Abbott Laboratories (ABT) at JPMorgan Healthcare Brokers Conference

Brian Yoor – SVP and CFO

By 2050, 17% of the global population will be over 65

All of our businesses are well-positioned to address the most relevant needs and to build on attractive healthcare and demographic trends such as improving social economic conditions in emerging markets, in a rapidly aging global population that are driving increasing demand for healthcare. In 2015 people above the age of 65 comprise 8.5% of the global population. In just 15 years this will increase to 12% and by 2050 is projected that people over the age of 65 will comprise nearly 17% of the global population.

 

Expanding middle-class in emerging markets is a significant long-term growth opportunity

In emerging markets, rapid growth in healthcare is being driven by an expanding middle-class and improved access to care. Healthcare spending as a percentage of GDP remains low in these geographies compared to the developed world representing a significant long-term growth opportunity as emerging markets continue investing to modernize their healthcare systems.

 

60% of sales are international

In addition to this unique product balance, our nutrition business is also geographically well-balanced with roughly 40% of our sales occurring in the United States and 60% outside of the United States including nearly 50% of our total nutrition sales in emerging markets… We have also built a world-class global supply chain and development organization that spans both the developed and emerging markets including state-of-the-art manufacturing facilities and localized R&D efforts in China and India in order to develop innovative products designed to meet the local adult and pediatric nutritional needs.

 

Diagnostics testing influences up to 70% of healthcare decisions

Moving to our diagnostics business, which remains a reliable growth business consistently achieving above market growth in both developed and emerging markets. Diagnostics testing influences up to 70% of healthcare decisions and lab professionals are under constant pressure to deliver test results of quality, speed and efficiency.

 

ABT enters the arena of med tech with the acquisition of St. Jude

With the recent acquisition of St. Jude represents a major strategic move that establish Abbott with a premier medical device business with leading positions in cardiovascular, neuromodulation and diabetes care markets. Together the combined medical device portfolio will have annual sales of approximately $10 billion… With the acquisition of St. Jude, Abbott will now compete in nearly every area of the $30 billion cardiovascular device market and hold number one or number two positions across several large and high-growth markets

 

New facility in India will act as a hub, shipping products to over 30 countries

Additionally in the fourth quarter of last year, we announced our new Established Pharmaceuticals innovation and development center in India. This center will develop new drug formulations indications, dosing, packaging and other differentiated offerings and will act as a hub shipping products to over 30 countries that will further develop the products to suit their local needs.

Pfizer (PFE) at Guggenheim Conference Notes

Ian C. Read – Chairman and CEO

 

Delegation is a necessary evil, and the reason company culture is important

“they told at business schools we have delegations great, and I say it is not, it is the worst thing in the world. The only reason I delegate it is because I can’t do everything. So, you suddenly realize that the only way you are going to move the company is through the culture.”

 

In fact, company culture is the determinant of success in the pharmaceutical industry

“I have always finished by saying the only thing that in the end will make a difference is our culture. We all in the pharmaceutical industry most of us have capital, most have bright people, we all have the tools we need to be successful but we will make the difference if our culture is better than the culture of the other companies. And so when I took over I wanted to instill a culture.”

 

Mechanisms and procedures for deciding when to end product development are crucial

“you don’t want to spend money on something that is going to fail so you really want to be very critical as you put things into Phase 2. You don’t certainly want to get what we got to in Phase 3 with our PCSK9 and have it fail. That’s a very expensive failure. Now that’s a drug that started this development eight years ago, nine years ago so, you really want to make sure that you have made very hard and critical decisions in Phase 1. And you don’t let this sort of lingering syndrome of repurposing or staying around…  we need to know the mechanism…  we are not going to bring a product for development unless it’s first in class or best in class and within two years of the first in class. Because that’s the competitor dynamic you need to force yourself to”

 

95% of research is done outside the company

“research is driven by you believe you need experts inside the company and you need the most brilliant scientists. But you certainly — we certainly have forced ourselves to understand that 95% of the research is outside of the company. And the trick is to get the scientist focused early on, on outside opportunities. So we have a partnership with about 19 universities. We get some 300 submissions on things that our clinicians and our research scientists wants to develop. We go through them, we pick about 16, we put our scientists in their labs, they come to our labs. We are trying to cut out that five to six period where it sort of swims around in universities and doesn’t really go anywhere in the Academy. And then some VC picks it up. What we’re trying to do is get ahead of the VC”

