Restoration Hardware 2Q17 Earnings Call Notes

Gary Friedman – Chairman & CEO

Teams are buttoning down the hatches in Florida

“as it relates to the Florida market. Our teams are buttoning down the hatches everybody is prepared for the storm and so we don’t have any more information than anybody else does at this point to know, to know the business impact in Florida.”

Membership model?

“Really because we’re the only specialty retailers ever done this, outside of Amazon and Costco and a few others we’re the only one made a move to membership that didn’t start out with membership this way and there is no benefit in us creating a roadmap for anybody else follow-up. So we’re not going to say a lot about membership other than the fact that we made a very brave move, a lot of people thought it wasn’t going to work. We’re in a position to tell you today that it is working and the renewal rates are positive. And the membership growth is positive. So other than that we don’t need to get anybody else a roadmap to simplify their business and gain the benefits that we are going to gain over the next couple of years because of that.”

Department stores have been dying forever

” Amazon is wrongly accused right, the department stores have been dying forever. It’s been a slow deferment from a lack of innovation and from very rigid business models that couldn’t adapt and innovate.”

You have to think of us as 7 years old

“you really have to think about this company like a relative new company we are really like 7 years old. I got here in 2001 and the company $20 million market cap is about ready to go bankrupt. We had to raise money three times to kick the company out of bankruptcy. And for the first — for the first five to seven years we were just on the edge of bankruptcy trying to make it. And we took the company from a $300 million, losing $40 million a year to $700 million making $40 million a year. And we’re taking the company private, and then, the economy collapsed in 2008 and 2009 and that set us back to $500 million company losing money again, right? And then, we came out of that really in 2010 as when we made it the significant pivot to the luxury and to the market and really emerged as the kind of a new company if you will.”

HP at Citi Conference Notes

Cathie Lesjak – CFO

Japanese competitors have benefited from weak yen but that is normalizing

“So, when it comes to Japanese competitors, one of the advantages that they have had and this isn’t an alternatives question, this is kind of the core business. The Japanese have had a fairly weak yen if you look at oh the last couple of years that has enabled them to be very price aggressive on a unit prices perspective. What we’re seeing is that that hasn’t stepped up significantly despite the fact that the yen has weakened a bit. And so it seems that it kind of normalizing.”

Buying market share can be bad economics

“As the CFO, I get quite nervous about having a goal of market share, because you could go out and buy a lot of bad units. And you could high-five on the market share. So, it’s important that it’s profitable and then it’s then consistent with our strategy.”

Price increases as commodity prices increase

“So, as we talked about earlier, using our balance sheet is one of the levers that we use. That is not related to price increases directly. The second lever that’s available to us to deal with commodity cost increases, is increasing prices. And we’ve done several price increases.”

Customers may expect price decreases now that the dollar has come down

“we keep talking about the fact that commodity costs are increasing, which they are and as well the fact that until recently the currency has been a bit of a challenge as well. So, when you sit and talk to the customer and you help them understand why you’re increasing prices, you have heightened their awareness as to what drives price increases. So, we expect that with the weakening dollar, we will have to drop prices much more rapidly than we had in the past. The customers are going to basically say, I stuck with you when you were raising prices, because I understood why you needed to do it. Now, there is an opportunity for you to lower prices, we expect to lower price. And so we do expect the prices will come down if the dollar stays kind of at the levels that we’re seeing or weakens further.”

Have the opportunity to disrupt manufacturing with 3D printing

“We have the opportunity to disrupt a $12 trillion manufacturing industry. We are playing today in plastics, 3D-printed plastics, which is the biggest market for 3D at this point in time. You are seeing huge companies, just look at this opportunity and realize that it’s going to make a difference to their manufacturing.”

Alphabet at Citi Conference Notes

Diane Greene – Senior Vice President-Google Inc.

Now “with every business becoming a data business”

“Cloud was originally a place for startups, a place for surplus capacity, sort of a cost savings thing. And now with every business becoming a data business, the Cloud, people are moving to the Cloud to be secure and they’re moving to the Cloud to gain competitive advantage.

