Nike FY 2Q16 Earnings Call Notes

Mark Parker

China had an incredible quarter

“in China specifically, as you recall, we spent time resetting the marketplace and we are now seeing the results of that reset really take place. They had an incredible quarter. I was actually just recently there. We are seeing just great growth across the Sportswear, the Running, the Basketball business, the dotcom business is doing exceptionally well.”

Still have excess inventory from West Coast port shutdown

“Overall, the excess inventory in North America is really current fresh product and the largest portion of that really stems from the residual impact of the West Coast port congestion earlier this year. And it really consists of basically part of that was delayed. We proactively delayed some products in favor of priority products that we felt that would actually work well in the marketplace.’

Excess inventory should be liquidated at factory stores

“we expect that more of our inventory would be liquidated to our factory stores. Like we have said, we have got a robust network and we continue to feel very positive about the demand in the marketplace for the brand. And so for those consumers looking for a value occasion, we think we are providing great value at this – particularly with the recency of some of these products.”

Movado 3Q15 Earnings Call Notes

Movado’s (MOV) CEO Efraim Grinberg on Q3 2016 Results

Global market continue to present challenges

“As a recurring theme for this year, during the third quarter, global market has continued to present challenges, giving us who many referred to as a VUCA environment that is one filled with volatility, uncertainty, complexity and ambiguity.”

Challenging environment for retail

“as everybody has witnessed over the last quarter, the Retail environment went through a very challenging time in the third quarter. One of the important things is there is always Christmas in the fourth quarter. So, I think that’s going to be an important catalyst to how the retailers and the year. But I think given the continued volatility in environment, you are going to see a continued focus on inventory levels, not only in watches, across retailers overall.”

Trying to focus on ourselves

“Like we said before, we’re very confident in our innovation pipeline. Our product offering for this holiday season is really very strong, not just because we’re saying it but our Retail partners are also commenting on the strengths of our product offering across our portfolio.”

It may be less promotional this year

“it’s been quite promotional over the last several holiday seasons. I think there is possibilities you’ll see is scaling back of that in the future. I don’t think you’ll see that this holiday season.”

Perry Ellis FY 3Q16 Earnings Call Notes

Perry Ellis International’s (PERY) CEO George Feldenkreis on Q3 2016 Results

Tough period for retail

“Last quarter was a very challenging period for the apparel and retail segments. Business are facing tremendous headwinds that resulted in lower sales for the early fall, September, October months for many of our retail partners.”

Cost benefits from stronger dollar should flow through in coming quarters

“because of the dollar strength which is not good for business in our international markets. We have been able to get a little bit of cost reductions in Asian countries and the decline of cotton prices and synthetics et cetera. That represent maybe a 2% reduction in general, not applicable to every country, not applicable to every commodity, but this is something that we are going to hopefully we will be showing in the quarters ahead. As you know, we do buy merchandize really five, six months ahead and that’s when commit to a price level.”

There is a lot of investment going into Vietnam to be able to use the benefits of Duty free there with TPPA

“The TPPA agreement which is the Pacific Trade Agreement with 11 nations, which is the only major really nation at this point that is important is Vietnam. We will pass some time next year or the year after. So that will bring large infrastructure sourcing into Vietnam. We feel that we have very good position because we have had relationship that go back almost 20 years. But there is a large influx of investments from Chinese and Taiwanese and Korean companies going actually, going – very large projects, even from Chinese factories going vertical into Vietnam to be able to use the benefits of duty-free from Vietnam.”

Also more sourcing opportunities in Africa

“Another development is, there is some sourcing now – more sourcing going on in Africa. We have been in the short run, Kenya for a couple of years now and there is more movements into Kenya and Ethiopia. Going forward, there are very large investments by the Chinese government in Ethiopia and they are building a lot of infrastructure highways which are very important.”

Oscar Feldenkreis – Vice Chairman, President and Chief Operating Officer

It’s incredible the new fabrics that are being developed today

“And people adjust on the sourcing side, our people just came back from the major fabric shows in Shanghai and all the new fabrics that are being developed today, it’s incredible, it’s very, very exciting what the new opportunities are out there today.”

Urban Outfitters 3Q15 Earnings Call Notes

Urban Outfitters’ (URBN) CEO Richard Hayne on Q3 2016 Results

October was weakest comp and trend has worsened in first half of November

“As noted above, October was the weakest sales comp in the third quarter and this negative trend has worsened into the first half of November. As of quarter to date, this negative trend is consistent across each of our brands and most prevalent in source.”

