Ralph Lauren 4Q16 Earnings Call Notes

Ralph Lauren (RL) Q4 2016 Results

We have not focused enough on the core

“In short, we have not focused enough on nor evolved enough the core of what made us great in product, marketing and the shopping experience. In addition, our underlying business engines are not running at full speed. We also have an inefficient cost structure and an organization that’s not nimble enough in the marketplace.”

Dodgy response to whether or not Amazon is a distribution partner

“In parallel with that, we are expanding our direct-to-consumer channels, and out of those channels, the e-commerce is by far the most important to get back to strength and high performance. And overall when it comes to the channels in the U.S., we are working to make sure that we secure the high-quality distribution, right balance in the distribution between the different channels, and we’ll come back and give you more details in June.”

Pricing power is about having the best products

“Thanks, David. So when it comes to pricing, I believe that we’re in a world where the consumer decides today. So charging (32:58) a premium pricing comes back to having the best products, and that’s what our strategy is focused on, to go back to the core of who we are and where we come from and evolve that and make it current for today and have better authentic style, better quality and be more relevant, and that connects to the pricing. And when it comes to the actual product strategy, I look forward to sharing that more in detail when we see each other in June.”

Teased analyst day

“Yes. John, again, sorry to disappoint you. The in-depth sharing of this we’ll have to wait until June, but higher level I’m very excited when it comes to unlocking supply chain capabilities. And getting to know the business the way I’ve done over the last months and getting to know how our customers work, I see big opportunities in implementing a lot of the same best practice. And also excited by seeing that our wholesale partners are very excited and willing to dive into improving the supply chain together with us.”

Miscellaneous Earnings Call Notes 2.6.16

Amazon.com (AMZN) Management on Q4 2015 Results

Brian Olsavsky

Distribution partners have not been able to handle all the capacity that we need at peak

“what we’ve found is in order to serve – properly serve our customers at peak. We’ve needed to add more of our own logistics to supplement our existing partners. That’s not meant to replace them. And those carriers are just not – no longer able to handle all of our capacity that we need at peak. They have been and continue to be great partners. And we look forward to working with them in the future. It’s just we’ve had to add some resources on our own. You mentioned trucks. The Amazon trucks, we did invest in those – this past year. We use those primarily for movement between our warehouses and our source centers.”


Microsoft (MSFT) Satya Nadella on Q2 2016 Results

Security is now a major driver of cloud adoption

“Security is now a major driver of the cloud adoption. As threats become more frequent and sophisticated, Azure’s unique technology like machine learning empower customers to adapt to these new realities.”

AI will be at the heart of every business in the future helping to understand the past and predict the future

“At the heart of every business in the future will be systems of intelligence, powerful AI that helps people understand the past and predict the future. Cortana Analytics is the building block for these systems of intelligence. ”


Flextronics International (FLEX) Michael M. McNamara on Q3 2016 Results

See weaker industrial demand pull through

“As far as the macro, what we see is kind of broadly across the industrial set of businesses particularly – probably more so in the United States, but also in Europe. We see it’s just been a challenge. We’ve started seeing the macro push probably in the September quarter. We talked a little bit about it – maybe even at the end of the June quarter. We continue to see it going into the December quarter. And our forecast for March reflects kind of a weaker industrial demand pull-through.”


United Rentals’ (URI) CEO Michael Kneeland on Q4 2015 Results

Market activity is solid and in many cases trending upward

“Beyond the current market uncertainty, we agree with the industry forecasters that there are multiple years of growth ahead for rental in North America. The latest projection from Global Insight is about 6% annual growth in construction and industrial rentals through at least 2017. And we’re seeing levels of customer activity to support this view. That point can’t be lost when revenue flattens out for reasons I mentioned earlier. So it’s important to note that our actual — market activity is solid and in many cases trending upward. And our customers are on a whole optimistic.”


