetings of parents and grandparents. You got to see it to believe it. You are laughing, but it is no joke.” —Starbucks (Coffee House)

Tax avoidance is one of the biggest barriers to electronic payment adoption in India

“And only idiots like me pay taxes there…not paying taxes is a bloodsport in India, right. And that’s going to be, that’s one of the biggest reasons why acceptance in India is poor, acceptance is probably less than a million merchants, there is probably $10 million merchants and $1 million take cards and even they say the take cards, you show up with your card and the first thing will be told is, do you pay cash instead and it’s just the whole way it works, right. That’s going to take time to change.” —Mastercard (Payment Processing)

Financials:

Uhaul’s management noted that prices are getting a little high for acquisition of self storage properties

“We’ve been mentioning over the last couple of years or the last year really that prices on self-storage project have been going up. So we have been a little bit more careful on acquisitions of existing storage” —UHaul (Moving Trucks/Self Storage)

This is probably about as good as the credit cycle can get

“I think we’re at the point where we’re seeing kind of at the low end of the cycle of credit losses and I personally would not expect to see material significant downside going forward, on a positive downside.” —Toronto Dominion (Bank)

Competition for auto loans may be abating

“in terms of the competitive outlook, anecdotally we think we’re getting a little bit of relief there, but when you talk to the guys in the field there is still plenty of competition, if anything it’s just been a slight marginal improvement and certainly things aren’t getting any worse or any more aggressive.” —America’s Car Mart (Used Car Dealer)

Visa’s infrastructure isn’t a barrier to entry. It’s the analytics that sets them apart

“The things that we’re doing – anyone can build the switch. I mean, if we think of what we do for living, in networks or switch, in this day and age, that’s not the hardest thing to build. It gets harder if you actually want to have access to 2.5 billion consumers and 35 to 40 million merchants across the world. But that too can be built over a period of time…It’s the analytics, the fraud scoring, it’s all the work that we do to make that transaction valuable because it runs across the network which everyone else has to catch-up on.” —Visa (Payment Processor)

Consumer:

Costco said that it’s easier to secure organic food inventory because the supply chain is expanding

“the challenges are still out there although they are becoming less formidable because we like everybody else – there is more organic supply and producers doing it. And we are pretty good at getting out there and working with suppliers, both here and around the world to commit more to it, whether it’s raising eggs or ground beef processing or produce” —Costco (Retail)

Social Media followers is now a reportable metric

“In the fourth quarter on a year-over-year basis Facebook followers increased 22%, Instagram followers increased 99%, Twitter followers increased 46% and Weibo followers increased 120%, as consumers around the globe turn to Michael Kors for lifestyle and fashion inspiration.” —Michael Kors (Apparel/Accessories)

Visa and Mastercard have better data than anyone when it comes to helping digital advertisers

“We go to merchants and we say, we can do work for you, to help you understand what value you’re getting from your digital advertising. And there are plenty of people that will tell you, what happens in terms of how many clicks you get but they’re really very few if any who could tell you, whether it results in something actually turning into a sale, we can do that for you.” —Visa (Payment Processor)

Technology:

Michael Kors’ watch business is “not healthy” in North America, but it’s not clear whether that’s due to Apple

“Our watch business is not healthy in North America. Outside of North America it is. And we did see shift in our business to jewelry. So whether that’s something that’s cyclical, whether that’s something that’s a trend, whether that’s something that’s driven around other entries into the category, we are not exactly 100% sure.” —Michael Kors (Apparel/Accessories)

It’s still early days for large scale companies to run finance software in a pure cloud environment

“It’s still relatively early in the days of selling finance large-scale to large-scale companies running in a pure cloud environment.” —Workday (Enterprise Software)

Healthcare:

Healthcare costs are much lower in foreign countries, which helps SG&A spending

“By the way what helps those numbers also has increased foreign expansion. There is a – just on benefits, which is primarily healthcare medical, dental, and vision in a large extent. They are U.S. versus other countries. In some countries there is 40 basis points to 60 basis points of delta just on that SG&A item because healthcare cost in the U.S. are so much higher than everywhere else.” —Costco (Retail)