 

Current US tax policy allows foreign companies to buy US assets at zero tax, putting PFE at a disadvantage

“I think for the US companies there are multinationals, that is the biggest competitive reset against our European competitors if we get an effective tax policy. Suddenly they can’t buy U.S. assets at a zero tax rate because they have no profit in the U.S. and they take it away outside. So your ability to buy U.S. assets compared to Europeans become equalized and all of a sudden they’ll end up paying at least the corporate tax rate or the import tariff on everything they sell in the United States. So I think it’s the biggest level there for us in that sense competitively.”

 

Responsibility for long-term healthcare costs is best handled by providers

“So I think the long-term risk needs to be with the providers. The providers, the hospitals have formed chains, they’ve formed semi monopolies in geographic areas. So they hold the patient for the patient’s life other than people who leave the area to go to another area. But 90% of their population is theirs for their whole life. So these are the individuals, these are the institutions that you should be able to incentivate to look after long-term healthcare costs. Work on smoking, work on lipids, work on diabetes, work on obesity. Work on smoking cessation where you can pay these institutions to lower and bend the cost curve and they are the natural holders of that. You need to be able to have rewards and incentivate them to hold those risks.”

Citigroup (C) Presents at Goldman Sachs Conference

John Gerspach – Chief Financial Officer

Few answers on what the Trump administration will do

“I have very few answers… Almost none”

 

Which is why the plan is to assume a similar environment to 2016 and be poised to react to changes

“we can’t build a plan on hope. So, our base plan going into next year is really looking very similar to an environment that looks like ‘16. We don’t know what the new administration is going to do. I think during the campaign trail, both candidates said a lot of things. And now exactly what gets rolled into policy and new laws and what gets repealed, we don’t know. We don’t know the timeframe in which they are going to handle things. We don’t know the priority in which they are going to handle things. So for us, it’s you build the plan based upon what you see and then you make sure that you are poised to take advantage of the opportunities…”

 

The reason behind interest rate increases is important  

“100% certain, 95% certain that we are going to get a rate increase next week. Fine, we had already assumed that. The key then becomes what happens after that and I think, even more importantly, why. If you are just getting rate increases for the sake of getting rate increases, that’s kind of nice. If those rate increases are because the economy really is growing at a faster rate, you do get stimulus as far as whether it’s tax reform or its infrastructure spending that would all be a big positive for us.”

 

No particular emerging market is an area of special concern

“we are no longer overly concerned about what’s going on with Brazil and Russia. When I look at the world, there really isn’t a spot in the emerging markets that really stands out as something that says, well, watch here. You watch everything, but there is no special area of concern right now.”

 

Europe deserves extra attention though

“I was going to say the one area that we actually are spending more time looking at right now is Europe… we are just not sure as to how that Brexit is going to be negotiated. So a lot of that is going to be determined over the course of the next several months and perhaps even years and therefore, it’s a little uncertain as to what the impact will be on the UK and uncertain as to what the impact is going to be on the remaining countries in the EU.”

 

1 million new accounts in the Costco portfolio

“Little bit of a rough patch in the beginning, but the Costco portfolio is performing extraordinarily well. Just this past weekend, we got to our 1 millionth new account since we have taken on the portfolio. So, we have added 1 million accounts in less than 6 months. Don’t take that as a run-rate, but it’s a great way to start. That’s pretty good. You take a look at how we are growing revolving balances with Costco. All of that is good. We have secured extensions on most of our key co-brand partnerships now.”

 

Yet, reserve build required for Costco rewards and rebates was high

“When you bring on a portfolio like that, it’s going to take you a good year before it really becomes accretive and there is probably 6 months after that before it normalizes… We had $150 million reserve build on Costco in the third quarter. That should be the highest reserve build that we ever have on Costco, so it should decline from here, but it’s still going to take until the second half of ‘17 before it’s really accretive to earnings.”