Honeywell International (HON) David M. Cote on Q4 2015 Results

Not seeing negative surprises in January

“Right now, I’d have to say it feels just fine. I know last year we got surprised the other way. This year we’re not getting surprised. But it’s three weeks, so who can tell how the whole thing’s going to go? But it’s – I would say we’re not having to deal with the same kind of negative surprise we had last year.”

Big thing in aerospace for us is that flight hours continue to increase

“if you take a look at what’s happening in the aerospace industry, the biggest thing for us is that flight hours increase. And flight hours last year were up 4% or 5%. They’re likely to be up 4% to 6% again this year. And the big thing is that planes fly, and as long as they fly, and as long as there’s a need for the kind of upgrades that we keep talking about, and as long as the technology keeps progressing towards this kind of connectivity and the need for airlines and passengers to just be connected better than they have in the past, those are all good phenomena for us.”

No doubt it’s a slow growth environment

“there’s no doubt, it’s a slow growth environment. That being said, whether it’s slow growth or high growth, we believe your best bet is Honeywell ”


Colgate-Palmolive’s (CL) CEO Ian Cook on Q4 2015 Results

It’s difficult to find anybody with anything optimistic to say

“it is difficult to find anybody with anything optimistic to say about much of anything these days. Without being overly general, I would say that the underlying consumer sentiment and behavior in China and India is okay. I would say that the underlying consumer sentiment in Mexico is okay. I would say that the underlying consumer sentiment in Russia is not great. And that would be English understatement. And I would say in Brazil, the underlying sentiment in Brazil is not great.”


Mattel (MAT) Christopher A. Sinclair on Q4 2015 Results

Richard Dickson – President and Chief Operating Officer, Mattel, Inc.

Barbie still relevant

“never has Barbie been more diverse on so many dimensions and more celebrated. TIME Magazine’s cover story and associated buzz last week are great examples that underscore not only how powerfully relevant the Barbie brand is, but reinforce that we’re on the right track.”


Ralph Lauren (RL) Stefan Larsson on Q3 2016 Results

Our performance over the last couple of years has been very disappointing

“And when I looked at our performance over the last couple of years, including the recent quarters, it’s very disappointing. So I see significant untapped value in both the idea behind the brand and as well as how we drive the business. And therefore, in the way I outlined the way we approach, building the growth plan for the future, there will be a customer facing component which is about evolving the brand, evolving our product, marketing, shopping experience, and then radically improve some of our business engines. ”

The consumer is now in charge in retail

“When it comes to the disruption, I’m a firm believer that we’re just seeing the beginning. So I believe that the biggest disruption is that the customer is now in charge. So the customer has better visibility and better choices than ever before. So any company that’s in the business of providing generic products or don’t have any real value add beyond the lower and lower price or who, more importantly, is not close enough to the customer will be in trouble. So that’s why we are building on the strength that’s made us great, and we are adding an even closer focus to what’s going on in the market and what’s going on with the customer.”


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.”

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)

 

 

Ralph Lauren FY 4Q15 Earnings Call Notes

Continue to experience impact of strong dollar/lower tourist traffic

“While we continue to experience the negative impact of a strengthening U.S. dollar and lower tourist traffic, our product across core and emerging categories was well received and we achieved strong sell-through in most regions.”

Raising prices, negotiating lower costs in response to currency impacts

“Moving to foreign exchange, we have taken decisive actions to mitigate the negative currency impacts. First we are raising prices in certain markets that have been impacted by currency devaluation, including Japan, Canada, Australia and Europe. These pricing actions are generally in the mid-to-high single-digit range and will be effective in the back half of the fiscal year.

Second, our supply chain organization has negotiated lower cost across our manufacturing base as a result of lower raw material and oil prices as well as the strength of the U.S. dollar. These lower costs will also become effective in the back half of the fiscal year. Finally we will reduce operating cost by restructuring the organization.”

Better margin outlook for FY 17, but negative side is FX hedges rolling off

“On the second question, in terms of what does it mean for fiscal 2017, I think that there’s going to be a couple of different things happening in fiscal 2017 and it’s premature for us to give guidance that far out. But obviously we would expect to see a full year impact of the pricing action that we’re taking, which would be a positive. We would expect to see a full year impact of the cost reductions that we’re taking, which would be a positive, and we would expect to see a ramp-up of the restructuring savings, which would be a positive. And so all of those would lead to a better operating margin outlook in 2017.

