Company Notes Digest 5.17.13

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A digest of some of the top insights that I’ve gathered from this week’s earnings calls. Full notes can be found here.

Macro

Nordstrom saw “normalization” in April:

“there was a certainly a softness throughout the quarter. April was better, more return to normal.” (Nordstrom)

Government spending may be improving with the rest of the economy:

“The state and local business…two years later, you’re starting to see upturn.” (Cisco)

Plenty of companies still talking about weather, JACK wasn’t the only one:

“we don’t typically speak about weather, but we certainly saw the difference based on the footprint this time around.” (Jack in the Box)

Coca Cola’s European bottling arm is the second beverage company that I’ve heard with positive things to say about Nigeria (the 7th largest country in the world by population):

“We are encouraged by the strong growth across all categories in Nigeria during the quarter. We continue to execute on our strategy in the country, which focuses on investing behind our brands” (Coca Cola Hellenic Bottling)

Retailers

IT was a major focus for everyone in retail. Omnichannel is the buzzword, also refreshing POS systems and experimenting with RFID:

“Our major IT initiative in fiscal 2014 is the implementation of a new point of sales system at all of our Pier 1 import stores…Over time, we will integrate our POS system with Pier1.com offering seamless transactions for our customers, from cash and carry, to order online, to pick-up in store to home delivery. The POS system and the website will work together, seamlessly.” (Pier 1)

“the store fulfillment has been a huge success and has allowed us to greatly increase the amount of online orders that we’re able to fulfill and satisfy customers.” (Macy’s)

“we made significant additional technology investments…We are on track to replace our e-commerce platform in the second quarter…We will also expand our RFID pilot…We will pilot mobile POS in the third quarter.” (Kohl’s)

But Kohl’s, like a wet blanket, notes that e-commerce probably isn’t exactly additive:

“[e-commerce sales] are coming out of everybody’s [brick and mortar] business. We’re not alone in that. Well, I think we’re just a little more honest about it than other people. If you look at our sales per square foot with e-com, it’s basically been flat for the last 5 years.” (Kohl’s)

JC Penney declared itself not dead yet:

“The good news is our fundamental business processes are still strong and our senior leadership is intact, with especially strong teams in merchandising, planning and allocation and our store leadership.” (JC Penney)

Traffic was down, but the real problem was that the selection didn’t resonate with JCP’s customers:

“the core customer the traffic was down 17%. The business was down more than that. So we had traffic in the stores. She just didn’t buy as much because she didn’t find as much of what she wanted.” (JC Penney)

The good news is that JCP’s customers aren’t really loyal to anyone, so they may be back:

“I’ve read a lot of studies, I’ve read a lot of opinions about where people went. Clearly the customer in our segment isn’t necessarily loyal to one retailer, and I think they probably doubled down on one that they had not spent as much time when we were’nt the first choice” (JC Penney)

Lookout on LULU, lots of people can make activewear:

“[activewear] has been successful for us, and Zella has been a huge catalyst for that, given that we own that brand and manufacture it and design it ourselves, that’s something we’re really proud of. And we’ve not really come close to the full potential of that brand in the Women’s area.” (Nordstrom)

Retailers always have to stay on top of changing trends:

“you’ve got to keep moving forward and make sure that you’re really grounded in what the customers are — what’s motivating the customer to buy and lifestyles evolve and change” (Nordstrom)

“by the way, sometimes the customers change. If we look at the number of stores that are Latino-influenced, it’s growing significantly since we started 4 years ago” (Macy’s)

Some general thoughts on managing a retail business:

“Our merchants are constantly forecasting and re-forecasting the business, and making sure we’re taking the markdowns we need to keep the right age of inventory. Because the key to running a retailer is keeping the flow of fresh receipts.” (Macy’s)

“we have found that even small investments in lighting can have a significant impact from the productivity of the store.” (Pier 1)

“it’s a symphony, not a solo” (JC Penney)

Other Consumer

Some surprisingly insightful comments from World Wrestling:

Everyone is battling for the consumer’s time and resources:

“in the battle for time, there’s millions of competitors. So when you ask me about MMA. I’m not sure, but there’s a million things that I’m fighting for, it’s video game, it’s cat videos, it’s hundred different shows that people spending their time watching.” (World Wrestling Entertainment)

Even traditional media is about aggregating eyeballs:

“You’re aggregating eyeballs, that’s all we’re doing maybe some of the eyeballs are more valuable than others. But at the end of the day you are aggregating eyeballs and you are monetizing it through advertising” (World Wrestling Entertainment)

Stars are made, not born:

“you can just take…20 athletic people of X descent, put them in that country and people are going to say it’s WWE. You got to be on TV. You got to be made a star and people then want to see the stars.” (World Wrestling Entertainment)

The big movie releases create the year to year base for box office receipts, it’s the one or two surprises that move the needle for the industry:

“a lot times what makes or breaks the box office in a given year is not those six or eight key tiles, it’s those titles that fill in around that.” (Regal Entertainment)

At least movie theaters understand what they’re up against:

“I think the industry as a whole recognizes that we need to continue to make sure we maintain the gap between the experience you get in a theater and the experience you get on your couch.” (Regal Entertainment)

Technology

Cisco really seemed to beat up their competitors:

Analyst comment: “as we went through the last three weeks and listened to every one of your competitors, things didn’t seem as rosy as you see them…clearly you are taking business away and you’re executing at higher levels…” (Cisco)

“We do see IT CapEx spending continuing to be challenged, but we believe we are gaining more than our fair share” (Cisco)

Dell’s thoughts on the PC Market. Maybe some catalysts?

“look I think it’s a good question and it’s one we spent a lot of time debating and talking about – there are multiple dynamics playing out. I think you continue to see a Win 7 on the commercial side of the business. It’s driving a refresh cycle. But at the same time and I would say even recently we’re seeing improved demand on the corporate and SMB markets. But if you look at consumer, you look at government; you look at federal those have been rather challenged. And it’s some of the things we’ve been talking about over the last few quarters where you have competing devices in some cases. Windows 8 has been from our standpoint, not necessarily the catalyst to drive accelerated growth that we had hoped it would be. We are encouraged by what’s going to play out with new chip sets and some of the work that is going on within the windows ecosystem to hopefully over the next few months create some catalysts. But you look at the recent external data from any of the third party sources, we would expect to continue to see over the next few quarters year-over-year declines in PC demand” (Dell)

Cyclicals

Jack in the Box lowered its expectations for food inflation. (Different from what Pilgrim’s Pride said last week on Chicken):

“we now expect commodity costs for the full year to increase by approximately 2% to 2.5% compared with our prior guidance of 2% to 3%, primarily due to lower expected inflation for beef and chicken….for chicken, we have contracted our price through the end of calendar year 2013, and are now expecting poultry prices to be 2% higher versus our prior forecast of 6% inflation.” (Jack in the Box)

The shipping industry is still awash with overcapacity, and capacity is still growing!

“the shipping lines’ inability to turn off supply has resulted in for long period of excess capacity, that’s required them to go out and try and scrap vessels, idle vessels and do whatever they could do to try and positively impact freight rates as they continue to deal with this.” (TAL Container Leasing)

But the manufacturers in China that make the containers can turn off their factories with the flip of a switch. Partially because labor is so flexible and the facilities there are pretty sophisticated today:

“If you consider labor in China to be variable, which it generally is…these are high-tech production facilities. So there is not really any need to keep the factory running in order to cover anything. So I think [the container manufacturers]…recognized particularly since 2009 that by closing…[they] will do better because we’ll be able to maintain higher price levels that will provide them with better returns to the cycle.” (TAL Container Leasing)