 

70% of Costco card spending is outside of Costco

“On the reward component for Costco is baked in there. There is nothing – there is no front end on that. So everything with the Costco portfolio as far as that value proposition that we put out in partnership with Costco is operating at or better than what we expected. We mentioned in the third quarter earnings that 70% of the spend on the Costco card is occurring outside of the Costco stores and that’s better than what we had planned.”

 

Compliance with the Volcker rule and regulations in general requires 29,000 workers

“When you take a look at our entire workforce of 220,000 people and you think about 29,000 people being involved in risk, compliance, audit, yes.”

Pfizer (PFE) at Citi Global Health Conference

Mikael Dolsten – President, R&D

 

Pipeline has a balanced distribution among phases

“When you look at the pipeline that deliver this flow of Phase 3 and approvals, we have about 90 projects. Slightly more than 40% in Phase 3 registration, slightly less than 40% in Phase 1, and about 20% in Phase 2”

 

PFE wants a “networked R&D organization” that utilizes both internal and external product development

“Very briefly when it comes to internal versus external, we really have our strategic ambition to be a networked R&D organization, some strong capabilities internally welcoming biotech and pharma partners and you can see three example of that approach. Product acquisitions through M&A, Medivation, access to Xtandi, Talazoparib… Next to that we have strategic acquisition of technology and early product. Bamboo is a company engaged in gene therapy… And then a partnership with Western Oncolytics that provides us with an oncolytic virus particularly interesting for cancer therapy of what we call cold tumors with moderate to low immune activity”

 

Strategic investments will likely continue into 2017

“I would say we will continue to have appetite for our strategic investment areas. Right now I think we have a very comprehensive immune-oncology portfolio but we would always built and if there is a new agent appearing, you may have seen that we have invested recently in — novel — see, there are four construct that are aimed to be local active in the tumor to circumvent that systemic talks…”

 

PFE’s Christmas wish list includes finding solutions for Duchene’s Muscular Dystrophy and diseases like Parkinson’s and Alzheimer’s

“And we’re going to Duchene’s Muscular Dystrophy, it would love to see us being able to change fatal outcomes for boys with that disease and we’ll certainly keep our eyes open if there is another gene therapist as we have one of the — I think best manufacturing facilities for clinical studies…One of the few areas of metabolic disease where you could come to market without big outcome studies and I think it would be a disappointment if I didn’t mention that you will always be open on your eyes for breakthroughs in neurological diseases like Parkinson’s and Alzheimer’s and then it’s going to be a combination therapy. Maybe, new agents that deal with newer inflammation which seems to be a major culprit, that would be nice New Year’s gifts”

Kraft Heinz (KHC) 3Q16 Earnings Call Notes

KHC plans to modernize its meat business like it did its cheese business

“What we’re trying to do, we’re trying to get two things at once. One, modernize the manufacturing capability and the technology to be able to make the products of the future rather than the products of the past. And two, try to get a cost advantage compared to anyone in the marketplace and we believe we are in a strong position to do so. It’s just going to take a little bit of time for us to complete that project, and once we’re out of it, no different to the model we did in cheese when we modernized and reduced our costs and we became world-class, cost effective in it. The meat business would be in a similar situation.” George Zoghbi – The Kraft Heinz Co.

 

Investment is across the board, not just in meat

“It’s a very good question. Yes, there are. Actually, meat, while meat has taken the lion’s share of our footprint investment, there are a number of other manufacturing sites where we are making investments. As a matter of fact, about 15% of our active lines are affected between transfers, decommissioning old lines and installing new ones. What we’re also doing, we are outsourcing a number of non-core low volume SKUs across the board, and we are in-sourcing some higher volume SKUs, again across the board, not exclusive to meat. And we’re also reducing the number of warehouses and distribution centers. So all together, it’s a very large investment across the entire network. The meat happened to have the larger portion of it, but we’re doing it across the board.”  George Zoghbi – The Kraft Heinz Co.

 

Data analytics are being used to determine promotional activity

“What we’re finding though, it’s not just the promotional activities or the sales generated from promotional activities, rather than the return that we get from promotional activity. We have become, through data analytics, lot more competent in the ability to select which promotion and which category with which account. And we’re finding very, very different returns. And that, by itself, is allowing us to actually do more with that.” George Zoghbi – The Kraft Heinz Co.

