Company Notes Digest 8.27.15

Each week we read dozens of transcripts from earnings calls and presentations as part of our 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:

We’re all watching the market’s gyrations

“we are not immune to a further deterioration in the global economy. So, like all I view, we are anxiously watching the market gyrations over the last two weeks, particularly in the emerging markets.” —Brown Forman (Liquor)

There’s more uncertainty than there was a couple of weeks ago

“I think it’s more the uncertainty around…what might occur going forward as a result of just the skittishness that we have seen over the last, I mean, literally week to ten days we are acting a little bit more I think to just the recency of some of these market sell-off.” —Brown Forman (Liquor)

It’s way too early to tell if there’s been any impact on the real economy

“What’s going on lately, it’s too early to tell. It’s too early to read anything into it over the last couple of weeks. We’re obviously keeping a very close eye on it, but most of our international buyers are Asian-American, been here for generations, not impacted by their home country economy…And that buyer seems quite confident and ready and able to buy. But we’re obviously, as everyone is, keeping a very close eye on it. But right now it’s just too early to tell you much more than that.” —Toll Brothers (Homebuilder)

And it’s impossible to quantify any impact anyways

“With regard to recent news from China in the same way that it’s not possible to quantify the positive wealth effect from a rising stock market on our sales growth there in the past couple of years. It’s similarly difficult to predict any potential negative effect on sales in magnitude or duration from their recent stock market correction or currency devaluation.” —Tiffany’s (Jewelry)

But you can’t help but be a little more conservative about how you run your business

“The challenge is – trying to operate that business is, trying to get beyond a lot of the noise that’s going on from the stock market point of view and where we see the business moving and going. So you can’t help, but look at that business and be a little bit more conservative about how we project that business out both through the balance of this year and then moving into 2016 and beyond. So it just gives us pause.” —PVH (Apparel)

Alternatively, you could just try to tune out the noise

“I would just like to address the fact that there is a lot of noise really out there right now around the apparel sector. And just so you know my perspective, I shut it out because from where I sit across all of our businesses, our job is to deliver regardless of the noise that’s out there today and what I see is, I see a consumer who has confidence, I see dollars being spent and I see an opportunity for us to continue to get more than our fair share, as I look forward and I am very optimistic” —Gap (Apparel)

But people are concerned about deflation

“We’re looking at continued deflationary pressures, as those have mounted as we progress through the year. We’re looking at a more challenging macro environment.” —The Fresh Market (Grocery)

And deflation makes it hard to drive revenue growth

“the challenge, the biggest challenge we’re looking at is, how aggressive to raise prices particularly in a world, as you look out there that is facing extraordinary deflationary pressure in just general terms across a – the ways most economists speak, the biggest concern is deflation, not inflation” —PVH (Apparel)

On top of that, as we enter the final third of the year hedges are rolling off, which will impact earnings

“The six point gap between as-reported and constant currency revenue performance is wider than prior quarters, as the financial hedges are rolling off.” —Hewlett Packard (Technology)

International:

The Bank of Canada has cut interest rates twice this year

“in the recent months, we have seen mixed economic data and weaker than anticipated growth which led The Bank of Canada to cut interest rates for a second time this year.” —Royal Bank of Canada (Bank)

A weak Euro is boosting European tourism

“our Chinese consumer or Asia consumer instead of being in the United States is more so in Europe. And as you – I was in Paris and I was in Amsterdam this last month, you could see the tourism boom that’s going on there and helping their economy.” —PVH (Apparel)

It may be boosting the whole economy

“Europe. It has gone through some macro issues, but we’re actually seeing positive sales trends in Europe. We believe that economy is coming back and that consumer is re-engaging.” —PVH (Apparel)

For what it’s worth, a Chinese Real Estate broker says that the property market is warming up

“As expected the overall Chinese property market started to warm up since the end of March driven in part by the governments loosened credit policies and purchasing restrictions in certain cities. Despite recent Chinese Stock Market volatility the real estate sector has stayed relatively stable so far.” —E House (Chinese Real Estate Broker)

Financials:

Brokerage firms are probably cleaning up in this environment

“In the equities trading side of the business, it’s really just agency trading. We are not really putting capital to work for to offer liquidity. So the equities trading business has actually been as you might imagine reasonably robust especially over the last several days” —Royal Bank of Canada (Bank)

These markets make it harder for high yield companies to issue debt

“I can start with the trading conditions currently. I think starting with fixed income, we are seeing because of the recent market volatility high yield for instance in the U.S. new issue flows is down, investment grade credit is steady but down a little bit, and in rates trading I would say it hasn’t changed.” —Royal Bank of Canada (Bank)

It sounds like mortgage markets have opened up though

“Our buyers remain to be strong. We have on the margin, a few people that struggle to qualify, but overall, we’re able to get the vast majority of our people into a mortgage if they want one. We’re not seeing any issue at all, really, on a macro sense with qualifying for loans…Actually, today, the jumbo rate is below the conforming rate, which is pretty astounding.” —Toll Brothers (Homebuilder)

