Whole Foods FY 2Q17 Earnings Call Notes

John P. Mackey – Whole Foods Market, Inc.

Rethinking labor scheduling

“I mean, the main thing we’re going to do be doing is we’re going to be rethinking the way we do our labor scheduling. I mean, Whole Foods Market is in the early stages of labor scheduling technology and where we’ve applied it so far, it’s been amazingly successful with getting the right people, the right number of hours scheduled in, say our customer service area. As we extend that through the whole company, we can get, we think we can upgrade our service while significantly reducing our cost. So that’s going to be one of the major initiatives that we think is going to help reduce our labor cost in our stores, not through laying people off, but just through attrition over time and the appropriate scheduling.”

Gabrielle Sulzberger – Whole Foods Market, Inc.

Five new directors to the board

“First, Ken Hicks. Ken brings an impressive record of successful leadership at Foot Locker and other companies in the retail sector. As the former Chairman, President, and CEO of Foot Locker, he is credited with developing and executing a highly successful turnaround plan. Joe Mansueto is the Founder and Executive Chairman of Morningstar. Joe grew Morningstar from a start-up to a global organization that is one of the most recognized and trusted names in the investment industry. Sharon McCollam is the former CFO of Best Buy and Williams-Sonoma. Sharon has more than two decades of experience as a senior leader in the retail industry. Scott Powers brings an important long-term shareholder perspective to the board. Scott was the President and CEO of State Street Global Advisors and brings decades of experience engaging with the investing community. And finally, Ron Shaich. Ron is the Co-Founder, Chairman, and CEO of Panera Bread Company. The results during Ron’s tenure have been impressive, with Panera delivering total shareholder return of more than 5,000%.”

Marriott International 1Q17 Earnings Call Notes

Arne M. Sorenson – Marriott International, Inc.

*Home sharing phenomenon has been less impactful than imagined

“You know, it’s a good question, Ryan. I think, the answer is that Airbnb and the home-sharing phenomenon has probably been less impactful to the RevPAR numbers that we’ve posted the last number of years than folks might first have imagined. And similarly, is probably less impactful today even with what’s happening on the regulatory side in a number of cities and states. Now, we will continue to analyze this data as much as we possibly can to understand it, but I think by and large, they are serving a mostly different customer than what we serve at Marriott. They are skewed much more towards leisure. They are skewed much more towards a value-centric customer in the bulk of their business, and if their business is under pressure because of a regulatory environment, I’m not sure necessarily that that customer immediately pops up and shows up in our hotel suites.”

Under Armour 1Q17 Earnings Call Notes

Kevin A. Plank – Under Armour, Inc.

13,000 points of distribution, competition has 23,000 points

“Yes. So as I mentioned a minute ago, we told you a while back that we had about 11,000 points of distribution, we were targeting roughly 13,000. So we’ve now hit that. As far as distribution goes, number one, it was important to me that when we announced expanded distribution that it was the same day that we announced being on Fifth Avenue and committing to building the greatest retail store in the world that will open in the middle of 2019.

So our commitment to being premium brand has never wavered or changed, but to compete at the levels where we want to run, we feel that we need to be the best and we feel like we need coverage and coverage is about some of the volumes that we can drive.

And again, where we talk about being in 13,000 points of distribution, it’s important to remind people that some of our key competition has more than 23,000 points of contribution in North America alone.”

We out of acquisition mode and into activation mode

“As far as additional distribution or anything there goes, we are completely, as I said, out of acquisition mode and in activation mode. The goal that we have is making all of our existing partners better, and this means doing a better job in the stores where we are. So you’re not going to hear of any additional big box opening happening in the United States for a very long period of time. We like the team that we have on the court. We like our distribution, and we think that we have a great, great opportunity there.”

Procter and Gamble FY 3Q17 Earnings Call Notes

Jon R. Moeller – Procter & Gamble Co.

Emerging markets contracting

“India de-monetization continued to impact consumption in that market. In Saudi Arabia, one of our 15 largest markets, a prototypical household has endured a 20% income reduction, while utility prices have doubled and will more than double again by July as government subsidies are reduced. Economic crises in Egypt and Nigeria are dramatically impacting category size and markets in Russia, Argentina and Brazil are also contracting. ”

Deprivation testing

“In deprivation testing, we ask consumers to score the product they currently use, say out of 100 points. We replace the product they’re currently using, typically a competitive product, with the product we’re testing and have consumers use it for several weeks. Then we give them back their original product and ask them to score it again. If their score of the original product has not changed appreciably after use of the new product, we’ve not made a significant difference in expectation or delight and therefore wouldn’t rate the new product as irresistibly superior. If they rate their old product significantly lower after use of the new product, we know the new product has elevated the level of performance they expect in the category.”

