Andrew Sohn Notes: MW, SNOW

Rentals down

 

“Rental was down 3.3% as we continued to see an increase in wedding parties electing to purchase retail as an alternative to renting.” -Men’s Wearhouse (MW)

 

Big changes to Joseph Bank promotional model

 

“The current Joseph Bank promotional model has been in place for years. Historical practices include aggressive quantity discounting that frequently relies on buy one and get three or more free offers, requiring customers to buy more than they would naturally want at one time and makes perspective customers question the value proposition. We know most men don’t want to buy suites four at a time. Our research with the Joseph Bank customer tells us this, which is reinforced by our own experience. These promotional offers are not working for our customers and they are not working for us.” -Men’s Wearhouse (MW)

 

Trying to send a different message

“What we are going to do is we’re going to give the customers compelling values on our great quality product and not requiring them to buy larger quantity than they want to buy. So we can give great prices on single unit purchases or two for pricing, buy one get one frees. But it’s really going to be a shift in talking to our customers about what they are going to pay for the goods instead of what they are going to save on the goods.” -Men’s Wearhouse (MW)

 

Traffic is good on the mountain

 

“Our fiscal 2015 results reflect select price increases, higher visitations, and increased market share in our Mountain Segment due to strong season pass and frequency product sales, and the impact of certain growth capital investments.” -Intrawest resorts holdings (SNOW)

 

Growth despite decline in skiing

 

“On a same-store basis, Mountain revenue grew 6.4% and Mountain adjusted EBITDA increased 12.6%. We are especially pleased with its growth given the challenging conditions and the decline in skier visits across the country.” -Intrawest resorts holdings (SNOW)

 

 

Fall quarter looking good

 

“Season pass and frequency product sales for this coming season are pacing well ahead of last year both for our individual resort passes and our multi-mountain products. Heading into the fall sales promotions, seasons pass and frequency product sales were up more than 15% compared to the same time last year” -Intrawest resorts holdings (SNOW)

 

Don’t quite know the impact of El Nino on sales

 

“The reality is we’ve had El Nino’s in the past quite frequently and sometimes they result in average conditions, sometimes they result in better than average conditions and sometimes they result in below average conditions. And there is all sorts of factors that affect the weather and the snowfall and it’s way too early to tell to really have a constructive view on what’s going to happen.” -Intrawest resorts holdings (SNOW)

 

Strong currency helping out Canadian sales despite weak economy

 

“First of all, we think that one of the things that’s going to actually help us up in Tremblant is the weaker currency will most likely cause Canadians to stay home and will drive visitation at our Canadian locations.” -Intrawest resorts holdings (SNOW)

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)

 

 

 

 

Andrew Sohn Notes: URBN, CSIQ, GSI

Andrew Sohn, a junior at Columbia University, has started to contribute to Avondale’s company notes database. Below are quotes from some of the calls that Andrew has read this week.

 

 

 

Traffic down, prices are up

 

“Negative comp store sales, resulted from decreased transactions and units per transaction, partially offset by higher average unit selling prices.” –Urban Outfitters (URBN)

 

Not quite sure why

 

“our store sales have started out slower than what we planned and where we finished the second quarter. There are many factors that could be impacting our store performance and there is too little data at this time to draw any solid conclusions.” –Urban Outfitters (URBN)

 

Sales in Europe are strong

 

“We’ve seen particular strength in Europe, where our London team has doubled their business by improving operational execution and developing domestic relationships” –Urban Outfitters (URBN)

 

Mobile shopping still growing at incredible rate

 

“Meanwhile, the mobile migration we’ve been witnessing in the DTC channel has continued, with mobile devices now accounting for over 55% of our visitors and nearly 30% of our sales.“–Urban Outfitters (URBN)

 

Lots of in-store improvements coming

 

“In July, the team tested a prototype store with the new floor set and a number of category shop-in-shops…In addition to better category distortion, the brand is working to increase selling space in existing stores by shrinking the back-of-house, hold less back-stock in stores, create a supply chain that requires less time to flow new product into our distribution channels and integrate more digital capabilities into the store experience….At this time last year URBN unveiled its Vision 2020 strategy at our investor day conference. For those who attended you may recall our growth strategy was expand the number of products our brands offer, grow all of our distribution channels across all geographies and allow them to accommodate a larger product assortment, and improve operational capabilities and become more efficient.” –Urban Outfitters (URBN)

 

 

 

 

 

 

Lower store traffic an anomaly, maybe a result of weather?