Cloud was focused on startups and now its focused on enterprise

“Sure. I think when I came in we were mostly focused on startups. And obviously, the enterprise opportunities, at least, the slide deck, I mean the enterprise opportunities what we are going after. And we’ve made huge strides. So we had to really get all the table stakes functionality and things like identity and access controls and networking configurations and all the compliance and regulatory. So we got that done. That’s – it’s all there. Any enterprise customer can be fully deployed on us now. And then we have to build out the go-to-market, which – certainly it’s the direct sales force and an immense number of customer engineers, Google quality customer engineers, which our customers value. We set up professional services. We set up an office of the CTO, Customer Reliability Engineering advances, we set up a lot. And then it was partnering because we really – the most important thing is our ecosystem”

What is the Kubernetes?

“we want Kubernetes to run extremely well on-premise, to run extremely well in every Cloud. We are pretty certain that it’s going to run the best in our cloud.”

Some examples of how companies are implementing machine learning

“we are working with basically every customer on machine learning. And we can even bring them into our advance system labs and work with them. The public customers I can talk about are like Airbus that did use the vision to build a model to take the clouds out of their images. Something they’ve never been able to do in 20 years or Ocado one of the biggest online retailer in the UK, they’re based in the UK. And they were able to use our machine learning to detect customer sentiments and know how to handle calls in their call center or FamilyMart over in Japan used – it’s a huge chain of neighborhood grocers where they stock at three times a day and they can – they are using our analytics and machine learning to figure out how to stock things to predict what to do.”

We are investing heavily in cloud but we’re partnering with companies like SAP and Salesforce

“we are hiring incredibly aggressively. Alphabet is investing in Cloud. So it’s we are not sort of saying, oh, we’re done with our sales force and they are very Googley. We are building out a serious enterprise sales force. But I would argue that Cloud demands are different approach. It’s a very – if you think about what’s going on when a company moves to the Cloud, this is something they had in-house where they run it all and now they’re just building these assembling almost these applications and putting them in containers and we’re kind of doing everything else. That’s where it’s going. And so we need to partner with them.”

Built our own “TPU” for use in the cloud

” we have a lot of GPUs in Google Cloud, and we work very well with NVIDIA. And the TPU, so Google does an immense amount of machine learning internally as well as externally. And so for the big data machine learning, training and using the models, we saw an opportunity to build a custom chip that would give an order of magnitude performance advantage, which actually saves us a lot of money and also lets us do a better job on the machine learning because you could turn things around so quickly. And then it’s natural to put it in our cloud for our users. So the really exciting thing about Google Cloud is we now have a vehicle to take Google’s really ongoing technical innovations and share them with the world with every company and every geography of every size. That’s pretty exciting. And so it’s a natural thing to share the TPUs and we’ll also take advantage of all the innovations coming out of NVIDIA as well.”

Korn Ferry FY 1Q18 Earnings Call Notes

Gary Burnison

Definitely seen an uptick in industrial energy and manufacturing

“Now, look, if you go back a year ago, we have Brexit, right? So, when you go year-over-year, clearly there was a lot of malaise last summer. And quite frankly, even I was just there, they are actually still is in the UK, companies are still reluctant to invest there. But over the last several, I would not say it’s a burst, I mean, we have definitely seen an uptick in industrial around energy and manufacturing, but I wouldn’t say it makes any kind of outline trend in terms of the talent that we are bringing in, we are up big time in terms of consultant numbers and you know you could easily subscribe $1 million or $2 million per partner.”

If there isn’t legislative progress the conversations will be different

“There is still that feeling. You are coming off a period where many people took some time off, but I am still a believer in that. That if there is not let real legislative progress other than extending a debt limit by 3 months to give relief down to the people in Texas they needed, but if there is not real legislative progress the sense that I get is that it will be a different conversation.”