Insurance companies are getting into mortgage underwriting

“We believe we’re going to introduce a, for the first time in our history, direct sales to a major insurance company, which will be huge. So – and that also, by the way, is going to open up financing for foreign nationals but to a greater degree than we have today. So, I don’t see any issues at the moment in terms of availability or liquidity in either the conforming or the jumbo market.” —Toll Brothers (Homebuilder)

America’s Car Mart saw an increase in credit losses, but blamed their own execution

“Bottom line results for this quarter were obviously disappointing. Sales were very solid and we’re pleased with that aspect. Credit losses however were not. And we’re not pleased with our results…it is apparent to us that for these stores, this was primarily an execution issue.” —America’s Car Mart (Used Car Dealer)

Royal Bank of Canada has seen a slight uptick in delinquencies in oil exposed provinces

“Delinquencies remain near historical lows and we have not seen an increase in delinquencies for Canada as a whole but have noticed a slight uptick this quarter in oil exposed provinces. This increase is insignificant at this point and it’s too early to say that this is a trend.” —Royal Bank of Canada (Bank)

The Texas economy still seems to be holding up though

“Texas, overall, has consistently been a good performer for us. In the second quarter and year-to-date, it’s performed above the chain average for us. So it continues to be one of our best-performing regions.” —Ross Stores (Off Price Retail)

Consumer:

A late labor day is making it difficult to get a clean read on consumer spending

“the calendar shift has caused a little angst probably out there with the consumer, only from the standpoint that Labor Day has been pushed back a week, as you know. And most states with schools, they sort of key off of that Labor Day date. So in a lot of cases what we’ve seen is that the back-to-school has been pushed back in the calendar a little bit.” —Dollar General (Retail)

Poor results from retailers could lead to a more promotional environment

“we expect the retail landscape to be highly promotional during the fall season, especially given the recent results from other retailers…mixed results and – actually weak results from the department stores forces us to think that the environment which is already fairly promotional will continue to be pretty promotional in the back half…some retailers are going in to fall with high inventory levels. ” —Ross Stores (Off-Price Retail)

Gap is introducing some fast-fashion capabilities to its stores

“For the first time, we will be going to in season open in some of our key product programs and therefore able to get back in after we read the business in season with significant quantities of units. This is obviously an important capability for us. We are building this across the entire company” —Gap (Apparel)

Denim may have hit bottom

“we are pretty confident that the Denim cycle has hit bottom and it has been coming back over the last several months.” —Gap (Apparel)

Williams Sonoma is still working out kinks from the port disruption earlier this year

“while the port disruption was extremely difficult, the good news is that, it caused us to reexamine every single element of our supply chain. And we have identified significant opportunities to improve service levels and over time drive down costs.” —Williams Sonoma (Home Goods)

Technology:

Best Buy sees continued strong demand for consumer electronics

“Our first observation is that overall consumer demand for technology products and services including appliances and mobile phones is growing. This growth is driven by technology and product innovation and by micro factors such as population growth, the housing recovery and healthy living trends that are driving momentum in our appliance, home theater, connected homes and health and wearables business, which, we believe, will remain positive catalyst in quarters to come.” —Best Buy (Electronics Retailer)

The cadence of the Windows 10 rollout posed challenges for PC OEMs

“We did anticipate a challenging operating system transition to Windows 10 on two dimensions. One was a free upgrade that was of course offered. And the second was the very short transition time, which is normally about three months, which was compressed to under one month. And what that drove was fairly high Windows 8 channel inventory levels, and that will take a little bit of time to flush.” —Hewlett Packard (Technology)

Materials, Industrials, Energy:

Distressed assets still aren’t for sale yet in the energy space

“Well, there will be M&As and there will be distressed assets and what have you. I don’t see it come right now, it will come and, I think, well we will talk again in the quarter, and nothing will happen now in the quarter.” —Seadrill (Offshore Driller)

John Deere is expecting farm receipts to be down again next year

“Looking ahead to next year, based on our expectation of above trend yield – above trend-line yields for 2015 and declining livestock prices, our very early forecast calls for total cash receipts to be down slightly in 2016.” —John Deere (Farm Equipment)

El Nino could cause some swings in growing conditions around the world

“Keep in mind as we go into 2016, we did have some favorable weather conditions, El Nino actually strengthened through the summer. And that certainly bodes well normally for U.S. market or growing areas. But keep in mind that can have some more negative and dry impact on other parts of the world.” —Deere (Farm Equipment)

Miscellaneous Nuggets of Wisdom:

The best marketing is a good product

“I feel pretty strongly about which is the best marketing is good product.” —Gap (Apparel)

It’s easier to train people than to retrain them

“as everyone knows, retraining can sometimes be more challenging than training” —America’s Car Mart (Used Car Dealer)

