Andrew Sohn Notes: BBY, PVH, SDRL, DG

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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)