Materials, Industrials, Energy:

A sign of a floor for gold prices? Tiffany saw strength in gold jewelry

“fashion jewelry was a strong performer in the quarter. The strength in fashion continued to be led by gold jewelry designs.” —Tiffany & Co (Breakfast establishment)

The agriculture equipment industry is facing its deepest downturn in 25 years

“we’re facing, as you know, the deepest downturn in North American large Ag equipment industry in 25 years” —John Deere (Ag Equipment)

If the weather is good this year, 2016 will probably be another tough year for ag equipment suppliers

” if you talk to our Chief Economist, he would tell you we’re really in kind of a year-to-year type of mode right now. And as frustrating as it may be for people to hear, it really is about what happens this summer with the current crop that’s in the ground. If you’re going to assume another year of better than average weather, where yields are above trend yield, then certainly it’s going to be a challenging argument to make that 2016 would certainly improve really anywhere around the globe.” —John Deere (Ag Equipment Supplier)

Miscellaneous Nuggets of Wisdom:

Take your time when making big decisions

“this is a big decision, and we at AutoZone are pretty methodical in how we make decisions. This isn’t about next year or year after, this is about the long-term and so we want to make sure we get it right. So we’re going to take enough time to get it right.” —Autozone (Auto Parts Retailer)

The goal isn’t necessarily to be the biggest

“I’ve told you we don’t aspire to be the number one market share…the way that you would have to grow the market share additionally in North America would be very promotionally-driven and we don’t want to do that. And we’re comfortable with that.” —Michael Kors (Apparel/Accessories)

The quarterback gets too much credit and takes too much of the blame

“I think the quarterback always gets too much credit and perhaps maybe too much blame. But there is such great talent inside the company.” —Starbucks (Coffee Shop)

There is a propensity to under-estimate how much success a great company can achieve

“how many of you would have thought in 1992 when we went public we had 125 stores, we had one quarter of profitability, people could not pronounce the Italian words on the menu. People said what is the grande, what is a venti, what is that. How many people would have thought that from 1992 to today, we were to achieve this kind of recognition and respect in terms of the equity of the brand and the global nature of Starbucks footprint. And I suspect there is not probably many of you.” —Starbucks (Coffee Shop)

Full transcripts can be found at www.seekingalpha.com

Costco FY 3Q15 Earnings Call Notes

Gas and FX are big headwinds

“So excluding gas, the reported plus 1% U.S. comp number increase in Q3 would have been a plus 5% and the reported minus 6% international comp figure excluding gas and FX impacts would have been plus 7%. Such that the total company comps reported at minus 1% for the quarter excluding gas and FX would have been plus 6% for the company.”

687 Costcos worldwide

“:We will most likely end the fiscal year with 24 net new openings and 687 Costcos worldwide.”

Expected more but some pushed into next year

“We had originally planned to be closer to 30 for the fiscal year. However, several of these have been pushed into early fiscal 2016 due to timing and construction issues.”

Category performance

“In terms of merchandize categories sales performance for the quarter, in the third quarter, within food and sundries, overall low to mid singles, deli low reported, mid if you take the FX out. Deli and frozen were the relative standouts. For hardlines, the departments with the strongest results were hardware and garden. Consumer electronics comps were slightly positive, excluding FX. Within the low single-digit softlines comps men’s apparel and housewares were the standouts, and in fresh foods meat and deli were the strongest.’

43m members

“all told, we ended the quarter with 43.7 million member households up from 43.2 million and including extra cards 79.6 million at Q3 end versus 78.7 million just 12 weeks earlier.”

We try to be laggards on raising price in rising price environment and aggressive when prices are falling

“Historically when commodity prices are going up, we are the first to not have them go up as much and when they are coming down, we are going to go down as fast as we can.”