They call it Mad Money for a reason

“when you’re on that show with Jim Cramer, it does get a little crazy at times.” —PVH (Apparel)

When you say you’re going to do something, follow through

“our best sales tool is to give a potential company that we want to acquire a list of 10 or 15 names of people from whom we have acquired companies and we say just call them up and ask them. And that’s really the best sales tool because they do that and they find out that HEICO does what it says it’s going to do. If they promise you something that’s exactly what will happen. So that’s our formula and it works.” —HEICO (Aerospace Parts)

Full transcripts can be found at www.seekingalpha.com

Andrew Sohn Notes: BBY, PVH, SDRL, DG

Consumer demand for technology products growing

“Our first observation is that overall consumer demand for technology products and services including appliances and mobile phones is growing. This growth is driven by technology and product innovation and by micro factors such as population growth, the housing recovery and healthy living trends that are driving momentum in our appliance, home theater, connected homes and health and wearables business, which, we believe, will remain positive catalyst in quarters to come.” –Best Buy (BBY)

Customer service from brick and mortar stores might still be relevant

 

“the investments that we’ve made in our Renew Blue strategy to offer advice, service and convenience at competitive prices are paying off. This is evidenced by the market share gains we have achieved in the NPD-tracked categories, our growth in appliances and mobile phones and the overall positive domestic comps and expanded operating income rate that we have delivered both last year and year-to-date this year.”-Best Buy (BBY)

 

Efforts to work upstream

 

“In some cases, we actually work very much upstream, including in terms of product design and the choice of feature functionalities, and then this co-designing, the customer experience and in the marketing. In some cases, it’s more about the merchandising and the marketing. So there’s a whole range, but it’s – in general, what I would highlight is that it is – it happens earlier on. It’s more strategic, it’s more integrated and it’s working.”-Best Buy (BBY)

 

Online and mobile part of a general selling process

 

“we report online sales and it’s an important part of our business, but we believe that online and mobile are a much bigger part of the business than just the online sales, because it’s really front door to the store. This is where we all notice. This is where the customers start the research.”-Best Buy (BBY)

 

Greater use of online research has decreased store traffic in addition to online purchases

 

“Because when the customer gets to the store, she has done a lot of research and she’s much more educated than maybe a few years ago. And so it’s maybe that in some cases we see fewer trips to the store, because so much time has been spent before the store. And so the focus in the store is on the customer experience.”-Best Buy (BBY)

 

Affordable luxury prevails in China

 

“We’ve seen how the luxury market has been hit from the sales point of view. We haven’t experienced anything like that. I think our brands are – both Calvin and Tommy are very well positioned in that market as premium brands, affordable luxury.” -Phillips-Van Heusen (PVH)

 

Added boost fourth quarter form early Chinese New Year

 

“we are going to benefit in the fourth quarter like everyone else from early Chinese New Year, which really impacts a lot of the Asia markets. It’s about two weeks to three weeks earlier this year and you’ll get – you get two things happening; you’ll get earlier actual retail sales in the stores that we are operating, but also because of the early Chinese New Year, wholesale shipments are falling into January out of February.” -Phillips-Van Heusen (PVH)

 

Currency impact is minimal

 

“Well, the Chinese currency impact has been relatively small. It’s about a 3% reduction. So, I mean, that is what – at this point, what that might portend as the world – as you extrapolate that and if there’s more pressure on the Chinese currency, clearly that might make an opportunity for fall 2016 and beyond. But right now, at this point, with the pressure you’re seeing on labor rates offset by some currency benefit, it’s very marginal, just on that particular front.” -Phillips-Van Heusen (PVH)

 

Europe looking good, but need to address growing concerns over costs

 

“we’re actually seeing positive sales trends in Europe. We believe that economy is coming back and that consumer is re-engaging. The challenge we are facing in Europe for 2016 will be cost increases that are double-digit cost increases, and how much of that is reasonable in one or two seasons to pass on to the consumer. That’s the biggest challenge we’re facing in Europe.” -Phillips-Van Heusen (PVH)

 

European performance driven my stifled US tourism

 

“I think a lot more Europeans are staying home. And by staying home, I mean, I think they’re vacationing this summer within Continental Europe and UK where their euros are buying more, where if they come to the United States, forgetting everything else, their hotel and food, just from a currency point of view, is up 20% to 25%.”-Phillips-Van Heusen (PVH)

 

 

 

Amazon a great partner

 

“Our Calvin Klein Underwear business in particular is by far the largest selling underwear on the Amazon site, as you would expect giving them that product category. So they’re a great partner. We really manage that very closely from – making sure it’s brand enhancing. We just don’t want goods on the site. We want the brand experience on the site. And they’ve been very good at getting us that.” -Phillips-Van Heusen (PVH)

 

Commodities down again, drilling can’t get a break

 

“Following the recovery in oil prices during the first quarter, commodity prices have again moved lower and are now approaching the lows we show in the beginning of 2015. This continued low commodity prices environment’s reductions in oil companies spending plans and an increased over supply of drilling units, continues to have a negative impact on utilization and pricing.” -Seadrill (SDRL)