“Now there are a number of categories that are working and working nicely, and I don’t think it’s significantly different than the categories that we’re working in a — toward the end of the second quarter, and so it sort of begs the question as why would the stores be down and not the direct business. And the only things we can come up with and the factors are the calendar shift where the Labor Day holiday is a week later this year and they have something to do with weather, because it’s so hot on the East and West Coast, maybe people are taking more time away and going on vacations, therefore shopping online rather than in stores.” –Urban Outfitters (URBN)

Solving inventory problems

 

“I might add that the inventory management at Urban has improved dramatically and one of the biggest problems the brand had over the last year and a half 18 months was poor inventory management. And we expect the inventories to continue to improve. The weeks of supply will continue to decrease slightly as we put more operational efficiencies into the mix and when that happens, we believe that we have an opportunity to decrease our markdowns even further.” –Urban Outfitters (URBN)

 

 

Yieldcos still the preferred way

 

“The YieldCo continues to be the preferred way to securitize our utility-scale solar portfolio in low risk OECD countries such as U.S., Canada, Japan and UK.” -Canadian Solar (CSIQ)

 

Today’s yields are down but still accretive

 

“At the yields of the YieldCos that serve OECD countries and have strong projects. Today’s yields are still value accretive. However, they’re not in a range you would hope to have robust YieldCo launched in it. If they remain elevated for long periods of time we do have alternatives, we believe that they are going to return to more of lower level and a more normal level within the next six months or so and that lines up with our timing.” -Canadian Solar (CSIQ)

Energy saving is profitable in China

 

“In fact, we believe that the more an organization moves upstream towards energy saving and environmental protection solutions, the higher would be its return on investments and sustainability.” -General Steel Holdings (GSI)

 

 

Repeat of how California environmental problems impacted companies

“The government now is fully aware of the impact from fossil-fuel pollution and is therefore putting more and more money and resources into environmental protection solutions. Actually this situation is not unique to China. And in fact back in the 1970 in Los Angeles, California also had air pollution problem due to excessive emission. This required California state government to require all the cars to install catalytic converters that employ the latest catalyst reduction or we call it SCR technology to substantially reduce NOx emission which subsequently improved the air quality.” -General Steel Holdings (GSI)

 

 

Still looking tough for steel

 

“The second quarter of 2015 has proven to be even tougher than the first quarter for the steel mills in China. China steel industry has entered into a new phase of retrenchment due to slowing infrastructure investment and a sluggish housing market. This is partially because the central government has shifted away from investment led growth to a consumption driven economy.” -General Steel Holdings (GSI)

 

Might get better though

 

“But in the near-term, we think that the challenge for the steel sector will likely linger. But we believe the dynamics in the second half won’t be as tough as the first half of the year.” -General Steel Holdings (GSI)

 

 

Andrew Sohn Notes: KORS, SHAK, M

Andrew Sohn, a junior at Columbia University, has started to contribute to Avondale’s company notes database. Below are quotes from some of the calls that Andrew has read this week.

 

KORS

 

Cannibalization of mall traffic

“In North America, we experienced a high-single-digit comp decline, reflecting a channel shift to online purchases and the continuation of reduced mall traffic.” –Michael Kors (KORS)

 

Store traffic future looks bleak

“Near term, we expect continued pressure from macroeconomic headwinds, including currency fluctuation, lower store traffic due to channel shift, reduced tourism in select markets and geopolitical issues.” –Michael Kors (KORS)

 

Ready to pivot for new tastes, newness is key

“Newness is without a question what is driving her interest, and I just might add, on that point, if you look at what’s happening, there’s some really good things starting to happen in the handbag business. Backpacks are starting to trend, and I think we’re a leader in that category. I think we’ve caught it pretty early on. There’s a very big shift towards smaller handbags and then crossbodies and small leather goods, particularly the millennial customer. It’s the way that she’s shopping. It’s the way that she’s wearing the product.” –Michael Kors (KORS)

 