Altria at Barclays Conference Notes

William Gifford

Thoughts on FDA proposal to decrease nicotine

“At the same time the FDA raised the concept of the nicotine product standards. Of course product standard are not new, they’ve been on the regulatory tables since the FDA took jurisdiction over cigarettes, we’re prepared for it, we’re ready to engage in it, but a couple of things should be kept in mind. First, all the FDA did was to raise the concept of nicotine product standards. The FDA didn’t come forward with a proposal, let alone the rule. And second, in order to convert concept into a rule, the FDA is going to have to undergo the regulatory process which is very long process it will take years, any final rule have to be based on science and evidence and be subject to judicial review. So this is proving to be a very long and uncertain process.”

Consumer trends

“We certainly saw to your point, we saw that recovery of our consumer in 2015 and that’s where we saw industry volume almost flat through the year. As we progressed we feel like there is economic factors that we launched are still a tailwind for our consumer just not to the extent from a competitive standpoint that they were in 2015, so the factors are still pointing in the right direction.

We get a lot of questions about the low end. A lot of people ask well we see if you buy the cheapest cigarette in the store that share is growing and that is correct but we really break the industry into two segments premium and discount. And then – so when you look at that discount category in total, it’s flat to slightly down thus far through the first part of the year, within that discount category, the cheapest thing in the store what we call deep discount is growing but is offset by branded discount like L&M, Pall Mall, Maverick those types of brands.”

HD Supply 2Q17 Earnings Call Notes

Joe DeAngelo – Chief Executive Officer

Change in the competitive environment

I think the competitive fit, if you look at it is one were the traditional competitors have been absorbed in some cases into larger players, right? So you have gone from specialty shops that we competed against that provided a specialty service within our markets and now they are part of a larger entity, primarily retailers and then you have e-tailers out there. E-tailers, we have seen a lot of change in terms of what’s going on there, I mean typically that’s available to the various very small customers and I think that’s an extension from consumer to people that own 10 apartment units, 50 apartment units whatever.”

Tough pricing environment

” I think as you look ahead and kind of where it is now, it is very competitive. So I wouldn’t see price increases. We’re certainly not getting gross margin accretion from going out and raising our prices. We’re getting gross margin accretion from having the right line logic, selling the right mix, and doing great cost work with our suppliers. So that’s real category management execution of being the price rise every day and price rise for the appropriate structure for the side and size of customers that we’re dealing with. So it’s going to be a tough pricing environment, it’s always been a relatively tough pricing environment and we don’t see that change and that’s why when we say executing flat gross margins is a really great execution that is a really great execution up there.”

Very little steel being imported

“in C&I, the installation or cost increases are really coming from one major product category and that’s the Rebar. So with the current administrations tough stance on imported steel there is very little steel being imported into the United States for that and so most of the available steel is now being produced by the domestic mills and the domestic mills have taken advantage of that and raised prices. Because of the competitive landscape, it is very difficult for us to pass on that increase in steel cost to our customers.”

Evan Levitt

Steel prices up but can’t pass on price because of competitive environment

” Rebar gross margins continue to be challenged. The flow of imported steel into the US has dramatically slowed due to duties and the threat of additional counter availing duties by the current administration. The result is an increase in the cost of this product with a limited ability to pass the increase onto the come customer, due to the competitive environment. We expect to reap our margins to continue to pressure construction and industrials overall margin through the remainder of the year.”

Headwind and tailwind from hurricane

“Generally what you see is the short-term headwind and then as the rebuilding efforts begin to take place we get a little bit of a tailwind on balance that hasn’t been a huge positive for us, historically. We are certainly going to lean in and make it as positive to our bottom line, as well as to help the communities in which we participate to the extent possible.”

Campbells Soup FY 4Q17 Earnings Call Notes

Denise Morrison

Yes these are challenging times

“Yes, I think that the – again, as I said, I think the retailer environment right now is hypercompetitive. I mean, you’ve got the Amazon acquisition of Whole Foods, the expansion of Leadle and Aldie, creating some new retail formats and some escalated competition in the marketplace.= However, I’m optimistic that retail continues to morph. I mean, I remember and I’m going way back when club stores and supercenters were a new format. And the retailer market and companies like ours adjust to that. So we’re really focused on making our brands accessible in multiple channels, and we believe that the new sales design that we have will help us in that effort. So, yes, I do think these are challenging times. And I do think that, as the consumer changes, retailers will change with the consumer and we’ve got to do the same.”