Able to offer great meat quality in the downturn

“I remember right after the economy got hammered in late 2008, there were some fiscal quarters and calendar years 2009 and 2010 where we were upwards of a third of all the prime meat sold in the United States when usually that was nothing or very little because it all goes to restaurants and hotels.”

We’re willing to eat the gross margin pressure when others wont

“when others were raising their chicken prices from 4.99 to 5.99 we were willing to – if eat if you will $30 million, $40 million a year in gross margin by keeping it at 4.99 and that’s what we do for a living.”

Drivers of growth

“I mean we are out there every day trying to get new items and new exciting stuff and lower some of our prices. And organics has helped, gas helps. We are still certainly as many new locations that can get gas gets it which is more than the company average and there is still several out there that existing locations that we are fighting hard to get gas stations or buying land next door or appealing the 12th appeal out there ourselves in one city I can think of. But at the end of the day, that is what we do. So fresh – in my view, fresh foods, gas, executive membership, opening in new geographic markets outside of United States, all those things are net positives.”

At some point the FX stuff will mitigate

“At some point the dollar is going to slow down and shrink and maybe even reverse a little bit, I don’t know when and if and when, maybe it’s another year of FX weakness for us first and but at some point I think that impact will mitigate.”

Foreign expansion helps SG&A costs

“By the way what helps those numbers also has increased foreign expansion. There is a – just on benefits, which is primarily healthcare medical, dental, and vision in a large extent. They are U.S. versus other countries. In some countries there is 40 basis points to 60 basis points of delta just on that SG&A item because healthcare cost in the U.S. are so much higher than everywhere else.’

Organic supply chain challenges becoming less formidable

“the challenges are still out there although they are becoming less formidable because we like everybody else – there is more organic supply and producers doing it. And we are pretty good at getting out there and working with suppliers, both here and around the world to commit more to it, whether it’s raising eggs or ground beef processing or produce,”

Toronto Dominon FY 2Q15 Earnings Call Notes

Partnering with Nordstrom for credit cards

“You would have seen our recent announcement about our program agreement with Nordstrom, to purchase their existing U.S. Visa and private-label card portfolio and to become their exclusive credit card issuer in the U.S.. We’re proud to have been selected in this competitive process for our customer-centric approach and proven capabilities by an organization who shares our common values on customer experience. Nordstrom is one of the most respected retail brands in the world and this announced transaction will build on the success of our growing North American credit card portfolio.”

Operating environment remains challenging

“our operating environment remains challenging. Prolonged lower rates, a slowing Canadian economy, mixed recovery signals from the U.S., continued expectations for low oil prices and regulatory and legislative pressures in both the U.S. and Canada will continue to result in slower revenue growth. ”

Credit performance remained strong

“Credit performance remained strong across all portfolios throughout the Second Quarter. Gross impaired loans and new formations remained at cyclically low levels and are in line with results over the past four quarters. ”

Oil book is holding up

“With respect to our oil and gas exposure, outstanding exposure remains stable at CAD3.8 billion representing less than 1% of total loans and acceptances. Our oil and gas book is performing within our expectations and we’re not seeing a significant deterioration in consumer credit quality in the impacted provinces. As it is still early days, however, we continue to maintain a cautious approach across retail and non-retail exposures impacted by low oil prices.’

Tracking alberta closely but haven’t seen anything

“we’re tracking Alberta very closely. It’s very heightened alert but what we’re seeing is very little if any change in the core credit metrics that would say that any, in fact that has not driven any increase in the reserves for those areas on the consumer credit side. Now maybe it’s a little early and it’s not over yet but I would say anything that is required will be captured naturally in our reserve process.”

I think we’re seeing a low end of the credit cycle

“I think we’re at the point where we’re seeing kind of at the low end of the cycle of credit losses and I personally would not expect to see material significant downside going forward, on a positive downside.”