Luxury companies should have strong balance sheets

“We believe that having a company that operates with a strong balance sheet is the right way to build a luxury company. Other companies don’t run their businesses that way, but we think a luxury company should be run with a strong balance sheet, of which we’ve done from the date that we really went public.” –Michael Kors (KORS)

 

Reducing inventories for department stores

“as we see the department store channel in North America slowing down because you know that, you know the department stores here are not posting robust results. We’ve decided to reduce the amount of inventory that we’re starting to put into that channel because we don’t want to have a lot of markdowns showing up inside the channel.” –Michael Kors (KORS)

 

Odd things happening in Europe

“You know, it’s so funny because while Greece doesn’t mean anything, while that was going on, all of a sudden business softened up. And the minute that that kind of got past whatever was in the consumer’s mind, our business in this quarter has really accelerated. So there’s some funny stuff going on over there.” –Michael Kors (KORS)

 

 

SHAK

 

Pursuing cluster growth

 

“We continue to execute our strategy to cluster growth in existing markets, opening our third Shack in New Jersey, at the village of Bridgewater Commons; and our second Shack in Chicago, on Michigan Avenue, on the ground floor of the impeccably restored Chicago Athletic Association, a boutique hotel overlooking Millennium Park.” -Shake Shak (SHAK)

 

Increasing pace of growth due to favorable environment

 

“Development conditions remain favorable for Shake Shack. And as a result, our team has been able to increase our pace of openings to exceed our originally stated guidance of at least 10 new domestic company-operated Shacks in 2015. We are confident that we will now open 12 new domestic company-operated Shacks in 2015.” -Shake Shak (SHAK)

 

Commodity prices going to be a problem for the foreseeable future

 

“As you know, we follow the market in our major baskets of beef and dairy. So beef is still up, high-single digits from last year for us, even in Q2. So we’re being conservative about what that means for the rest of the year. And we just don’t see the light at the end of the tunnel there just yet for sometime. We’ve been winning on dairy as of late, but then as Jeff noted starting to get a little more expense. Eggs are up. Our dairy costs have gone up” -Shake Shak (SHAK)

 

 

M

 

Consumer spending restricted to certain categories

“The overall growth in the economy is modest at best and we are seeing customers gravitating to restaurants, recreational services, healthcare, and electronics rather than to traditional general merchandize apparel and furnishing category.” -Macy’s (M)

 

Cautious expansion in China

“Our game plan is to start small and use a test and learn approach as we move forward. We also believe that by increasing the presence of Macy’s in China, we will actually help our business here as well both with the Chinese tourists as well as Chinese residents.” -Macy’s (M)

 

Must maintain financial flexibility

“the key here is maintaining financial flexibility, so that if the business hits a bump, we would still have the access to the financial markets that we need to operate the business as a proxy for that. That is why we talk about remaining investment grade as being so important to the company because we want to be a strong retailer for many years to come, and so we do need to have that flexibility for the speed bumps that do happen or the cyclical nature of retail.” -Macy’s (M)

 

Andrew Sohn Notes: RL, HOS, DIS

Andrew Sohn, a junior at Columbia University, is a contributor to Avondale’s company notes database. Below are quotes from some of the calls that Andrew has read this week.

 

With inventory problems at the beginning of the year, long term brand preservation as opposed to short term inventory management proved to be a good bet to make

“These conditions created an excessive inventory and, therefore, more promotional environment in North America. We made the decision to be less promotional than the landscape, because we believe it’s critical to protect our brand. Looking at comp growth across some of our largest customers, we are in line or better than their stores’ average performance.” –Ralph Lauren (RL)

 

Inventory levels are starting to normalize

 

“We saw our inventory was up about 8% at the end of the quarter, and we feel very comfortable with the inventory levels in the content of that inventory. If you look at the inventory at the end of the quarter and what drove the increase, it really was impacted by the timing of receipt plans as well as getting ready for the launch of Polo Sport, the expansion of Polo Women’s and the opening of new stores. So when we look at the underlying factors that we’re getting ready for going forward, we feel very confident and comfortable with the inventory content and level.” –Ralph Lauren (RL)

 

There’s still more room downwards

 