 

Hardships will continue for a while

 

“Subsequently dayrates remain at or below breakeven levels for both the floater and jack-up markets. We believe this challenging market will continue through 2016 and the visibility for 2017 and beyond is depended upon commodity prices stability, oil companies realizing the benefits of the capital spending rationalization programs and continued fleet attrition.” -Seadrill (SDRL)

 

No growth till 2018

 

“In light of the likely continued cold scrapping, stacking and new build delays, they remain at the high likelihood that there will be limited or no growth in the marketed fleet between now and 2018.” -Seadrill (SDRL)

 

“Haven’t reached the bottom yet, not M&A and distressed assets right now”

 

“Well, there will be M&As and there will be distressed assets and what have you. I don’t see it come right now, it will come and, I think, well we will talk again in the quarter, and nothing will happen now in the quarter.” -Seadrill (SDRL)

 

Macroeconomic headwinds subsided

 

“What we saw was once we got through the month of June and into July, the weather patterns normalized, the heat returned and those torrential rains in Texas and Oklahoma and other areas subsided. And we saw a return to a little bit of a normal pattern where our consumable and non-consumable businesses both did very well as we moved into the weeks of July to the end of July.” -Dollar General (DG)

 

 

Customers need to see stability before confidence to spend goes back up

 

“I think it’s way too early to have seen and we really haven’t seen any indication that the consumer is spending anything more because she has additional wage money in her pocket. But again, our core consumer is a little different in that before she starts to spend, she really needs to have confidence and see a sustained ability that income will continue to come her way. So, she is a little bit slower on pulling the trigger on spending a little bit more money.” -Dollar General (DG)

 

Back-to-school looking good

 

“Now the great thing here at Dollar General that we’ve seen is that where school has already started, our back-to-school comps are hitting and/or exceeding our expectation.” -Dollar General (DG)

 

 

 

 

PVH 2Q15 Earnings Call Notes

Strong performance in Europe and China, weak performance in Korea and Brazil

“By region, we are seeing very strong performance for Europe and China for both brands. In Korea and Brazil, where we have a large Calvin Klein business, sales trends continue to be challenging as we are being negatively impacted by the macroeconomic environment for each of those countries.”

Later back to school is making it difficult to read the wholesale business

“In North America, we are dealing with a later back-to-school selling season, due to a weak later Labor Day Holiday, which is making it more difficult to read the business. Our retail same-store sales are running negative low-single digit at Calvin Klein and negative mid-single digit at Tommy Hilfiger. Those two businesses are running on plan given the later back-to-school season and are continue to be impacted by international tourist traffic and spending”

You can’t help but be a little bit more conservative watching what’s gone on with the stock market

“The challenge is – trying to operate that business is, trying to get beyond a lot of the noise that’s going on from the stock market point of view and where we see the business moving and going. So you can’t help, but look at that business and be a little bit more conservative about how we project that business out both through the balance of this year and then moving into 2016 and beyond. So it just gives us pause.’

Valuations are high but we still want to buy the Hilfiger license that we don’t own in China

“on Tommy, potentially we’re acquiring the 55% of the Tommy Hilfiger license business that we don’t own throughout China…I think from a valuation point of view, although that market has taken hits – if you look at PEs or valuations (23:28), they’re still relatively high. So we will be diligent as we look at that. But, clearly, one of our goals would be to own that business sooner rather than later”

It’s tough to read how back to school is going

“I think – geographically, I think it’s much more of a Northeast, Southeast phenomenon with the whole back-to-school being somewhat later. I think as you move across the country, some of those schools come back earlier. And since most of our retailers and ourselves have a concentration of business in those regions, it’s having a significant impact on trying to read business. I think when we get to September 15 or whatever, we’ll have a real clear understanding of how this back-to-school period is trending”

Favorable shift in Chinese New Year for Q4

“we are going to benefit in the fourth quarter like everyone else from early Chinese New Year, which really impacts a lot of the Asia markets. It’s about two weeks to three weeks earlier this year and you’ll get – you get two things happening; you’ll get earlier actual retail sales in the stores that we are operating, but also because of the early Chinese New Year, wholesale shipments are falling into January out of February.’

How do you raise prices in a world facing deflationary pressure

“the challenge, the biggest challenge we’re looking at is, how aggressive to raise prices particularly in a world, as you look out there that is facing extraordinary deflationary pressure in just general terms across a – the ways most economists speak, the biggest concern is deflation, not inflation.”

The biggest headwind we face is currency

“the biggest headwind we face, cut through it all, is currencies. ”

We’re seeing positive trends in Europe but also cost increases

“Europe. It has gone through some macro issues, but we’re actually seeing positive sales trends in Europe. We believe that economy is coming back and that consumer is re-engaging. The challenge we are facing in Europe for 2016 will be cost increases that are double-digit cost increases”

Planning to grow China mid single digits

Clearly, this is not the heydays of three years ago [in China] where, from 2007 to 2010, the business grew 15% topline. We are planning the business to grow more mid-single-digits. I think that’s reasonable.”