Anthony Di Silvestro

Expecting sales down 0-2%

“Now, I’ll review our 2018 outlook. We expect sales to change by minus 2% to 0%, adjusted EBIT to change by minus 1% to plus 1% and adjusted EPS to change by 0% to plus 2%. This guidance assumes that the impact of currency translation will be nominal. We are forecasting sales growth in both Global Biscuits and Snacks and Campbell Fresh. However, we expect sales in Americas Simple Meals and Beverages to decline.”

Micron at Citi Conference Notes

Ernie Maddock – SVP & CFO

Future data use is DRAM intensive

“use of data is expanding and as you think about applications like autonomous driving and artificial intelligence, so every single thing we contemplate that’s driving the economy, the future is reliance on data.

And when you collect data, you have to sort it and you have to process it and as more and more data is processed that becomes more and more DRAM intensive. DRAM is an essential part of harvesting and collecting insights from the data that so many enterprises are collecting these days. And then obviously you have to store it and that speaks very heavily to the demand environment on the NAND side and the storage world.

China wants in to the memory market

“Sure. And there’s no doubt about China’s ambition to enter the memory market, whether it be NAND or DRAM. There’s no doubt that they are building fabs and certainly equipment suppliers will suggest that there is equipment being ordered, but at the end of the day, being able to effectively produce NAND or DRAM, so the answer is the same for either technology.”

“And we continue to see very strong demand from our customers, very willing to engage in those discussions. But in general, I would say the pricing environment continues to be — continues to be good.”

I think the big driver for server demand is that there has been a massive amount of data that people now want to use

“I think the big driver for server demand and I don’t discount that AI has been an important driver, but I think that a far bigger driver is simply there are massive amounts of data that have been collected that have sat unused for a long time and you now have people using more and more and more of that data to try to form business insights and business intelligence and that is what is driving both the content increase in servers as well as what we see in this hyperscale environment. So, AI is an important trend. I think I would actually think it will be more important on an ongoing basis than it is necessarily fully impacted at least to our 2017 view. So, this is a trend that will sustain demand we believe on a going forward basis.

NAND growth in 40% range, DRAM in 20% range

“I think given that we believe NAND bit growth CAGRs are in the 40% plus range and DRAM bit growth CAGRs are in the 20-ish percent range, NAND is obviously growing more quickly than DRAM and we will be making decisions about where to position the company from a market perspective relative to those growth rates.”

Johnson and Johnson at Barclays Notes

Jorge Mesquita – EVP, Worldwide Chairman, Consumer

There’s a lot of disruption in our industry

“But the reality is that the pace of change in our industry is truly accelerating as Lauren said, in fact where I want to spend my time with you here today is to talk about that our industry is really being disruptive. If you look at our last few decades in this industry, there were a series of barriers for entry or sources of competitive advantage that were well established but those are becoming less and less unique. It used to be that companies like ours would acquire the best talent through our recruiting human resources mechanism, but it’s never been easier for you to source great talent across the world on demand.

Our ability to build and nurture brands, brand building competencies used to be again a source of competitive advantage but the reality is it’s very easy for you to start building a business, building a brand from scratch and you really don’t need a ton of money to get a community of active users that support you. Large scale manufacturing assets used also to be a source of competitive advantage. But the reality is if you want to compete in this industry, you can access high quality contract manufacturing work any place in the world.

Retailer relationships used to be also a source of advantage and a barrier for entry, but as you all know, new companies can now sell directly to consumers profitably in most markets. Innovation used to also be a big barrier for entry but again you have an ability now through a network of external partnerships to access innovation even crowd sourcing. And then financial firepower for companies like J&J is not as critical as it used to be because new startup entrants can access capital relatively easy through VCs.