“We actually share the view that we are in a secular downturn, driven by fundamentals that are largely out of our control and which only time will sort out. So, there are plenty of reasons to be somber. However, we are what we call pessimistic optimist. While things are bad, we believe they’re going to get worse before they eventually get better.” –Hornbeck Offshore Services (HOS)

 

Cash is king, even more so given the unpredictability of the future

 

“Now that cash truly is king, we intend to be very stingy with it. While we continue to grow cash from operations and do not expect that to stop, our ability to do so is not a guarantee. Without a prudent margin of safety, we would not afford to be optimists and instead, could find ourselves in the same position as some of our public and private competitors.” –Hornbeck Offshore Services (HOS)

 

Cash is even more important with the lack of visibility for the future

 

“To our way of thinking, it only seems wise to strategically horde cash to preserve our position in an unsettled environment such as this one, where the depth and duration of this downturn cannot reasonably be predicted.” –Hornbeck Offshore Services (HOS)

 

 

Still a lot of rigs out there in the Gulf of Mexico

“The sustained level of deepwater drilling units active in the Gulf of Mexico is indicative we think of the long-term promise that this market holds. After all, we’ve seen a 50% drop in the commodity price of oil and yet there are still as of today 40 or so deepwater units actively drilling in the Gulf of Mexico. We see that level remaining flat for the time being, but is still at historically high levels. Plus, we expect five additional high-spec floating rigs mobilized to the Gulf of Mexico over the next 12 months.” –Hornbeck Offshore Services (HOS)

 

 

 

Good management is so important during tough times

 

“The silver lining here is that poor markets tend to reward better managers and call out weaker players. Our focus will be in delivering great service to our customers, the customers we have and in finding ways to build efficiencies into everything we do without sacrificing quality or safety.” –Hornbeck Offshore Services (HOS)

 

Feels like a V bottom

 

“However, given the current operating environment and uncertainty as to the depth and duration of the current downturn, we know that cash will be king as we navigate further through this cycle, especially if this market recovery turns into a long U bottom or worse, as some people fear, the dreaded L bottom. At this point, it certainly does not feel like a V bottom.” –Hornbeck Offshore Services (HOS)

 

 

Decrease in multichannel households hurting ESPN subs

 

“ESPN’s experienced some modest sub losses although those have been less than reported by one of the prominent research firms and the vast majority of them, 80%, were due to decreases in multichannel households with only a small percentage due to skinny packages.” –Walt Disney Co. (DIS)

 

Confident ESPN can transition into new media

 

“ESPN’s embraced technology better than anyone in traditional media reaching its fans and engaging with them in more meaningful ways online and on mobile devices with its linear channels as well as with an array of additional programming, sports information, commentary conversation and very rich social media features. All of this adds up to a very strong hand and gives us enormous confidence in ESPN’s future no matter how technology disrupts the media business.” –Walt Disney Co. (DIS)

 

 

Tourism doing well

“At Parks and Resorts growth in operating income was driven by higher results at our domestic operations which saw gains in both attendance and guest spending, partially offset by lower results at our international operations.” –Walt Disney Co. (DIS)

 

 

 

Netflix doesn’t spell the end for traditional media giants like Disney

 

“In addition to that you have the growth of platforms like Netflix or SVOD, that’s interesting as well because, while one could argue that for all the right reasons that’s starting to incentivize or maybe incentivizing people including millennials to cord cut, it’s also providing us opportunities because the Netflix has become a really important partner to us in buying our off-network product, buying original programming for us, the Marvel deal is a good example. And then our film library kicks in the output deal for the ’16 slate kicks in. So we look at Netflix actually right now as more friend than foe because they have become an aggressive customer of ours.” –Walt Disney Co. (DIS)

 

 

Embracing disruption, greater market size and good positioning

“the average American is watching about 5.5 hours of TV a day and we see that going up to about 6 hours. The reason they’re watching 5.5 hours of TV a day is because of just what I just described as huge value in the multichannel product for customers and its popular and the reason we believe it’s going to increase from 5.5 hours to 6 hours is because of the advent of new technology driven platforms, whether they are over-the-top, whether it’s SVOD, whether it’s new smaller services. So it’s a long over that way around my saying that we actually believe that with Disney, ABC, ESPN, our products we are really well-positioned. We’ve been among the first if not the first to offer our products on new platforms even if it’s somewhat disruptive, we still believe in the expanded basic service for years to come but we are going to take advantage of opportunities.” –Walt Disney Co. (DIS)