Consumers lack enthusiasm for apparel and accessories because of a lack of newness

“In general, sales of apparel and accessories have been slower, while home intimates, shoes, and beauty have been more robust. I believe our customers current lack of enthusiasm for the apparel and accessories categories. This is primarily due to a lack of fashion newness. We currently have a number of new fashion bright spots in our apparel offering. But whether or not these trends become more mainstream is uncertain. Having been in this situation before, my experience tells me the best course of action is to keep inventories lean, continue to expand and know that new trends will emerge soon”

Getting into the restaurant business?

“This morning we announced an agreement to acquire substantially all of the Vetri Family group of restaurants which includes its award-winning Pizzeria Vetri. Most recently Food and Wine Magazine named Pizzeria Vetri the best pizza restaurant in America.”

Our analysis is that the lower traffic is because of the lack of newness in fashion

“We have seen lower traffic as I said in my prepared remarks that you could hear them. We’ve had lower traffic throughout the quarter and traffic got a little bit worse in October. I think that from our analysis the primary thing driving is a lack of newness in fashion. I think the current fashion look is getting a little long in the tooth and I wouldn’t be surprised that we start to see some signs of it changing a little bit more radically than it have let’s say over the last four or five years. ”

We don’t think the lack of traffic is a precursor of a recession environment

“what we have seen outside of the apparel and accessory areas and why I don’t believe that it is the lack of traffic is let’s a precursor of recession area environment as we seen real strength in a number of our categories.”

JC Penney 3Q15 Earnings Call Notes

J. C. Penney (JCP) Marvin R. Ellison on Q3 2015 Results

3Q very challenging macro

“The third quarter was clearly challenging from a macro perspective. But at JCPenney we focus on controlling what we control, and this focus is represented by our ability to grow sales by 6.4% in the face of unprecedented warm temperatures”

We were pleased with back to school performance

“we were very pleased with our sales performance over the all-important back-to-school selling period.”

Improving in the science of retailing

“we’re focused on improving and enhancing the science of retail at JCPenney. As I mentioned before, we are great at the art of retailing, areas of design, styles, store aesthetics, and merchandise presentation. And we’re not very good, but improving, in what I call the science of retailing, areas of data analytics, inventory replenishment, assortment and item planning, and process execution.”

We’re winning, taking back market share

“the exciting takeaway for me is that we’re winning versus the competition. We are reclaiming market share despite significant opportunities that remain to improve the way we use data and customer analytics.”

Reducing pension plan obligations by 1/3

“We recently announced a series of pension transactions that materially reduced the company’s pension obligation by between $1.250 billion to $1.750 billion. These proactive actions further the company’s objective of de-risking the plan and reducing pension volatility while improving our long-term risk profile.”

We already have 5m square feet of distribution center space thanks to our heritage as a catalog retailer

“At JCPenney, we have a rich heritage of being a catalog retailer. Therefore, most of our Omnichannel infrastructure is in place. As an example, we have three large .com distribution centers strategically located with approximately 5 million square feet of space.”

Transaction and traffic was up despite macro

“transaction and traffic was up, so we’re excited about that. What I can tell you is although we don’t give in-the-quarter sales guidance, where we have more moderate weather, we’re performing better. ”

Working hard to reduce labor activity in stores that is not going to serving customers

“we are working very hard to make sure that we are reducing the non-value-added activity that exists in our stores, the tasks that have nothing to do with serving customers or driving sales. As we reduce those tasks, we’ll have the ability to reallocate those activities to the sales floor to drive improved service and to make sure that we continue to take advantage of conversion opportunities.”

We really believe in radio

“digital impressions are up dramatically over prior years. But so are radio. We really believe in radio and radio impressions will be up dramatically as well. TV is up slightly and then, direct mail and preprints are down a little bit to help pay for the digital and radio impressions.”

It’s good to tie instinct with data

“we are going through the process of building a team and building a database so that we can have a more thoughtful approach to elasticity, to liquidation schedules, to promotional cadence and understanding the true value of promotions. A lot of things that we do are from pure instinct. The good news is we have a lot of instinctive knowledge here. But what I’ve learned in retail is instinct, that tie with data is very powerful. And we have instinct without data and we’re building data to leverage the instinct.”

Fossil 3Q15 Earnings Call Notes

Fossil Group (FOSL) Kosta N. Kartsotis on Q3 2015 Results

Tech enabled watches and lapping of Michael Kors success are driving declines in watch category

“The data we collect suggest that very recently, the watch category has declined with what we believe are two root causes. First, tech-enabled watches are clearly impacting traditional watches. Some of that may be temporary, but the data clearly support that. Second, the huge success that the Michael Kors brand had in driving interest of the category has not yet translated to other brands.””