McDonald’s (MCD) 3Q16 Earnings Call Notes

90% of restaurants have self-order kiosks in Canada

“In Canada… We now have dual point service and self-order kiosks in almost 90% of our traditional restaurants” Steve Easterbrook – President and CEO

 

Self-service kiosks and “Experience of the Future” will be substantially integrated into US market by 2018 or 2019

“In terms of modernized restaurants, it’s just over 50% of the U.S. state is modernized; we’ve got some work to do to complete that. And then of course within that we want to layer on top of the other elements, the broader [ph] elements, consumer facing elements of Experience of the Future, integrating that into the self order kiosk, offering different ways that customers can be served, they can place their orders, they can customize their food. So, we expect to start seeing that wrapped up through 2017 and literally the minute you convert the restaurant, we see a sales lift. So, yes, it’ll be a contributor, but we’ll probably be getting that full rate through 2018 and 2019 as well, which I think is a very strong program.” Steve Easterbrook – President and CEO

 

Commodity prices are favorable, but labor costs are rising globally

“While we continue to benefit from favorable commodity costs around the world, we continue to experience rising labor costs in many of our markets.” Kevin Ozan – CFO

 

Spread between eating at home and eating out is larger than it’s been in 30 years

We are also mindful that the current 450 basis-point GAAP between the costs of eating at home versus dining out is the largest spread in more than 30 years and maybe impacting consumer behavior. We continue to track these metrics and expect our overall menu price increase at year-end to be more in line with food-away-from-home inflation. Kevin Ozan – CFO

 

Restaurant industry is experiencing a squeeze because of broader economic issues, not just drop in cost of home dining

“I think there are broader macroeconomic issues of consumer confidence and just uncertainty of wage increases, the slight squeeze on discretionary spend with gas prices aging back up and healthcare costs going back up. So, I think those are sort of things that we see affecting customers and basically the spare cash they have in their pocket” Steve Easterbrook – President and CEO.

 

Mcdonald’s position in lower-end dining offers a buffer from the drop in cost of home dining

“The gap clearly plays a role but it’s not the reason for the broader softening, it’s not the sole reason. So, I think it is an element. But when you are lower average check business like we are, I don’t think that magnifies out the same as if we were a mid scale dining or fine end dining. So, yes it’s probably in the mix but it’s certainly doesn’t explain.” Steve Easterbrook – President and CEO.

 

Stability of McDonald’s value menu differentiates it from the more variable promotional offerings of the industry

“I’d say you can see out there, there is still some promotional offerings certainly around the industry. I think all of us certainly including us would like to see kind of just a stable platform where you can — that’s why we put McPick 2 in. The idea is to have an ongoing value platform that customers can count on and not have to come up with some discounted promotion, if you will, every now and then.” Kevin Ozan – CFO

 

Terror and security concerns have slowed tourist traffic and even domestic traffic in France

“we know that GDP is down in France but the different dynamics and given some of the situation and the security, terror situations they faced there, it really is creating some very significant dynamic changes in that market. Tourism, which has always been a substantial part of this fuel of the economy in France has really softened. And you see it in the hotel bookings and you can see impacted in certainly the more tourist areas where it’s the Southern France or Paris within our business where we do have a heavy concentration of restaurants. But you’re also seeing effect of the way that consumers live their lives, French consumers. So, there is a slight reticence to go into high density tourist areas because they’re slightly concerned at environment.” Steve Easterbrook – President and CEO

 

Delivery plays a substantial role in Chinese market

“China is a challenging market… As they are seeing, just as one example, they now have a substantial part of their business is the delivery business. And not just — originally we set up and established our own McDonald’s delivery service and that proved to be very successful. We’re now integrating into third party delivery providers and that has way further accelerated our momentum in business and customer satisfaction, as more people are getting used to ordering and eating at home.” Steve Easterbrook – President and CEO

President Obama’s Essay on Economic Policy after the Election: “The Way Ahead”

The Economist

“The Way Ahead” – President Barack Obama.