 

China proving to be a difficult market

 

“The home-video market in China is obviously challenged by the fact that it’s a market that’s been you know rife with piracy and so a legitimate home-video market never quite developed there.” –Walt Disney Co. (DIS)

 

 

Andrew Sohn: LMT, YHOO, SFS, UA

Andrew Sohn, a junior at Columbia University, has started to contribute to Avondale’s company notes database. Below are quotes from some of the calls that Andrew has read this week.

 

 

Lockheed Martin (LMT)

 

Acquiring Sikorsky Aircraft

 

The first strategic action we announced is our signing of a definitive agreement to purchase Sikorsky Aircraft.

 

Potential spinoffs or sales in the near future

 

The second major action is the commencement of a strategic review of our government IT infrastructure services work at Information Systems & Global Solutions and of our technical services work at Missiles and Fire Control. The strategic review will address the changing market dynamics affecting these businesses and will help us determine how to best position them for future growth and is expected to result in a spinoff or sale of the businesses.

 

Sikorsky catered to similar customer base, possible synergies

 

Some of the important strategic benefits of this acquisition are that Sikorsky has familiar customers. This familiarity will assist the integration process through utilization of similar knowledge and interaction with common customers.

 

Macroeconomic factors also helped acquisition of Sikorsky

 

Their strong aftermarket business is also expected to provide a long-term source of earnings to the Corporation and another lever of value creation. The opportunity to access capital in today’s historically low interest rate environment is another significant contributor to the rationale and value creation of the acquisition…Sikorsky footprint in the commercial aviation segment is well-established with the extensive activities supporting the oil and gas industry. While this segment has been under recent pressure due to low oil prices, it is expected to recover in the future and add value to the Corporation. We believe these current pressures enable us to make this acquisition at a low point in the economic cycle.

 

 

 

Adjusting operating profit and EPS guidance

 

On Chart 20 we provide our updated outlook for the year. We are leaving both orders and sales unchanged at this time… We are increasing our segment operating profit by $75 million due to our strong performance through the first half of the year and as a result of our increasing profit, we are also increasing our earnings-per-share guidance by $0.15 to a new outlook of between $11 and $11.30 per share.

 

 

 

Industry has more competition, and customers looking more at prices

 

As you know, there is a lot more competitors that have come into the marketplace and our customers’ priorities are changing and what they’re looking at more – they’re much more price-sensitive and so the elements of our business predominantly will be in the work that we’re doing for civil agencies, IT infrastructure type services.

 

 

Sikorsky offers more leverage through cross-selling

 

I think in particular the international sales market is an interesting one for us where we – through the combination of our portfolios coming in having a discussion about the security needs of our international customers whether it’s F-35 Littoral Combat Ships, now Sikorsky helicopters is a much much more powerful discussion than what I believe the current parent could have in terms of bundling products and services together to go into the international marketplace.

 

 

Yahoo (YHOO)

 

Tailwinds last Q3, not so much this time

 

You may recall, in Q3 of last year, we had a number of beneficial factors that led to a very good quarter. These included the World Cup, new patent license royalties, and some accelerated fees around the Alibaba IPO. As a result, we expect to see some pressure in terms of year-over-year trends in Q3. We expect to be able to continue to show strong top line revenue growth in terms of GAAP, but our revenue ex-TAC and adjusted EBITDA will likely be under pressure year-over-year.

 

Focusing on expanding market share

 

We’re also making important investments for the long term. We are investing heavily to grow market share through both traffic acquisition and marketing. Two examples are our recently announced partnerships with Mozilla and Oracle, both are large search deals that we believe will enhance and stabilize our market share. But they obviously run at a lower margin than our organic traffic.

 

 

Mobile search is important

 

Mobile search is key to Yahoo!’s future. Search is half of our business. Users are more and more transitioning from desktop search to mobile search and we think it is fertile ground for innovation.

 

 

Premuim ads, native pricing, and video pricing drove revenue growth

 

So across more premium ads being sold, native pricing improving, and the enhancement of video pricing being added to the mix, that’s really what drove a lot of that 10%.