This time reminds us of the last time we faced stagnant growth but things are different

“It reminds us of the last time we faced stagnant growth, which is in 2008. We regrouped and refocused our efforts on design and innovation and positioned Fossil Group for strong growth. While today’s source of disruption in the market is different than it was at that time, our sense of determination, focus, and drive for innovation hasn’t changed.”

Affected by general economic sluggishness in Asia

“Strong growth in India was offset by declines in most markets in the region, including Korea, Hong Kong, and China, where general economic sluggishness and changing travel patterns continue to impact our business.”

The fourth quarter could not be as strong as we had anticipated

“we’ve lowered our expectations to accommodate the fact that we think that the fourth quarter could not be as strong as we had anticipated going in. I mean we always operate with a relative limited visibility. So a lot remains to be seen, and most of the business is done in the second half of the quarter, and we don’t operate with backlog. But we’ve left a fairly wide range to accommodate lower sell-in and sell-through.”

It’s increasingly clear that wearables will be a large and growing category

“In terms of the confidence in the size of the category, it’s – I think the first is, we’re seeing the market develop, where it’s increasingly clear to us that wearable technology is and will be a large growing category.”

Wrist devices are definitely selling. And we have a fashion miss in that we don’t have technology

“It’s clear to us that the wrist devices are selling. They’re selling in terms of trackers and also in new entrants in smartwatches. You could say for our overall watch business that we have a fashion miss, which is we don’t have technology across our platform. ”

Our wrist devices with technology are selling extremely quickly

“our wrist devices with technology are selling extremely quickly. So, we think that one of the most important fashion trends right now in the industry is this huge interest on the consumer side of the convergence of fashion and technology.”

Millenials clearly overspend on tech. There seems to be a slowdown in consumer activity overall

“Millennials clearly overspend on technology, there is a – seems to be a slowdown in consumer activity overall, but one thing that’s clear is consumers are still spending on technology, we think that continues.”

There’s a new assortment of Kors watches coming next year with a new look

“you’re going to see a whole new assortment of Kors watches next year, even before the wearable technology comes in. We’re going to totally change the look. It’s more modern, simpler, et cetera. There’s a totally new look for it. It gives the consumers, the Kors fans, reason to buy another watch.”

Misfit acquisition is going to allow us to get better in smart watches

“the expertise we’re going to gain from Misfit is everything is going to get better, battery life is going to get better, chips are going to get better and less expensive. The objects are going to get smaller and we’ll be able to put next year or shortly thereafter, women’s smartwatches out there, our Android smartwatches at some point probably next year will be untethered, which means you don’t need your smartphone with you, but all of this is going to get better”

Google and Intel are still good partners, but this is about owning the cloud and app platform

“In terms of our technology partnerships, Intel and Google, who are both of our announced partnerships, they have been fantastic partners and will continue to be partners with us. The Misfit acquisition is really about owning the cloud on the app platform, given how integral it is now to product and brand and customer experience. So, we’ll own that part of the customer experience through the app and cloud, but we will continue to partner with the leading technology companies across the world to continue to build the right ecosystem of partners to compete in this space”

Smartwatches are male dominated. Females are playing in the activity tracker space.

“the smartwatch market in particular today is still male-dominated. Females are playing in the activity tracker space. So, it’s really not replacing for female fashion-conscious customers anyway. Smartwatches are not having a large overlap today”

The trajectory of our performance in Europe changed very quickly

“the biggest change in the way we’re thinking about the fourth quarter comes from Europe, where going into this last quarter, we had seen one quarter of less favorable performance following about seven or eight of very strong double-digit or so growth coming out of Europe, so the trajectory changed there fairly quickly, so we’ve adjusted our expectations.”

Kohls 3Q15 Earnings Call Notes

Kohl’s (KSS) Kevin Mansell on Q3 2015 Results

Texas was most challenging

“Geographically, which includes online originated orders, the Southeast was the strongest region and the South Central was the most challenging, particularly in Texas. All the regions were generally consistent with the company.”

Using data driven insights

“‘We’ve analyzed multiple years of Kohl’s data and along with qualitative research, we are now focused on using data-driven insights to make our value much more apparent to customers. We’ll focus intensely on the categories and items that create the greatest impact on value perception.”