On the negative side, we have hedged our FX exposure. And so as those hedges roll off, we will have a year-on-year hedge FX hurt continuing into fiscal 2017 from the portion of the business that was hedged in fiscal 2016. ”

Shared service group

“So the supply chain and the back office will continue to be operated as they are today by our shared service group. So we have a shared service group today that handles global manufacturing and supply chain, that handles finance, that handles HR, that handles real estate, that handles operational capabilities, and that will continue because we believe that those groups are better leveraged across the entire enterprise and we don’t intend to disrupt that.”

Polo Ralph Lauren FY 3Q15 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Global currency fluctuations were headwinds

“The 3% constant currency revenue we achieved in the quarter was below our expectation, largely due to external forces. As the U.S. dollar continue to strengthen against several major currencies and geopolitical tensions remained elevated. There was a sustained negative impact on global tourism, and in certain instances, local customer demand.”

US environment was more competitive

“The U.S. market size was more competitive with greater promotional activity across all distribution channels.”

Best trends in Northern Europe

“Generally speaking, we continued to see the best trends in Northern Europe recovery in the southern part of the continent and more steady expansion in central Europe.”

Moving from a regional to an integrated structure

“Today, we are taking the next step to simplify our operating model. Over the next several months, we will commence plans to move from a decentralized channel and regional structure to a fully integrated global brand-based organization structure.”

We saw a dip in consumer purchase behavior after thanksgiving and so people got extra promotional

“as we enter the holiday season, we got off to a pretty strong start over the Thanksgiving period, the week before Thanksgiving through Cyber Monday, and then we saw a little bit of a drop in sort of the consumer purchase behavior and that period between the Thanksgiving – the end of the Thanksgiving shopping period and the first couple of weeks of December. And as a result of that what we saw was that a lot of the competitors ratcheted up the promotional intensity in terms of trying to deal with the inventory that they had on the floor and so reacted to that not to ensure that we stayed competitive during the period and I think that’s what we were alluding to in our commentary. And again, that was really a U.S. phenomenon, not so much international.”

Ralph Lauren 1Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“The operational expertise of our global supply chain organization is one of the company’s most significant competitive advantages. Over the years, our sourcing and logistics team have navigated through not only the growing scope of our global operations across regions, channels and product categories, but also dynamic changes in input costs, all while meeting the company’s high standards of innovation and quality.”

“The extraordinary creativity that is a hallmark and point of pride for our company is matched only by tremendous merchandising discipline that has enabled us to maximize our market share potential.”

“Since we’ve assumed direct control of most of our strategically important merchandise categories and regions, we’ve learned that there’s a great commonality to our worldwide bestsellers. This insight is a foundational principle that grounds our global merchandising organization.

Centralized in New York in order to work in close proximity to Ralph and his design teams, we have built teams made of merchants representing our key regions around the world to work side-by-side in a highly collaborative manner, to conduct global line reviews and plan global buys. These teams work very closely with their respective brand teams across sales, planning and marketing in order to inform their thought process with real-time feedback on sales trend, product performance and marketplace dynamics. We are confident that over time, greater consistency of the product story will drive both product development and production efficiencies that will allow us to leverage our global growing scale and provide opportunity for continued gross margin expansion.”

“We believe a more centralized approach will ensure greater singularity of message, and therefore, global consistency of advertising, marketing and in-store presentations. Creating an even more direct link between Ralph’s vision and the consumer experience across all distribution channels becomes increasingly important as tourists traveling all over the world become a larger subset of our customer base.”

“We’ve learned a lot about the Chinese business. We’ve gotten a lot of feedback from the customers both in China, in Southeast Asia, in Europe and the United States. The good news is they are gravitating towards the same looks and categories and items. They clearly want luxury”