 

Much of the protectionist mood in the US is driven by anti-immigrant sentiment and a resurgence in nativism

“How has a country that has benefited—perhaps more than any other—from immigration, trade and technological innovation suddenly developed a strain of anti-immigrant, anti-innovation protectionism?… Much of this discontent is driven by fears that are not fundamentally economic. The anti-immigrant, anti-Mexican, anti-Muslim and anti-refugee sentiment expressed by some Americans today echoes nativist lurches of the past”

 

Rise in inequality and slow growth in income for the low- and middle- class has also contributed

“But some of the discontent is rooted in legitimate concerns about long-term economic forces. Decades of declining productivity growth and rising inequality have resulted in slower income growth for low- and middle-income families. Globalisation and automation have weakened the position of workers and their ability to secure a decent wage”

 

Also a growing resentment of business and political elites

“And the financial crisis of 2008 only seemed to increase the isolation of corporations and elites, who often seem to live by a different set of rules to ordinary citizens.”

 

Despite these negatives, trade, globalization and technology have been overwhelmingly beneficial to the US

“Over the past 25 years, the proportion of people living in extreme poverty has fallen from nearly 40% to under 10%. Last year, American households enjoyed the largest income gains on record and the poverty rate fell faster than at any point since the 1960s. Wages have risen faster in real terms during this business cycle than in any since the 1970s. These gains would have been impossible without the globalisation and technological transformation that drives some of the anxiety behind our current political debate.”

 

To restore people’s trust in the forces of capitalism and globalism, the inequality gap needs to be addressed

“Economists have long recognised that markets, left to their own devices, can fail. This can happen through the tendency towards monopoly and rent-seeking that this newspaper has documented, the failure of businesses to take into account the impact of their decisions on others through pollution, the ways in which disparities of information can leave consumers vulnerable to dangerous products or overly expensive health insurance… A world in which 1% of humanity controls as much wealth as the other 99% will never be stable. Gaps between rich and poor are not new but just as the child in a slum can see the skyscraper nearby, technology allows anyone with a smartphone to see how the most privileged live. Expectations rise faster than governments can deliver and a pervasive sense of injustice undermines peoples’ faith in the system.”

 

Radical change, however, is not the answer

“As appealing as some more radical reforms can sound in the abstract—breaking up all the biggest banks or erecting prohibitively steep tariffs on imports—the economy is not an abstraction. It cannot simply be redesigned wholesale and put back together again without real consequences for real people.”

 

President Obama advocates fiscal stimulus to boost productivity growth

“A major source of the recent productivity slowdown has been a shortfall of public and private investment caused, in part, by a hangover from the financial crisis. But it has also been caused by self-imposed constraints: an anti-tax ideology that rejects virtually all sources of new public funding; a fixation on deficits at the expense of the deferred maintenance bills we are passing to our children, particularly for infrastructure; and a political system so partisan that previously bipartisan ideas like bridge and airport upgrades are nonstarters.”

 

Unions flexible enough to not hinder American trade policy, and tax policy are key to addressing inequality

“In the future, we need to be even more aggressive in enacting measures to reverse the decades-long rise in inequality. Unions should play a critical role. They help workers get a bigger slice of the pie but they need to be flexible enough to adapt to global competition. Raising the Federal minimum wage, expanding the Earned Income Tax Credit for workers without dependent children, limiting tax breaks for high-income households, preventing colleges from pricing out hardworking students, and ensuring men and women get equal pay for equal work would help to move us in the right direction too.”

 

New trade deals— the Trans-Pacific Partnership and the Transatlatnic Trade and Investment Partnership— will make American firms more productive and lift wages for workers

“Lifting productivity and wages also depends on creating a global race to the top in rules for trade. While some communities have suffered from foreign competition, trade has helped our economy much more than it has hurt. Exports helped lead us out of the recession. American firms that export pay their workers up to 18% more on average than companies that do not, according to a report by my Council of Economic Advisers. So, I will keep pushing for Congress to pass the Trans-Pacific Partnership and to conclude a Transatlantic Trade and Investment Partnership with the EU. These agreements, and stepped-up trade enforcement, will level the playing field for workers and businesses alike.”