Biggest thing we’re dealing with is uncertainty

“I guess the biggest thing we’re dealing with is uncertainty and what that does to – potentially does to the consumer, how that forces us to plan our business, and reacting to the macro-environment”

60% of our marketing budget is directed at digital

“I would say between Calvin and Tommy, 60% of our marketing budget are directed at digital marketing, and connecting with the consumer there, converting them to our in-store platforms, our wholesale customers’ in-store – online platforms or our own brick-and-mortar stores as well.”

Important to get into other retailers besides department stores to connect with younger consumers

“I don’t think it’s any surprise to anyone that department stores tend to skew somewhat older…
So the opportunity with some of the retailers you talked about, Urban Outfitters, with Topshop, particularly The Buckle as we move forward, some other players Opening Ceremony, you mentioned, it’s as much – it’s as important as it is commercially. It’s also very important from a brand positioning point of view how we connect with the younger consumer, how we connect digitally, how we sell online for that consumer.”

European tourism is booming with the weak Euro

“our Chinese consumer or Asia consumer instead of being in the United States is more so in Europe. And as you – I was in Paris and I was in Amsterdam this last month, you could see the tourism boom that’s going on there and helping their economy.”

When you go on that show with Cramer it does get a little crazy at times

“when you’re on that show with Jim Cramer, it does get a little crazy at times.”

Amazon is good about getting us the brand experience on their site

“Our Calvin Klein Underwear business in particular is by far the largest selling underwear on the Amazon site, as you would expect giving them that product category. So they’re a great partner. We really manage that very closely from – making sure it’s brand enhancing. We just don’t want goods on the site. We want the brand experience on the site. And they’ve been very good at getting us that. ”

50% of outlet sales are going to be from tourists?

“if you’re a global player that really attracts a global consumer, in those centers like Orlando or Harriman, your customer base in those centers for those brands, 50% of the credit card sales are international tourists from South America, Europe and Asia. “

Dollar General 2Q15 Earnings Call Notes

Same store sales strong in may weak in June, but stronger in July

“Same-store sales started out strong in May with June being weaker and sales strengthening in July. It is my belief that this was reflective of the weak overall U.S. retail sales report for June and mirrors what you have heard from some other retailers. Sales per square foot reached a record $225.”

Relatively new CEO

“Thank you, John. As I approach the conclusion of my first 100 days as CEO, I am as excited as ever about the opportunities ahead of us at Dollar General. I feel great about the team that we have in place, and I am confident that Jeff and Jim will play an important role in Dollar General’s long-term success. The team is energized and excited as we look to help our consumers save time, save money every day.”

As weather normalized, sales rebounded from June

“When we looked at our sales, it really did mirror, I think, what the nation saw at retail out there. What we saw was once we got through the month of June and into July, the weather patterns normalized, the heat returned and those torrential rains in Texas and Oklahoma and other areas subsided. And we saw a return to a little bit of a normal pattern where our consumable and non-consumable businesses both did very well as we moved into the weeks of July to the end of July. So, that’s what gives us confidence in our guidance for the full year in sales because we’ve seen that our sales have rebounded from that dip in June.”

Haven’t seen consumer spending more with higher wages

“we really haven’t seen any indication that the consumer is spending anything more because she has additional wage money in her pocket. But again, our core consumer is a little different in that before she starts to spend, she really needs to have confidence and see a sustained ability that income will continue to come her way.”

The calendar shift of labor day is making some anxious but back to school has been good where not affected by it

“the calendar shift has caused a little angst probably out there with the consumer, only from the standpoint that Labor Day has been pushed back a week, as you know. And most states with schools, they sort of key off of that Labor Day date. So in a lot of cases what we’ve seen is that the back-to-school has been pushed back in the calendar a little bit.

Now the great thing here at Dollar General that we’ve seen is that where school has already started, our back-to-school comps are hitting and/or exceeding our expectation. So we feel very good about that”

Going to open 900 locations next year

“We’re going to open 730 new units this year and we’re targeting about 900 new units next year and we continue to see these new units perform at about 85% the comp base. And we continue to see them, as I said, deliver great returns”

Competitive environment is rational

“I have to say that the environment is still very rational. And when we look out, we don’t see anything that’s structurally – where that changes.”

Currently have 12k stores going on 13k

“When you look out across our store base and the beauty of Dollar General is we got over 12,000 stores and working our way to 13,000 stores. And as you can imagine, in some areas, we’ve got better standards than others, and we’re always working to make sure that we better our standards”

Tiffany’s 2Q15 Earnings Call Notes

Results pressured by strong dollar

“from an overall perspective second quarter financial results from the top line to the bottom line continued to be significantly pressured by the strong U.S. dollar and worldwide net sales as reported were flat to last year. ”

Lower tourist spending

“higher domestic spending in the Americas largely tied to strengthen statement jewelry sales was offset by lower foreign tourists spending in the U.S. especially in New York and Hawaii, which we attribute primarily to the effect from the strong U.S. dollar.”