Biggest opportunity for saving is in raw packaging materials

“Within this strategy, the largest opportunity, about $4.5 billion of the $7 billion, is raw packaging materials. These savings will come from strategic supplier partnerships, supplier consolidation and through an overarching simplification of our SKU lineups and manufacturing platforms. We’ve established joint business plans with our top suppliers focused on end to end supply network synchronization with a goal of reducing product cost year-on-year.”

Digitizing manufacturing

“We’re digitizing our manufacturing operations and automating with robotics using, for example, collaborative robots to automate activities like palletizing, and autonomous vehicles to move materials and pallets within our operations. We see an opportunity for additional $1 billion of savings from transportation, warehousing and other cost of goods sold.”

Packaging still important even in e-commerce

“the increase in the amount of business that’s done through e-commerce does not decrease the need for superior packaging. In fact, in some ways it increases it. There are product integrity challenges that are created by the e-commerce logistics channel that we need to address. And that’s the Air Assist packaging I was talking about. That’s one of the things that it’s designed to address. There’s also kind of a new moment of truth, if you think about it, in an e-commerce purchase. There’s the first moment of truth which is on the site. There’s the second moment of truth when you open that brown box and what’s inside of it and how is that packaged. And that can be a delighter or that can be a detractor and we want that to be a delighter. And then of course there continues to be the next moment of truth which is the use of that product and it needs to perform in an irresistibly superior way. So also, 95% of the business that continues to be in bricks and mortars retail stores, that packaging is very important in terms of informing brand choice, educating, communicating with consumers, attracting her to the shelf. So I don’t see packaging as being an area that should receive less attention going forward. If anything, it should receive more.”

April is slowing a bit I don’t know what that means

“April frankly is slowing a little bit. I don’t know what that means. And you know, you have to realize we’re talking about pretty small changes on the margins. They have a big impact on our results in any one quarter, but it’s hard to look at that and understand therefore what the future looks like. ”

E-commerce 5% of business total but 40% in Korea

“That’s a very interesting question. First, let me just comment on the progress on e-commerce. I mentioned earlier, organic sales grew 30% online in the quarter. It’s now 5% of our business, maybe it’s about a $3 billion business. It’s primarily focused, but not exclusively, in the U.S., China, and in Northeast Asia, particularly Korea. China is about a $1 billion business online currently. I would expect that’ll be 20% to even as high as 30% of our business within the next 12 to 18 months, so that’s moving very quickly. Korea, it’s 40% of the business today. ”

E-commerce in US skewed to bulky items

“The U.S. development in e-commerce is very different by category, with some of the bulkier and heavier products appealing to people online, so they’re not having to fill up their shopping carts with those items, baby diapers, as an example, but also items were more specialized attention. Skin care, for example, is seen as a benefit.”

Share is just as high online

“There has been a lot of talk though about kind of the other side of your question, which is what happens to big brands, businesses like P&G in an e-commerce context, and is that good or bad? And we actually believe that it’s good, that we can be very effective in an e-commerce world, and our market shares currently bear that out. Our online shares, on an aggregate basis globally, about equal to our offline shares, and as I said, the growth rates, not just from a growth standpoint but also from a share growth standpoint, are currently higher online than they are offline.”

Consumers actually expose themselves to fewer brands online

“There are two kind of discussions that occur relative to the online environment, and people who prognosticate the demise of big brands in that environment refer to lower barriers to entry, and they refer to what I’ll call the land of endless assortment. And clearly, there are lower barriers to entry, which is a threat to our business but is also something we can benefit from if we’re proactive about it just as well as anybody else can. From an assortment standpoint, if you actually look at shopping behavior, a typical shopper exposes themselves to a lower, smaller assortment online than they do offline. When they go to the store, they’re exposed to what’s ever there. Very few shoppers click through to the third or fourth page of a search, and what typically shows up on the first page of a search are the more popular offerings, the larger offerings. And then there are tools, whether it’s subscription or other tools that allow us to increase the loyalty of those consumers to our brands.”

Significant decline in growth rates in Jan and Feb, rebound in March, slow in April

“What we saw, and that I do know, was significant decline in category growth rates, I’m talk about the U.S. now, in January and more significant in February with a rebound in March. And April is, by all indications, relatively soft. And I don’t know what all the drivers are of that. And we’re just going to have to see as we go forward. And as I said, that’s going to have an impact, hopefully a positive one, but it will have an impact on our results both this year and next.”

Wynn 1Q17 Earnings Call Notes

Stephen Wynn – Chairman of the Board and Chief Executive Officer

Business is good for us

“Okay. You can see the numbers. Business is good for us. We’ve been joining a research and sub activity at the top-end in China. Our hotels there – we’re enjoying the continuing prosperity of Wynn Macau and the steady growth of Wynn Palace pursuant to plans and the expectations we’ve had since the inception of that project.”