JS Notes: CPRT, UHAL, DE

Jeremy S., an investment analyst here in Southern California, has started to contribute to Avondale’s company notes database. Below are quotes from some of the calls that Jeremy has read this week.

 

Copart’s (CPRT) CEO Jay Adair, whose firm sells salvaged vehicles, says the firm saw declining average selling prices across their business

“In the quarter we saw further softening of average selling price as what we refer to as ASPs (average selling prices), compared to the second quarter.  Looking at May data, average selling price has dropped again, but we believe we are currently at the bottom in terms of where salvage values will end up for the fourth quarter.”

And he is predicting prices will stay weak

“Additionally, we expect this trend of low ASPs to continue into our future quarters and do not anticipate that average selling price will bounce back in the next couple of quarters. We believe the cause of this lower ASP or average selling price is due primarily to lower scrap prices and softer international bidding.  The lower scrap prices affect many of the lower end vehicles that we sell. The lower scrap price is caused by weakening global demand and a strong U.S. dollar. The softer international bidding primarily affects the higher end units that we sell and is primarily caused by a stronger U.S. dollar.”

They are also forecasting that the average age of a car on the road will continue to increase

“Additionally, we have seen the age of U.S. fleet increase for the past seven years and as we discussed on previous calls older vehicles will sell for last and auction. With the older fleet, we have seen total loss frequency increase. We believe this trend will continue as the fleet ages and so with the likelihood of the vehicles becoming total losses.  We also believe repair cost are up increasing the number of total loss vehicles and fuel prices being lower are causing miles driven to go up again causing more accidents and more total loss vehicles.  We believe the trend of vehicles aging will continue. Therefore average selling price should continue to be soft and volume should be up for the foreseeable future.”

 

 

 

U-Haul (UHAL) Principal Financial Officer Jason Berg says the firm continues to build out their leading network

“Our retail distribution network continues to expand. During all of fiscal 2015, we increased our independent dealer network by 800 net outlets along with another 60 company-owned and operated locations, bringing our total system to nearly 19,800 locations. We once again increased the number of trucks, trailers and towing devices in our rental fleet.”

U-Haul (UHAL) Principal Financial Officer Jason Berg says the company’s small insurance business has a material investment portfolio

“On a combined basis, the annual operating results from our life and property and casualty insurance operations improved by $7 million to $53 million combined and both are performing to expectations. Together our insurance operations have a combined investment portfolio of just over $1.5 billion.”

U-Haul (UHAL) Principal Financial Officer Jason Berg says that prices for self-storage acquisitions have been going up and the company remains disciplined  

“We’ve been mentioning over the last couple of years or the last year really that prices on self-storage project have been going up. So we have been a little bit more careful on acquisitions of existing storage.”

 

 

 

Deere (DE) Finance Manager Susan Karlix said the firm’s flexible cost structure has allowed it to remain enormously profitable even through this most recent downturn in agriculture markets 

“We also saw benefits from our success holding the line on costs and assets, a fact that gives our performance a measure of resilience we have not seen in prior downturns. Of note, crop receipts for 2015 are forecast to be about 23% lower than 2012’s record.  John Deere expects to be solidly profitable in 2015. In fact, the year is forecast to rank among our stronger ones in sales and profits, even with the pullback we’re experiencing in the farm sector. Such an achievement says a lot about the progress we’ve made establishing a wider range of revenue sources and a more durable business model.
And they are seeing many of their customers switch from buying their product outright to a leasing structure
“We are seeing a move towards more leasing. We think some of that has to do with giving some of the lower margins customers are facing. And as well as – so again, when you purchase the equipment, you tend to get a better advantage from a tax deduction perspective.”

 

Mastercard at Bernstein Conference Notes

THree elements to competing in Europe

“Competing in Europe, so, I guess you should think about competing in Europe one with domestic processing schemes in Europe. Two, with Visa and Amex in Europe, and three, with the regulatory environment in Europe, right. So, kind of all three aspects play in Europe.’

