JS Earnings Call & Investor Presentation Notes 9.22.2015 – AZO, JPM, GIS

Autozone (AZO) William Rhodes said the company continues to focus on the “do-it-yourself” auto retail segment while also growing it’s commercial garage business

DIY remains our number one priority. Our DIY business continues to grow, remains the largest portion of our sales, and continues to generate tremendous returns.  We also see significant opportunities for new store growth and improved productivity in our existing stores. As our commercial business continues to grow and is intertwined with our retail business, we’ve continued to identify opportunities to optimize our inventory placement and distribution strategy in order to respond to the ever increasing challenge of parts proliferation in the industry.”

Despite robust sales and profitability growth over the last decade, he said the company can still improve and often missing out on sales opportunities due to inventory being out of stock

To this day, it surprises me how often we’ve to say sorry, we don’t have that available. Even with our new part additions too many customers leave our stores without their needs being met. In this spirit to help the customer we continue to make significant systems enhancements and to capture data about our customer shopping patterns across all of our platforms.”

And the company continues to benefit from the tailwind of increased mileage by drivers

As new vehicle sales are reaching all-time highs and gas prices on average are down year-over-year, vehicle miles driven continue to increase.  This trend is encouraging.  We continue to believe that lower gas prices have a real impact on our customers’ ability to maintain their vehicles, and cost reductions help all Americans, we hope to continue to benefit from this increase in disposable income.”

And the company’s management team restated their “return on capital” mindset as opposed to “grow sales at all costs” mindset

We should also highlight another strong performance in return on invested capital, as we were able to finish fiscal 2015 at 31.2%. We are very pleased with this metric and is one of the best in all of hardline retail.  Our primary focus has been and continues to be that we ensured every incremental dollar of capital that we deployed in this business provides an acceptable return, well in excess of our cost of capital. It is important to reinforce that we will always maintain our diligence regarding capital stewardship as the capital we invest is our investor’s capital.”





JP Morgan (JPM) CEO Jamie Dimon is taking the long view on his economic outlook for China

“Our view of China is in 20 years it will be a large developed nation probably housing 20% to 25% of the global Fortune 2000 or something and that’s where we are keeping our eye on. We know that between here and then, they are going to have some serious bumps in the roads in a couple of ditches and maybe even a rough like we had in 2008 or 2009. And I think they are very bright, the reason for that though is, they have a lot of lot of issues they got to deal with and they are very open about these issues.”

JP Morgan (JPM) CEO Jamie Dimon said it doesn’t matter when the Fed raises interest rates

“It’s a lot of chatter about nothing. I don’t want to add to that chatter. Let the Fed decide when they want to raise rates and wherever I go I ask businesses, consumers, small business, large business, will it affect you if rates go 25 basis points? I haven’t found anyone who says, Oh my god. By the way, if someone says oh my god, I’m in trouble.”

He went on to say the bank’s returns have come down but they expect them to go up in the long run 

I mean, when you look at a business, if you add just one checking account and in the old days the NPV of that was 25% or so, the IRR is 25% and you do it today and the IRR is 12% or 8%. Would you not open that account? Of course, we open the account because that will change over time and as spreads go up. So we’re looking at – we’re keeping our eye on the long haul here and not the short one.”

JP Morgan (JPM) CEO Jamie Dimon said the bank has no acquisition plans 

We are not the acquisition business right now unless it was kind of a small fit in something. And obviously we can’t do a bank here and I don’t think we are going to try a bank overseas right now. There is no reason for JPMorgan in getting a fight with regulators around the world what we’re trying to do and distract us from our mission at hand. I believe we’ll grow organically for a long time.  We are legally not permitted to buy banks in the United States.”

And he explained to what degree the bank will become more profitable in a higher interest rate environment

So we make a disclosure in our 10-K that if rates go up 100 basis points, we will make little over $2 billion more. More of that’s in the short and long end, but obviously how they go up really matters and how fast they grow up really matters, but in general rates going up, all things being equal will do better. “   





General Mills (GIS) CFO Donal Mulligan said the company has implemented many cost savings initiatives in hopes of reducing expenses

“In addition we are making good progress on our incremental cost savings initiatives, including Project Catalyst, Project Century, Project Compass and the changes to our administrative policies and practices. Taken together these initiatives remain on track to deliver between $285 million and $310 million in annual savings this fiscal year and more than $400 million in fiscal ‘17.”

General Mills (GIS) CFO Donal Mulligan stated that the company is using the Proctor & Gamble focus strategy of prioritizing its most profitable and popular brands

We are prioritizing what we call our Power 450 SKUs. These are our 450 best turning national items. In fact they turn at a rate that is nearly four times faster than the other items in our portfolio. These products represent three-quarters of our U.S. Retail volume, but less than 20% of our SKUs. More importantly we have on average less than 350 of these 450 items on the shelf. That’s almost a 25% distribution gap and a significant growth opportunity for our largest and most profitable brands.”

General Mills (GIS) Senior VP Shawn O’Grady said E-commerce is one of the fastest growing sales channels for the company’s products

On the e-commerce front, in the U.S. food sales that are going through online are between 1% and 2%. Now that’s changing pretty quickly, meaning moving from 1% to 2%. If you said what does it look like out four or five years ahead, all the projections I’ve seen are in the 5% to 6% range. So it’s going to be a high growth area. Obviously Amazon is leading some of the thought there, Wal-Mart.com is investing a great deal to make sure that they and utilizing their stores to make sure they are competitive. And that really is causing all the players in the marketplace to one of the actives in the e-commerce space.  We have only to look at other markets where we do business like the UK and France where, for some of our categories our online sales are approaching 10%. So it’s pretty clear that we’re going to move in that direction very rapidly in the U.S. and this is an area that we’re investing in at General Mills to develop our capability.”