Impossible to quantify effect of stock market on sales

“With regard to recent news from China in the same way that it’s not possible to quantify the positive wealth effect from a rising stock market on our sales growth there in the past couple of years. It’s similarly difficult to predict any potential negative effect on sales in magnitude or duration from their recent stock market correction or currency devaluation.”

Net Earnings down 16%

“With regard to recent news from China in the same way that it’s not possible to quantify the positive wealth effect from a rising stock market on our sales growth there in the past couple of years. It’s similarly difficult to predict any potential negative effect on sales in magnitude or duration from their recent stock market correction or currency devaluation.”

Focusing on growing inventories less than sales

“our goal for this year and beyond is to also keep inventory growth below the rate of sales growth by achieving better productivity in our stores as well as in our overall supply chain.’

Williams Sonoma 2Q15 Earnings Call Notes

Partnership with AwesomenessTV to reach Gen Z

“In order to attract new customers, PBteen continues to increase its social media reach. In July, PBteen announced a partnership with AwesomenessTV, a multi-platform media company that is a global leader in engaging the Gen Z audience.”

Still working through port strike frictions

“During the second quarter, as expected, we saw higher shipping and fulfillment related costs from shipping inefficiencies stemming from inventory shortages and unbalanced inventory positions across our distribution centers. We entered the period with elevated backorder levels as a result of delayed receipts. In order to get the goods to our customers as quickly as possible, multiple deliveries on a single order as well as out-of-market shipments were made as we got back in stock.”

Key initiative in inventory optimization

“one of our key initiatives is inventory optimization. We are investing in technology, including enhanced inventory planning and allocation systems and upgrades to our customer order visibility tools, as well as incremental labor and shipping costs throughout the back-half of the year.”

Expect additional shipping costs to continue but not to the same degree

“we expect some additional labor and incremental shipping costs will continue primarily in Q3, but obviously not to the degree we saw in the first-half as we continue to rebalance our inventory levels, especially in our West Coast DC. But we’re also accelerating our investment in technology. So it’s not just a labor cost, it’s also an investment in technology.”

Inventory tools that they’re investing in

“accelerating our investment in inventory tools that will allow us to better forecast our inventory flow and space capacity requirements by DC, brand, and channel. And additionally, future system enhancements will give us better customer order visibility, allowing us to know what every touch point where that inventory resides.”

Port disruption caused us to reexamine the whole supply chain

“while the port disruption was extremely difficult, the good news is that, it caused us to reexamine every single element of our supply chain. And we have identified significant opportunities to improve service levels and over time drive down costs.”

Sometimes customers want to shop online, sometimes in store

“obviously, sometimes the customers are going to want to shop online, sometimes they want to shop in the store. And we want to serve them wherever they want to shop.”

Three weeks into the quarter, haven’t seen much volatility

“On the macro, as I said earlier we are three weeks and we have a Labor Day shift. We haven’t had a lot of market volatility. We never read too much into short-term volatility changes that are based on all the market we’ve seen it before. But the balance of what we’re seeing is that, we have a strong lineup for the balance of the year.’

Brown Forman FY 1Q16 Earnings Call Notes

We’re all anxiously watching market gyrations

“This leads me to my second topic, our outlook for fiscal 2016, which we reaffirmed today. Before I dig into that topic, I would like to add that while we are fortunate to have a business model that combines long-term growth with defensive characteristics, we realized that we are not immune to a further deterioration in the global economy. So, like all I view, we are anxiously watching the market gyrations over the last two weeks, particularly in the emerging markets.”

Our emerging market footprint is <10% of our total

“But for now, our emerging market footprint outside of Poland and Mexico is less than 10% of our total revenues. So our exposure is significantly less than the competition. Additionally, this approximate 10% is well diversified, spread over a 100 plus countries around the world.”

5 million cases of Jack Daniels is a lot

“One noteworthy milestone that occurred during the quarter was Jack Daniel’s Tennessee Whiskey surpassing 5 million cases in the United States for the first time in its 149 year history and to be clear here, I am referring to the parent brand Jack Daniel’s Black Label as most know it.

I’ve been reflecting some on this recent accomplishment. So I thought I’d share a few perspectives with you about it. First, I’ll simply note that attaining the 5 million case level in our industry is a rare event in its own right. This is a very high level of consumer acceptance achieved by very few brands.

Add to this the fact that Jack Daniel’s is priced the super premium price level, well above the price of most brands that have achieved the 5 million case level and the recent milestone is even more rare and impressive in my view”

Big brands have had a headwind

“The first factor outside is the difficulty the big brands have experienced both inside and outside our industry. As evidenced, consider that the largest ten brands by volume in calendar year 2010, in the United States have not only lost share, but cumulatively lost over 1 million cases in the last four years with six of the top 10 having lower volumes today versus 2010.”