 

Unemployment insurance and educational opportunities should be used to address employment

“There are many ways to keep more Americans in the labour market when they fall on hard times. These include providing wage insurance for workers who cannot get a new job that pays as much as their old one. Increasing access to high-quality community colleges, proven job-training models and help finding new jobs would assist. So would making unemployment insurance available to more workers.”

 

Post-crisis reforms have made the the US financial system more stable

“There should no longer be any doubt that a free market only thrives when there are rules to guard against systemic failure and ensure fair competition. Post-crisis reforms to Wall Street have made our financial system more stable and supportive of long-term growth, including more capital for American banks, less reliance on short-term funding, and better oversight for a range of institutions and markets. Big American financial institutions no longer get the type of easier funding they got before—evidence that the market increasingly understands that they are no longer “too big to fail”. And we created a first-of-its-kind watchdog—the Consumer Financial Protection Bureau—to hold financial institutions accountable”

 

As evidenced by today’s interest rates, monetary policy alone should not bear the burden for boosting productivity

“With today’s low interest rates, fiscal policy must play a bigger role in combating future downturns; monetary policy should not bear the full burden of stabilising our economy. Unfortunately, good economics can be overridden by bad politics.”

 

Fiscal policy has been blocked these last four years by Congress

“My administration secured much more fiscal expansion than many appreciated in recovering from our crisis—more than a dozen bills provided $1.4 trillion in economic support from 2009 to 2012—but fighting Congress for each commonsense measure expended substantial energy. I did not get some of the expansions I sought and Congress forced austerity on the economy prematurely by threatening a historic debt default. My successors should not have to fight for emergency measures in a time of need. Instead, support for the hardest-hit families and the economy, like unemployment insurance, should rise automatically.”

Costco (Cost) 16Q4 Earnings Call Notes

Richard Galanti – Executive Vice President and Chief Financial Officer

 

Rewards program is estimated to improve by 40-50% under Citi

“In terms of increased cash back rewards, the estimate is about a 40% to 50% improvement in the reward program, which is already previously a very good reward program to the members using the Citi Visa Anywhere card… In terms of improved cash back member rewards, our former card provided a 3% cash back on gas, 2% on restaurant and travel, and 1% everywhere else, including everywhere at Costco other than the gas. With the new CV’s Anywhere card 3% on gas now is 4%, 2% on restaurant and travel is now at 3% and probably the most significant rewards improvement in terms of the total bucket here is the previous 1% reward on all other Costco purchases doubled from the previous 1% cash back rewards now to 2%.”

 

80-90% of the Amex to Citi benefit will go back to the customers in the form of lower prices

“the best, simplest answer is that just like when we buy a physical product better lower we can buy whether it’s lower freight, greater purchasing power or greater production efficiencies or whatever we figure out with our supplier, we generally wanted 80% or 90% of that, the vast majority of it given back to the customer in terms of lower price because that’s what drives us and drives our business… That will drive value to that member and loyalty to us and also more business to us. And secondly, what’s left over and when we originally did it, we did it such that we are going to keep a small amount of it.”

 

Food and tobacco deflation and other deflation may continue at current levels for a few months. No guess on gas

“I would say probably best guess is five months or six months of continued deflation at these newer levels in some cases. Gas, who the heck knows… Late fall, so it’s a few months. That sounds like a definite maybe.”

 

Foreign stores may have started slow, but they have picked up

“And as we have said, the one market that has been – we start, we remind ourselves that there is a time when we were going to close Korea and Taiwan and they are our most and almost our most profitable productive countries and locations. And we have talked about our first unit in Syria [ph], got off to a slow start. It’s growing nicely now. Madrid got off to a much better start and it’s growing nicely.”

 

People come to Costco for the value. Not for American Express card

“Our view has been we don’t think that many people left Costco, because they can’t use their American Express card. American Express is a great brand and it was a great relationship for many years. But at the end of the day, they are coming to Costco because of our quality in our value.”

 

Online retailers are only taking “a little piece” from Costco

“The internet is taking from everybody. Our view is it takes a little less from us. And interestingly, when you look at the categories within our slightly lower sales over the last couple of few months, the categories that have buffed that trend have been discretionary nonfood categories like apparel and housewares and electronics. So, now when we look at food and sundries, we absolutely do not believe its delivery services. We do absolutely believe its deflation more than anything. But again, everybody takes a little piece of something.”