Working to bring inventory down

“generally, we would always have the perspective, less inventory is better than more inventory. So we’re working hard to try to turn our inventory more quickly. And so going into the holiday with more inventory than last year, we’d like to be going in with the same or less inventory. Having said that, we were able to bring our inventories down, we started the quarter, I think, 9% over last year and we ended the quarter only 5% over last year. And we expect to be down again by the end of the fourth quarter. ”

This is going to be a very promotional holiday season and we are going to have to up our marketing spend

“in general, Dan, level of inventory by category, level of inventory in total, general sense of the macro environment that we operate in, all are factors in how we determine where we think we’ll come out from a merchandise margin perspective. And I don’t want to minimize at all, and I don’t think Wes would want to minimize at all that we expect the holiday season to be very promotional, very competitive. Wes mentioned to you that we’ve baked into our assumptions a really pretty significant increase in our marketing expenditures, probably the biggest one we’ve had in a long time, and part of the backdrop to that is that we have an expectation that if we’re going to win, we’re going to have to drive traffic and that’s going to depend on our ability to both utilize digital marketing and mass marketing like broadcast to do it.”

Profitability of online sales is improving dramatically

” the profitability of our online generated order business is improving dramatically. A couple of lines that have really shown nice improvement, merchandise margins…The most impressive thing honestly has been in our e-commerce fulfillment centers in combination with our stores. Our UPH is up I think year-to-date 13% or 14%. It’s the highest that we’ve ever hit units per hour.”

Brands are driving results including new brands like fitbit and gaiam

“But some of the biggest successes we’ve had, to be honest with you, is the recommitment to our current brands. And so brands like Nike, brands like Levi’s, brands like Carter’s in some cases new national brands like Fitbit or Gaiam. Those are driving those results.”

Customers love national brands

“the fact remains that customers love national brands and the quality and credibility that they have that is a real key factor in deciding where to shop. And so, I think we’ve landed on the right strategy and it’s working.”

We’re just looking at it as a big sales bucket now and customers are choosing how they pick up the product differently

“we’re no longer breaking out the businesses separately from a sales perspective just because it’s all gotten very confusing in terms of Ship from Store and Buy Online, Pick Up in Store counts as store sales; when you return it to the store it counts a reduction in store sales, and everybody does research online. So we’re just looking at it as a big sales bucket and they’re just choosing how they pick up the product differently.’

Ralph Lauren 2Q16 Earnings Call Notes

Ralph Lauren (RL) Q2 2016 Results

New CEO comes from H&M and Old Navy

“This is my first week at the company. I have a lot to learn. The first week started with a board meeting and then an analyst call. I’m excited by that. I will spend my next few months in the role getting to know our teams, our customers, and our investors. For those of you who don’t know me, I set the bar for performance really high. For 15 years, I was a part of the team that grew H&M from $3 billion to $17 billion. Most recently, I led Old Navy, where we drove three consecutive years of high performance and we added $1 billion in sales.”

In fashion today you have to stand for something

“I believe that independent of where you’re in the market today, in fashion apparel, you have to be special, you have to be unique, you have to be exciting, you have to stand for something, you have to be consistent, you have to focus on quality, you have to focus on the experience, and you have to deliver something great.”

It’s a mixed environment across the business. Europe strong. Cautious in the US

“if you look broadly across the business, it’s really a mixed environment. In Europe, our reorder rate is stronger than it’s ever been. And so we’re seeing real strength in the wholesale channel in Europe, and we’re chasing to catch up with the reorder rate there. In the U.S., I think we’re being cautious given the environment that we’re facing. We’re wanting to manage the markdown allowances in a prudent manner that, as I mentioned on the previous question, positions us well as we exit the fall season and transition into the spring season.”

Build a brand by telling a story

“there are things happening out there, bigger changes in the environment, than ever before over the last 50 years in fashion apparel. And one change that I see is that the customer wants something special, and it has to be unique and there has to be a story. And you hear a lot of brands speaking about story telling. And then you can look back at what Ralph and the team has done. It’s been years before anybody else in telling real stories, inviting customers into movie, sharing a dream of a better life.”

Be authentic but be current

“When I look at what Ralph and the team have done to build the company to where it stands right now is based on an authentic idea. And so it’s about being authentic and it’s being – it’s about being current at the same time.”

Under Armour 3Q15 Earnings Call Notes

Getting ready to celebrate 10 years as a public co

“In three weeks, Under Armour will be celebrating our 10 year anniversary as a public company. Back in 2005, we were a $281 million company. Compression apparel made up two-thirds of our business. The phrase ‘connected fitness’ had not yet been coined. The day when we would feature a ballerina in a commercial seemed unlikely. And Jordan Spieth had only just begun his journey to greatness by talking golf lessons at Brook Hollow Golf Club in Dallas at the tender age of 12 from Pro Cameron McCormick.”