There has been intense competition too

“A third factor has been the intensifying competition in the American Whiskey segment as new entrants in craft premium plus and flavored whiskey have exploded in recent years.”

149 years of Jack Daniels

I find it impressive the Jack Daniel’s is in its 149th year in the United States and sits today at all-time volumetric point. Aside these factors to illustrate that Jack Daniel’s is not just normal brand, I believe it to be a special brand and often the exception to the rule.”

Millenial’s social habits are changing

“if you just look at the behavior of Millenial’s , where they might have spent three or four hours at a bar for an evening, they may only be spending an hour and a half in the first portion of it is in their apartment on the couch with their friends and so, the brand selections that occur in those different environments are really important and I think that actually is a contributing factor to why the flavored whiskies are actually doing fairly well because they are convenient to pour and consume and don’t require a lot of mixtures et cetera. So, I think there is some changing dynamics that made be with us for a while.”

The last week has injected some uncertainty

“I think it’s more the uncertainty around where – what might go, what might occur going forward as a result of just the skittishness that we have seen over the last, I mean, literally week to ten days we are acting a little bit more I think to just the recency of some of these market sell-off. That I mean, I am not, at this stage see what happens, I am not obsessed with what’s going on out there”

HEICO 3Q15 Earnings Call Notes

Aftermarket performance hasn’t been quite as good as expected

“I think in looking at it as we entered the year, the investors and I would say the analyst community were a little more bullish on the aftermarket performance than what turned out for most of the suppliers.

If you look at most of the suppliers they have been reporting sort of comparable a little bit disappointing numbers with the exception of GE and Saffron, which I think had some initial provisioning related to some new aircraft engine types in their numbers. But the way we look at it is, it’s a fairly complex equation in that you’ve got the base fleet aging obviously one year per year and then the older aircraft dropping out at the backend and of course the new aircraft coming in at the front end.”

Airlines have been flying older aircrafts for longer than what was expected

“The airlines have been flying the older aircraft beyond what everybody originally anticipated and I think that’s one of the reasons why the ASMs are up and if the airlines continue to fly these older aircraft they are going to have to put some dollars into it. We have based into when we build our budgets we analyzed the fleet plans of our customers and we have that all put in there — if you will the complex equation. So yes I think the retirements are impacting it and what’s going to be really a telling quarter will be in the fourth quarter when we find out whether the airlines are in fact going to go ahead and fly some of these older assets longer or whether they are going to pull them out as originally planned that’s a little bit unclear as of now.”

Don’t expect China to have much of an impact on us

“Yes. China as we say is a very good – remains a very good opportunity for us. We do sell some parts into China, but I do not anticipate any significant impact on our business whatsoever as a result of specifically China. Now to the extent China impacts the rest of the world and the rest of the world gets impacted and reduces their flying then obviously there could be some impact but with regard specifically to China no, that’s not going to be a major impact for us.”

It will be interesting to see if airlines put money into extending the life of equipment or retire it

“I think what is going on is that with lower fuel the airlines are flying some of the older equipment and that is increasing ASMs, but they are not putting money into fixing the older equipment. So really the moment of truth will come out when we find out whether they are going to infact retire or extend the lives of some of these aircraft.”

You can never tell when a deal is going to close

“Chris it’s potentially still in the pipeline. The acquisitions as you know you never can know when they are going to come around due to due diligence, you have questions and some of these things take a year and a half or more to incubate and the one that I was thinking about is still around I don’t know where it will windup we never do until we get to the closing table.”

You really just don’t know what you’ll find in a due diligence review

“Eric and I are having dinner with people tonight on an acquisition and God only knows what we are going to find out. So it’s just a question of due diligence digging and so forth so to predict we’re going to do, it is very difficult and I don’t like to blow the smoke and I don’t like to tell people, we are going to do this there is a good pipeline, but we never know when these things will close and what we’re going to find when we look under the rocks. And that is the problem with the acquisitions.”

Sometimes sellers just plain misrepresent

“Unfortunately many sellers just plain misrepresent. They say that they are going to produce apples and they produce oranges and when we get in there and we start turning over the rocks we don’t like what we see. So even though we are optimistic because they give us a great picture and they give us a book and show what a great company it is and then we start to look and we find out that it isn’t.”

Sellers value the fact that we do what we say we’re going to do

“our best sales tool is to give a potential company that we want to acquire a list of 10 or 15 names of people from whom we have acquired companies and we say just call them up and ask them. And that’s really the best sales tool because they do that and they find out that HEICO does what it says it’s going to do. If they promise you something that’s exactly what will happen. So that’s our formula and it works.”