 

 

New NFL deal offers new opportunity

 

On the NFL, one, we’re so excited that they chose us. It’s such a new area for them. It’s a great area for us. The fandom of the NFL is just immense, and so we’ve been working very closely with them to understand how the experience should be presented, how we should make it available to our different users, where on our site we should make it available.

 

 

Smart and Final (SFS)

 

 

10% unit growth is the goal

 

In the Smart & Final banner, our goal is 10% unit growth each year. That equates to 20 new stores in 2015 and at the end of the second quarter, we’re right on that pace.

 

 

Extra! In favor of Legacy

 

We also plan to continue our steady pace of Legacy Smart & Final banner store to Extra! store conversions and opportunistic relocations. With more than 50% of the Smart & Final banner stores now in the Extra! format, the fraction of legacy stores will continue to drop each quarter.

 

 

Deflationary pressures larger than expected

 

Generally speaking, deflationary pressures were higher than expected in the second quarter, but it’s important to note that we’re seeing across the board deflation in every category. In fact, in the Smart & Final banner, we tracked 27 sub categories of sales and in the second quarter, we believe that only four of the 27 categories were deflationary, but three of these are key volume categories for us; Cheese, dairy and produce and deflation in the quarter had an overall negative impact on sales growth.

 

Expanding into delivery models

 

One other element in introducing Smart & Final to potential new customers is our test of delivery formats. We’ve pilots in limited geographic areas in both San Francisco and Los Angeles markets. With Google Express for same day and next day delivery and more recently with Instacart, an on-demand delivery model, while our experience is limited, we’re encouraged by the potential of both delivery models to better meet the needs of our customers as well as the potential to attract new customers both households and businesses.

Under Armour (UA)

 

Making strong moves into NBA market

 

To help drive this initiative we’ve recently brought on Terdema Ussery who for the past 18 years has served as President of the NBA’s Dallas Mavericks and has prior industry experience in athletic footwear and apparel. We can speak to this in more depth at our Investor Day meeting at September but we want to be clear today about our intent. This category focus will provide the structure to help us sell more shirts and shoes. This structure has proven successful for us in Golf with the combination of great product; a great asset and a great team helped us double revenues in the past two years.

 

 

Using Connected Fitness platform to expand customer base

 

We can do so because of the strength of our Connected Fitness platform, but we continue to add more than 100,000 unique registered users of a platform every single day. We remained in the early stages of incumbent potential of what the world’s largest digital health and fitness community with now over 140 million athletes can do to help us build consumer engagement and drive healthier lifestyles…Ultimately the more people exercise the more athletic footwear and apparel they will buy. Again we will provide deeper detail on our Connected Fitness opportunities in September at our Investor Day but we’re extremely pleased with the growth of our community and the type of insight we can bring to our consumers lives.

 

Brand imaging is about consistency and long-term commitment

 

And so brands are built on consistency, consistency is built in trust and trust is built in drops and is lost in buckets. And so what you see is we had a great big pouring I think of credibility in the sport of basketball and which Steph brings us on a day to day basis but that’s going to require a lot more investment and it’s going to require a long-term commitment. And so we want to let everybody know particularly our consumer but frankly our competition as well that we are moving in the basketball we’ve been working on this for it’s not an overnight success we’re working on this for years if not decade and we’re incredibly proud of where we’ve gotten to but we’re really just getting started.

 

 

Don’t want to expand through fanbases

 

So we’re now looking at, a) our profitability and it’s been one asset at the time and it’s been things from joining the EPL football with people in places like Tottenham Hotspur and then finding ways to make investments the recent announcement we had with Sao Paulo Football Club down in Brazil it’s not an immediate return for us. I’ve always said I don’t really see us as a licensed jersey manufacturer I don’t like that idea of growing sport by simply selling fan gear, we want to be on the authentic athlete we want to be on the pitch on the court on the field. But there is ways for us to get in and so finding the resource that we can spin off to make an investment in the market is very new for us like Brazil, its’ a big deal. And so we’re — I think we’re very patiently doing that around the globe where we’re finding assets that make sense and especially we can reinforce at markets that we can create an ROI that’s sooner than later.