 

Costco will not compete with online retailers on their turf

“We are recognizing – we recognized that we are not going to be the provider. We may be the provider to somebody that wants to deliver like an Instacart or Google Express, but we are not going to be dropping off small items and our prices at your doorstep. That being said, we are, we have and we continue to add things… I think you are going to see big differences literally in the next several weeks of the types of hot items that you see on there on the non-food side in the treasure hunt. On the – I think that’s probably the biggest thing you will see… Our success has been based on pricing value, quality and quantity at the lowest possible price… we look at our core business of getting you in the store still is paramount to what we want to do.”

 

Furthermore, Costco acknowledges it is not Amazon or Internet proof, and reinforces that it will stick to its value proposition to bring people in-store

“I read the reports that some of you have written about that we and maybe one or two other retailers out there that are unique are Amazon proof or Internet proof. We don’t buy that for a minute. We do believe that we do rely and we do expect we are going to be impacted loss. We also don’t believe we have to go crazy on the other side, but we want both. But our value proposition is best served for us when it’s in-store getting members to come in and buying when they can see everything there that we have.”

 

Main purpose of gas is to get customers into the store

“When prices went down, our view is as retail gas, overall, they would lower their prices but not as much as they could have. And we lowered it more than that and we are still able to benefit a little from it. So that was a positive. I think yes, it’s the value proposition more than anything that gets people in our parking lot.”

 

Costco’s competitive position on price is stronger than it’s ever been

“But at the end of the day, if anything, our view is – the mode has continued to get bigger, in other words, our competitive position, pricing wise, is stronger than it’s ever been. But we are not resting on that. We are constantly trying to figure out how to widen it. That’s what we do.”

 

Organic food category growth trend continues strong and resonates well with millennials

“We expect organic to be up 20% this year. Now, some of that will be some cannibalizing of some traditional, conventional, but no, it’s the perfect items for us, because it’s our member. It helps us with millennials on top of that. We get that. It creates a bigger competitive pricing mode, because we have as good, if not better quality at much better pricing. In terms of supply, I think the supply is starting to catch up with the demand out there and I think that some of the – you have heard me talk in the past about many of our global sourcing initiatives, I think that’s going to continue to help us and make it more competitively advantageous to us.”

 

Millennials shop more often but buy less. In the aggregate they buy a little more

“What we were surprised at is that they actually shopped a little more frequently while a little less each time, but the aggregate of those two, they bought more over that year a little more, I mean, in the low single-digits, but there was more. It didn’t have a bracket around it. And they renewed at a slightly higher rate.”

Sprint (S) at Deutsche Bank Notes

Sprint’s marketing message: why pay a lot more for a network that is only marginally better?

“And so we’re very pleased with that campaign, because what it actually pointed out is that there isn’t much of a difference between network performance today. We don’t profess to have yet the best network but we do feel that our network is good and certainly does not justify a very large premium that the competitive providers are actually charging… we shifted the messaging to say why pay more. And this started to resonate with consumers in the United States” Tarek Robbiati – CFO

 

Network is the number one cause of churn

50% of the reasons why customer churn are network related. 30% to 35% are price related and 15% to 20% are service related.” Tarek Robbiati – CFO

 

CapEx is lower presently because Sprint is benefiting from its historically high CapEx

“We spent and historically Sprint has had the highest CapEx to sales ratio of the industry. With Network Vision we spent a fair bit of money modernizing our tower infrastructure. And so we are still benefiting from that historic investment and this is really a positive walking into fiscal year ‘16 and that’s why our CapEx in part was lower in the first quarter of fiscal year ‘16.” Tarek Robbiati – CFO

 

CapEx is also lower because small cell installation is far cheaper than towers and other previous infrastructure

“The cost of those cell sites, small cell site is a fraction of the cost of the towers. So it depends on how many cell sites you need to build in every geography but a cell site is on average costing 20% the cost of a tower. So you need to spend less per small cite as you roll out some of them. So the spend is more scattered over time because of the permitting and the unit dollars that you spend are lower and the two effects combined explain why we guided the market towards the 3 billion mark for this fiscal year. We said less than 3 billion.” Tarek Robbiati – CFO