Domestic processing schemes haven’t been able to keep pace with compliance and other investments

“Domestic processing schemes, over the past few years, thanks to both the law SEPA and the Payment Systems Director and thanks also to the amount of investment that’s going into chips and security and new functionality. Domestic processing schemes have struggled to spend the money to keep pace with that. So, in the Netherlands some years back, two or three years back, they kind of basically said, you take it over because we can’t keep pace with it. And little by little in every country, we’ve begun to see more and more volume running on our rails compared to what used to be largely the domestic processing scheme reel for debit, right, that’s begun to change.”

Visa Europe is a complicated entity

“it’s an association, it’s technology is different from the rest of Visa, even Visa checkout is not there in Europe [ph] we.me, there’s all kinds of stuff that debit cards issued in different countries in Europe, not working elsewhere, let’s say whole thing there, there we have a benefit. So, we were winning share in Europe”

Brazil is going through a rough time right now

“Brazil is going through a rough time as an economy right now. So, it’s – I don’t know how this will play out over the next year or two, because the first leg of the stool on everything we do is consumer spending”

Itau is one of the best players down there

“Itaú is not just one of the best players there in terms of size and scale, it’s also one of the best in terms of its innovation and operating methodology. It’s also a player that’s beginning to expand into other parts of Latin America, which is interesting.”

India is a heavily cash oriented economy, partially because no one wants to pay taxes

“And only idiots like me pay taxes there…not paying taxes is a bloodsport in India, right. And that’s going to be, that’s one of the biggest reasons why acceptance in India is poor, acceptance is probably less than a million merchants, there is probably $10 million merchants and $1 million take cards and even they say the take cards, you show up with your card and the first thing will be told is, do you pay cash instead and it’s just the whole way it works, right. That’s going to take time to change.”

Working on building better relationships with government too

“And the third thing, I’m trying to do because it’s not just about the merchants is to build a better relationship with governments, because I believe that governments have believed overtime, that we guys are just sitting in the middle of every transaction making money when you go by and I find that offensive. And so we’re trying to change that logic to make them understand and we can help governments improve the efficiency and effectiveness of their own payment system that’s why you see me out there talking about inclusion about government payments and efficiency.’

International regulation is a concern that’s out there

“domestic payment schemes through regulation, nationalism, nationalistic chauvinism, I worry about that, because it’s not just a domestic schemes. If every country said, you’re going have to process everything on soil, everything on soil. Then, one of my biggest advantages is my global technology. I have one technology released across the world, but the second advantage is I process most of the stuff in big centers with deep centralized servers. If I had to change that and make centers in every country, my cost of operation would change over time, right’

Tiffany 1Q15 Earnings Call Notes

Worldwide sales declined 5% which was better than expected

“Okay. Starting with the first quarter overview, while, results were admittedly far from robust, they did exceed our expectations and we were pleased with continued progress in executing our key store, product and marketing-related initiatives.

Net worldwide sales declined 5% in the first quarter, which was better than the 10% decline we had expected, due to strong performance in Europe and a smaller than anticipated year-over-year decline in Japan. On a constant exchange rate basis excluding the translation effect of the strong U.S. dollar, worldwide net sales increased 1%.”

Regional sales varied widely

“Regional total sales performance again on a constant exchange rate basis ranged from a 21% increase in Europe, benefiting from strong foreign tourist and local customers spending there to an 18% decline in Japan after a surge in spending there in last year’s first quarter.”

weak US sales growth due to tourist spend

“This minimal sales growth in the Americas reflected an increase in domestic spending, which was mostly offset by lower foreign tourist spending in the U.S., especially in New York, which we attribute to the strength of the U.S. dollar. Elsewhere in the Americas we achieved healthy sales growth in Canada and Latin America on a constant exchange rate basis.”

Weaker yen has affected tourist spending, but my have boosted domestic japanese spend

“We believe such a substantial weakening of the yen has affected spending by Japanese tourists when they travel but might be supporting some local spending in Japan.”