So what you see is a result of these barriers coming down, you see new class of competitors emerging and now we have our classic multi-national, well established competitors and you have these new entrants to contend with. So this disruption that is happening is digitally enabled and is changing the face of our industry. You see these new players coming into our category and at the heart of this disruption, there is a new consumer centric paradigm and that’s challenging completely the cost of goods scale and the value scale as we know it and its forcing a change in both the retail and the media landscape.

New playbook ks asset light infrastructure and control of the consumer relationship via data

“And what we’re seeing now is there is a new playbook emerging, a new how-to-win playbook that is really characterized by an asset light infrastructure. And the control of the consumer relationship,via the acquisition of the sports party data that allows for you to have a highly personalized iterative on demand consumer experience. And the ownership of this relationship with consumers and associated ecosystem that comes with it is now the new playbook. It is now the greatest new source of competitive advantage.”

Small players are succeeding because they are committed to breakthrough innovation, stay close to customers, build digital brands first and are hyper efficient

“What is it that is allowing them to succeed, because by and large if you look at our categories, these small players are the ones that are gaining shares and majority of large companies are losing market share. So we’ve found five things that we think these players are doing uniquely well.

First, they are really committed to breakthrough innovation by staying really close to consumers and customers and staying on top of consumer trend. They see where the product is going and they are designing to what that emerging consumer need is. They are focused on building digital first brands that have a clear purpose and a reason for being that resonates with millennial consumers.

They capitalize on the rise of emerging channels. They don’t just play in the legacy channels but they figure out what are the new shopping behaviors, new emerging channel trends and they disproportionate drive growth in those channels. They are hyper efficient. Normally have very lean cost structures, flat organizations, no bureaucracy and as a result they move very fast. Speed is a great currency for them.

Coca Cola at Barclays Conference Notes

Sandy Douglas – Executive Vice President and President, Coca-Cola North America

Bifurcated consumer environment

“What we’re seeing broadly is kind of a bifurcated consumer environment. The upper part of the economy is healthy and vibrant, positive expectations for investor performance, tax relief. And then the bottom half is really struggling, which is impacting purchasing habits, trips to retail, et cetera.”

don’t count out the brick retailers

“don’t count out the brick retailers. They’re moving fast. They have significant assets and they’re working to serve the shopper. And don’t think of e-commerce as a channel. It’s a way for consumers to research, to buy, to experience brands and then, ultimately, to have them have fulfilled.”

Digitization good for add ons

“But also, more broadly, think about like restaurant operators. Restaurant operators – think of pizza, for example. Pizza orders that have moved on to apps. Our incidence of beverage attachment, if we’re well merchandised on a digital app, is 50% higher than on telephone.”

Entrepreneurs face common issues around distribution

“And then the other thing we’ve done is we’ve found that – and it gets to this very fragmented innovative category that we’re in, is that the innovators are launching hundreds of new products every year. But once they’re successful, they all have the same kind of issues, issues like buying, procurement, like selling, distributing, manufacturing and capital. And so, we have a venturing group that we started about ten years ago and, basically, it goes out to all the entrepreneurs and says, instead of going to private equity to get money, why don’t we work with you, we’ll invest in you and we’ll help you. And we’ll help you take your idea, solve some of the issues you might have, and we can see how you can be a part of what we’re doing and we can help you achieve your dreams as an entrepreneur…All of that allowing us to kind of source external innovation, so that when you take a healthy core, build strong, new businesses, and then bring all the next businesses in, it gives you a sustainable top line.

The thing that had the highest correlation with success was the number of tries

“Because we’ve analyzed innovation and we did a pretty exhaustive study to try to figure out how we could become more innovative. And the net is that there are a lot of things going on in innovation, but the one thing that had the highest correlation with success was the number of at-bests.

It wasn’t the super brainy process. It wasn’t the eight-page request for authorization form that was better than another. It was, you had the general idea of what you’re trying to do and where the consumer is going and you create the opportunity for lots of tries.

And the only way we could figure how to do that was to get other people to try and then to give us the chance to help them make the more likely winners succeed. But even then, the more likely winners don’t all win.