It takes a long time to get making shoes right

“one thing I want to emphasize to people is that it is 10 years in making shoes for us, but it absolutely takes time. The first category we got into was American football cleats and that was 2006 and it was a big breakthrough and we had high teens, low 20s market share, and since that time we are now pushing close to a 40% market share in football cleats with our sight set on being number one. And I say that only because of the category we’ve been in the longest, and if we’re 10 years in football cleats and five years in running shoes, imagine what we’re going to look like in running shoes in another five years there.”

It’s beyond the aesthetic

“And so it was about the aesthetic of the shoe but it’s so many factors more than just do you make a good speed cleat as to, are you in basketball, do you have an asset like a Stephen Curry that gives the credibility to the one who wears the shoe.”

It’s also about being able to get to the A team in the best factories

“And then beyond that, it’s when we go to being in the biggest factories, it’s not only being in the biggest or the best factories but it’s not having the B, C or D teams in the factories, but getting to a point where you have the A teams in the factories. We’re not going to get to that point where I mentioned 30 million pairs of shoes versus 0.5 billion to our competition, until we have the ability to truly level-load and give them the things that they need”

I don’t think our industry has been incredibly innovative

“I don’t think our industry has been incredibly innovative at all. When you look and you compare the fact that 20 years ago the technology that can fit on my fingernails today or in my iPhone or Samsung device, it took a mainframe the size of a Greyhound bus just 20 years ago and today it’s absolutely evolved. In footwear, we make shoes, we make apparel the exact same way we did 80 years ago.”

Our team isn’t preparing to battle current competitors its getting ready to fight where they’re going in the future

“what our team is preparing for isn’t what’s the next shoe coming from one of our current competitors, what we’re thinking about is what are we going to do if Apple or Samsung decided to make a shoe, how are we going to answer that. So that’s the type of I think leapfrog mentality and that moon-shot thinking that we are challenging our team with, let’s not fight with where people are today, let’s think about where they’re going in the future and what we can do to be great.”

Nike FY 1Q16 Earnings Call Notes


” Before I move into a discussion on our business, I want to take a moment to introduce our new Chief Financial Officer Andy Campion. As you know, Don Blair retired from the CFO role as of July 31. ”

14% currency neutral revenue growth. 23% EPS growth

“NIKE Inc. revenues grew 5% to $8.4 billion, despite significant FX headwinds. On a currency neutral basis, NIKE Inc. revenues grew 14%. Gross margin expanded 90 basis points to 47.5% and earnings per share increased 23% to $1.34.”

Ecommerce revenue up 46%

“revenue for e-commerce business. It’s up an incredible 46% on a constant currency basis, with robust growth across all of our geographies”

Relentless focus on innovation

” Our obsession with speed has driven us for years, so we never settle, always looking to shave off that extra second. This relentless focus on innovation can be seen in the momentum of our Zoom Air technology”

Mindful of economic volatility in China, but focused on what we can control

“the brand in China is extremely strong. And that’s a piece that we have known for a while. As we went through the reset strategy, we wanted to be really focused on how to make sure that we could drive the Business. So, we’re very mindful of the macroeconomic volatility in the marketplace. But we continue to really focus on the things that we can control which is how we continue to bring excitement to the marketplace and also continue to align the marketplace around our category offense and we’re seeing success from that perspective.”

Inventory still elevated thanks to port issue

“demand for our products continues to be very strong in the marketplace. What we’re working through is the impact of the west coast port congestion from earlier this year. And what we have done is we have seen the actual flow of product from the port normalize. At the same time, we’re working to efficiently clear the excess inventory to keep the in-line channel healthy.”

Europe is an example of complete offense working

“I will just quickly add, we’re seeing incredible brand strength, too, across the major cities across Europe. And I think that is helping as well. The product that we’ve been introducing to the market has resonated — sell-throughs are strong. Western Europe is a great example of a complete offense, not just the category offense working, but the complete offense. So, we really feel good about executing across the categories up and down the price point spectrum and across the major channels as well. e-commerce”

The Jordan brand can transcend basketball

“I want to add, Jordan is a tremendous brand globally. It’s not just a subset of NIKE basketball. It’s a stand-alone brand with tremendous potential to resonate beyond basketball as a category. So, it’s largely been basketball-based and that will always be the core of the Jordan brand. With that though, we see tremendous opportunity to expand that brand, not just here in North America, but around the world.”

The Olympics are great for the world, but especially for Nike

“Clearly, the Olympics are a great sport moment for the world, but certainly for NIKE. These global events at this scale, the Olympics and the World Cup really stand above and beyond all sports events. And for us, there’s an opportunity to really bring our best product, the best innovation, our best storytelling out, serve the athletes at the highest level.”