Fashion jewelry led by gold

” fashion jewelry was a strong performer in the quarter. The strength in fashion continued to be led by gold jewelry designs.’

Continued weakness in silver

“we continue to experience weakness in silver jewelry sales before $500. We are focused on addressing this issue over the balance of the year through product development and advertising targeted at what we call our little luxuries.”

Starbucks at Bernstein Conference Notes

We’re pretty proud of our growth

“As we assemble here today, there are approximately 22,000 Starbucks stores in 67 countries. Last week, over 80 million people passed through Starbucks stores. We are employing over 300,000 people who are proudly wearing the green apron and I think the market cap for the company today, I’d ask Scott and JoAnn, I was here two years ago and I think the market cap of the company in the last two years is up about over 60%. So we’re pretty proud of that.’

We’ve tried to build a different company

“we’ve tried to build a different type of business, not better than anyone else but really different and that is trying to balance in a fragile way profitability and shareholder value with concerns and benevolence. As many of you know, we are the first company in America to provide comprehensive health insurance way before the Affordable Care Act to all of our employees, equity in the form of stock options and in this past year alone the first company in America to provide free college tuition first for juniors and seniors and then we came back about four months later and opened it up to freshmen and sophomore.”

Our stores come to life through our people

“We do all these things because we strongly believe that what we’re trying to do is really elevate the equity of the brand and to do in a way that demonstrates authenticity and truth. But above all else, we’ve come to the conclusion over many, many years that our brand is defined quite essentially by the experience in our stores and our stores come to life by our people. The last few years have been remarkable years for the company.”

We have a responsibility to more than the shareholders. Washington is not providing the leadership that we all deserve

“more than ever that we have a responsibility as a company to not only provide you with the shareholder value that you deserve, but also to do everything we can as a company to bring our people along with us on this journey to do everything we can to support the communities in which we are doing business; and to have significant social impact and to demonstrate – unfortunately that Washington is not providing leadership that we all deserve and that businesses and business leaders need to do more for their people and the communities we serve.”

We think we can make a super premium coffee experience

“like the wine industry, the fashion industry, the automobile industry; we think we can create a super premium experience. It’s a coffee forward experience, it’s more expensive but the drama, the theater, the romance everything that happens in that space is at a much, much higher level, literally it’s like a Disney ride.”

We have to drive traffic

I said on a conference call probably two years ago that we were all witnessing a seismic change in consumer behavior and those of us that are in the bricks and mortar retail business are going to face challenges, the likes of which we’ve never seen primarily as a result of ecommerce and mobile shopping. Less people in malls, less people in the street and as a result of that, we have to drive traffic.”

Have to innovate

“we have to drive innovation at all levels of the company, product innovation, store innovation, new concept innovation all kinds of things. And I would think they would say that the innovation of Starbucks is not one person, it’s not one group, the entrepreneurial DNA of the company despite we’ve been in business over 40 years is embedded and in printed in who we are and what we do.”

The QB gets too much credit and too much blame

“I think the quarterback always gets too much credit and perhaps maybe too much blame. But there is such great talent inside the company. I am deeply committed to the company. I am not leaving at anytime soon. I am here for many, many years and I’ve said publicly before that I have to describe Starbucks in terms of my own relationship with the company, it’s second to my family and if my wife is here sometime she would say, no, not exactly. But it’s about love and commitment and the passion we have for what we are doing and trying to build the great enduring company and we think we are just getting started.”

A big change for us moving to an international mindset

“I think one of the real sea changes in the company that is taking place is that despite the fact that we have been a global business, we pretty much manage the business through a U.S. lens. With the growing nature of Asia Pac at 5,000 stores and Europe turning around and our business in Latin America and the opportunities we now have in India with our partner with Tata, it quickly became obvious to us that we have to recalibrate the lens in which we were thinking about and managing the business. And specifically, we start managing the business to a global lens.”