 

Sprint wants to utilize multiple sources of financing going forth

“It’s important for us that we have a diversified financing strategy. And so we will use different types of source of financing whether it’s high yield, whether it’s asset backed lending or others that I’m not mentioning but — to continue to finance our operations. And that’s really important because now that we have shored up liquidity we’re paying more attention at lowering our cost of capital and lowering our cost of debt. We pay every year around $2.3 billion of interest expense. It’s a very high number and it stands in the way from us becoming pretax positive. You know, it’s not talked a lot about in our – by the analysts who follow us but we do have a fair bit of operating losses on our balance sheet that we would like to monetize and realize the value for. We have $19.2 billion of notes at the end of the first quarter… It’s really important that we have sufficient liquidity to repay them and it’s a gradual process that we are embarking on incremental over the next several quarters to reduce our cost of debt.” Tarek Robbiati – CFO

Verizon Communications at Goldman Sachs 2016 Notes

Consumer wallet spend on telecommunications has not changed for 20 years

“So, if you look at consumer wallet spend, consumer wallet spend on telecommunications products, and telecommunications products includes cable, wireless, and telephone. It really, the percentage of spend by the consumer has not changed for 20 years. It’s around 4% to 5%.” Fran Shammo – EVP & Chief Financial Officer

 

Working advertisers into the consumer-data consumption model is key for VZ

“in the wireless world, we know the consumer is going to hit a certain peak, where they say, I just can’t pay for the consumption of data anymore. So we created this model that said we need to be able to deliver data through the network and have someone else pay for it other than the end consumer… That’s why we purchased AOL. That’s why we looked at Yahoo, because at the end of the day in order to make that model work, you need to have the viewership in order for the advertisers to sell to.” Fran Shammo – EVP & Chief Financial Officer

 

Free iPhone 7 promo may or may not continue past the end of the month

The question, though is, when those promos end, and of course, the market right now is saying, they’re going to end at the end of the month, does that continue? And quite honestly, I don’t know the answer to that yet. Fran Shammo – EVP & Chief Financial Officer

 

Because the iPhone 7 promo deal doesn’t apply to the secondary market, it has minimal to no impact on VZ

“the trading is only on the iPhone 6 and the 6 Plus. And those phones really have not been available in the secondary market. So, as we collect these phones and we go to the secondary market, that value of that phone, I will tell you on average is somewhere between $320 to $400… now you’re down to a $250 number… So for us at Verizon, I will tell you, this will have no impact in our margins for – especially for the third quarter. I can’t really talk to the fourth quarter, because I’m not quite sure yet what volume is and what other promotional activity will come out. But here sitting at the third quarter, this will really have no impact on our profitability for the quarter. So from this perspective, this is just another promotion. It’s to stimulate the marketplace, but from a mathematical perspective, it really has no impact to us.” Fran Shammo – EVP & Chief Financial Officer

 

No company has more than a single-digit share of the IoT market

If you look at the industry itself, I mean, from a market share standpoint, there really no one owns the market at this point, it’s all single-digit market shares… It also sets you up down the road when you have smart city, autonomous cars, it sets us in a premier environment to be able to deliver those solutions. Once they’re solidified, which I think will take a couple more years before we get there. So it puts us in a really great position in that segment of the IoT marketplace. Fran Shammo – EVP & Chief Financial Officer

 

VZ’s brand rests upon having the best network

I’m going to speed into the 5G world in 2017, and it’ll be just similar to LTE as far as I’m concerned, where we get a leap on all of our competitors. So we’re moving forward. I mean, at least, two of our competitors are still trying to deal with building out their LTE network. I mean, that’s like five years ago already… They’re still dealing in the LTE world. I’m dealing in the IoT world, smart city world, telematics. So I’m moving ahead and they’re still talking about how great their network is in LTE So, look, every drive test proves it, Verizon Wireless has the best network. We’ve built our brand on that. We’re not going to lose that and we’ll continue to move forward. Fran Shammo – EVP & Chief Financial Officer