E House Holdings 2Q15 Earnings Call Notes

“As expected” the Chinese property market has started to warm up driven by government policies

“As expected the overall Chinese property market started to warm up since the end of March driven in part by the governments loosened credit policies and purchasing restrictions in certain cities. Despite recent Chinese Stock Market volatility the real estate sector has stayed relatively stable so far. As a result we are on track to achieve our overall revenue target set at the beginning of the year.”

Chinese real estate market has been quite healthy

“Yes, the first half of this year, the Chinese real estate market overall, it has been quite healthy. We are pleased with the state of the market and transaction volume can recovery in the fourth quarter, and continue into the summer. The month of July and August, we see this growth taper out to some extent which is normal. In a normal year, the month of July and August are a small — minor quiet period in terms of real estate market activities. And everyone is now gearing up and waiting for the next — traditionally a strong transaction season in September and October. So far, you know, everything that has happened is quite healthy.”

Lower interest rates will be good for us

“Yes, so the rate cut as well as the decrease in the required reserve ratio were mainly aimed to give a boost to the macro economy, and everyone is obviously — it has gotten the potential impact on the domestic stock market, but one thing that is clear is that this — the drop in interest rate is — will be good, will be beneficial to the real estate market”

I don’t think stock market drop will cause people to favor real estate over stocks

“I don’t think the recent drop in the stock market will again prompt many people to reconsider their investment strategy to favor real estate purchase more than stock market investment.”

Royal Bank of Canada FY 3Q15 Earnings Call Notes

Bank of Canada has cut rates twice this year

“Starting with the economy, in the recent months, we have seen mixed economic data and weaker than anticipated growth which led The Bank of Canada to cut interest rates for a second time this year. Looking ahead, we still forecast modest growth in Canada in the second half of the year as the strengthening US economy and lower Canadian dollar are expected to drive export growth, and consumer spending continues to be steady.”

Declining oil prices causing economic uncertainty

“Declining oil prices is causing economic uncertainty, particularly in the west with lower levels of investment. As we expected, lower oil prices are challenging for some of our clients. ‘

Lower housing activity in the oil exposed region

“Offsetting some of this growth is lower activity in oil exposed region. It’s important to remember that many areas of Alberta are coming off several years of hyper growth. So the recent slowdown is in part a return to more normal growth levels but we do recognize these markets remain vulnerable to lower oil prices.”

Credit quality remains strong

“credit quality remains strong this quarter as credit trends stayed near historic lows reflecting our strong risk management, low interest rates and strong employment trends”

Stressing oil portfolio for $35 oil could see some uptick in provisions at these levels

“As the price of oil has continued to decline through the year we’ve updated our stress scenarios. From a wholesale perspective, we stress test on a name-by-name basis. Our most recent scenario assumes a $35 oil price for the remainder of 2015 and uses the forward price curve for 2016 which currently averages $45. Based on this scenario, we are now monitoring a handful of additional loans compared to our prior scenarios. If the price of oil stays at current levels, we could see an uptick in wholesale provisions. However, we have seen a number of companies raise capital, delay capital spending or cut dividends which should help mitigate some of the impact.”

Our original expectations for redeterminations was $53

“One factor we will keep a close eye on is this fall’s borrowing-based redeterminations. Our price deck used for our spring redetermination expected the average annual price to be closer to $53 in 2015 with small increases to the mid $60 over time. Should the oil prices remain below $45, we would expect to see further challenges for these clients as our price deck would be reflecting these further depressed prices.”

Have seen a slight uptick in delinquencies in oil exposed provinces

“Delinquencies remain near historical lows and we have not seen an increase in delinquencies for Canada as a whole but have noticed a slight uptick this quarter in oil exposed provinces. This increase is insignificant at this point and it’s too early to say that this is a trend.”

Focused on managing expenses to a lower revenue growth outlook in ’16

“We are very focused as we go into 2016 Doug and myself on a more modest revenue growth outlook given market conditions. And so the completion of our international wealth restructuring program is allowing us to accelerate our expense program. So we are bringing that expense profile in line with our revenue growth, so that we are able to deliver positive operating leverage even in a more modest revenue environment.”

Not seeing deterioration in retail or commercial credit

“On the retail side, across all of the portfolios as I reported we’re not seeing deterioration in our impairment rates and in fact in some cases we are actually still seeing some improvements. So I am not really seeing either in retail or commercial significant concerns at this point, it’s just — I overlay of course, the market conditions that we’re operating in and so that’s why I’ve tried to express a cautious view.”

Fixed income new issue flows are down in high yield because of recent volatility

“I can start with the trading conditions currently. I think starting with fixed income, we are seeing because of the recent market volatility high yield for instance in the U.S. new issue flows is down, investment grade credit is steady but down a little bit, and in rates trading I would say it hasn’t changed.”

Equity trading has been robust recently as completing trades on an agency basis

“In the equities trading side of the business, it’s really just agency trading. We are not really putting capital to work for to offer liquidity. So the equities trading business has actually been as you might imagine reasonably robust especially over the last several days.”