An annual meeting for parents and grandparents of Starbucks employees in China

“About seven, six years ago, seven or six years ago we were having trouble not only hiring people to work in the stores, but maintaining their tenure and the reason was that the parents were starting to think that perhaps this is not the career that you went to college for. ”

“over the last four years we have done something in China that I don’t think has been done before and that is I go to China every year to hold annual meetings of parents and grandparents. You got to see it to believe it. You are laughing, but it is no joke. So we catch the room, with this room that we are in right now is too small for the meetings we have in Shanghai and Beijing. And we will have one in Chengdu in September. It is a giant ballroom with thousands of Starbucks and partners, parents, grandparents who are coming to be part of the culture and values of the company.”

You would never have thought that we could do this

how many of you would have thought in 1992 when we went public we had 125 stores, we had one quarter of profitability, people could not pronounce the Italian words on the menu. People said what is the grande, what is a venti, what is that. How many people would have thought that from 1992 to today, we were to achieve this kind of recognition and respect in terms of the equity of the brand and the global nature of Starbucks footprint. And I suspect there is not probably many of you. So how did we get here? We got here literally by creating a very, very unique experience.”

Toll Brothers FY 2Q15 Earnings Call Notes

Average price of signed contracts is up a lot y/y

“The average price of homes delivered was $713,000 compared to $706,000 in 2014 second quarter. Net signed contracts of $1.6 billion and 1,931 units rose 25% in dollars and 10% in units compared to fiscal year 2014 second quarter. The average price of net signed contracts was $826,000, compared to $729,000 in 2014 second quarter. This significant increase reflects our greater concentration in California and some high priced City Living products.”

California is strong

“We’re pleased with the way fiscal year 2015 is unfolding. California demand remains very strong. Our communities there accounted for roughly 30% of the value of signed contracts this past quarter as we enjoyed pricing power across both Northern and Southern California.’

Texas doing well

“Texas which for Toll is primarily Dallas and Houston, continues to perform well. Over the past few weeks more than 1500 visitors have showed up a grand opening events at our Sienna Plantation master plan community on the South side of Houston, where we and other builders will be selling homes.”

Pent up demand is releasing

“We have seen a number of strong community openings in the past few months elsewhere in the country. Pent-up demand is releasing in many markets.”

Housing market is on firm footing

“The economy and housing continue on parallel pace of recovery. It appears that the housing market is on firm footing and heading in the right direction. As pent-up demand is released, we envision a solid recovery for housing.’

Now weakness in Houston

“we keep a close eye on it as we’ve talked about, we’re constantly asking sales and our management team down there what they’re seeing and the market is holding on, we’re keeping our fingers crossed. Right now it’s okay, and we love our positioning.”

Mortgage rates are not going to have a huge impact on the market at this point

I don’t think the increase in mortgage rates is truly meaningful at this point. It is low as 3.5, 3.75 now you’re at 3.70. I don’t think that is going to determine the market going one way or the other.”

Buyers don’t talk about rates. They’ve been here for so long

“We’ve always said that if the rates pick up slowly because of great economic news, which is why they should pick up, we’ll take it all day long, and right now buyers don’t talk about rates, it’s not an issue, they have been sitting at this number for so long, so we don’t see it as an issue right now for our business.’

Less concern about reselling an existing home

“We don’t hear as much about the concern of selling the existing home as we heard few years ago. To Bob stats, the stronger the resale market becomes the higher price of the houses become, the more comfortable people are in moving up and that is evolving.’

Encouraged by demand all over the country

“We are encouraged by the demand we’re seeing released around different pockets of the country. And hopefully that continues and we will also contribute to margin expansion around the rest of the country in 2016, but we’ll probably have more on that more to say on that later this year.’

Have been able to be more selective with land acquisitions

“I wouldn’t read too much into the land levels coming down it’s just lately. We’ve bought a little bit less land and we’re in such great position with the land holdings we have, that we can afford to be very selective and we are.’

“With the recovery being a bit more gradual than other recoveries have been, the need to get land is not been a significant.”