Chinese are settling back into old routines

“I have a picture – I have an opinion on that. And of course, it’s just my opinion. But I’ve said in these calls in the past that it would be a mistake to misunderstand the primary underlying driver of the Chinese economy. It is a massive thing and when you say that as I have in the past that we have a very positive and bullish look forward into our long-term position in Macau, at some point the long-term vision and the short-term begin to meld as they are now.

The suppression of the VIP market was something that was the result organically of a process that the administration of President Xi Jinping thought was appropriate for the country, the elimination of corruption. And it had secondary effects on high-end products like shopping, and automobiles, and gaming was part of that. But having made a corrective move in China there comes a point when the corrective move, it sort of finishes.

And although corruption is still a major item in the PRC, the initial impact has softened, because so much of the work that they thought had to be done, was done. And so people begin to return to normal spending habits, and they are not so strongly influenced by public policy issues that involve public officials. So the people are settling back into routines that they’re comfortable with, and that includes going to Macau and buying a new car or shopping at Louis Vuitton.”

Nestle 1Q17 Earnings Call Notes

Mark Schneider

Weak consumer demand in US

Celine, this is Mark. On the US, I think there’s a general observation here and that is pretty weak consumer demand and that’s not a particular issue here for Nestle. I think that’s all throughout. That typical transmission belt we’ve seen in the past between good economic performance as measured by GDP and then consumer spending, that doesn’t seem to be working one for one this time. And so category by category, whether it’s us or anyone else, what you’re seeing is fairly soft demand, even in the face of pretty good fundamental economic data. The one area that does stand out a little bit, François pointed to it is petcare. I think here, we’ve seen a soft quarter. We had some issues in particular in drydock and I think we’re moving aggressively to fix those. So I’m more optimistic for the rest of the year.

Unilever 1Q17 Earnings Call Notes

Graeme Pitkethly – Chief Financial Officer

Prospects for global economy looking brighter

“I think it’s fair to say that the prospects for the global economy are looking a little brighter than they have done for a while. While last year’s GDP growth was the lowest since 2009, the forecast for this year are now looking a little better. Employment levels in the developed markets are improving and many of our key immerging market currencies like India, Brazil and Indonesia appear to be bottoming out.

Commodity inflation is returning

“Commodity inflation is returning and well there is adds to the cost pressures for us particularly in the first half of this year. It will of course be better and use for the economies of the producing countries themselves, many of which contain large Unilever businesses as you know.”

Changes everywhere

“We have faster changes in consumer trends at both our global and local level, or in our customer channels with the rapid rise with an online sales in convenience stores so progressively a little less reliance overtime on traditional big box retailing, or in media with a changing path to purchase now requiring multichannel digital mobile first approaches everywhere, or in the political environment with economic and political volatility.”

Brazil interest rate are 13% compared to inflation around 4%

“Okay, Alain. Let me tackle the Latin America question first. You’ve hit the nail on the head really, the Latin America was really a tale of two halves in the first quarter. We’ve seen just turning to Brazil which you’ve spoken quite a lot about in Q4 as well, but we saw a 10% volume decline in Brazil. Now the market was down between 5% and 6%. Now encouragingly that is an improvement from the negative 10% market volume decline that we saw in Q4. So there’s been a slowdown in the rate of decline in Brazil but the market is still declining between 5% and 6%. Added to that we’re in a situation where I think interest rates in Brazil around about 13%, inflation is around about 4%. What you see within the within our distributors and wholesalers and within the trade is a bit of a credit crunch if you like, you see a lot of tendency to put and take money out of inventory investment and put it on deposit where you make a 13% return against only 4% inflation, so it’s quite a good place to invest at the moment. ”

Overall message for Asia is we’re getting back

“overall message for Asia is that we’re getting back. I think we’re starting to see the start of normalization back to more historic levels of pricing growth hopefully in Asia going forward and a nice balance of mix and volumes.”

Netflix FY 1Q17 Earnings Call Notes

Reed Hastings – Founder and Chief Executive Officer

YouTube has a billion users

“Well, I’m – we’re super excited expecting to cross 100 million this weekend, that’s a big accomplishment. But it’s really just the beginning. When you look at YouTube having a billion active users and a billion hours every day. When you look at Facebook’s, multi-billion numbers. We see that the Internet is just a phenomenal opportunity, of course, we’re pay service, not ad supported. We’re not as deep in international as those companies. But we definitely see a big opportunity around the world to just continue to do what we’ve been doing, which is make fantastic content, get people really excited about that content, and then we’re just continuing to grow.”

Viewing is nowhere near as big as YouTube

“Yes, viewing is very large and growing, but nowhere near as big as YouTube. So we definitely got YouTube envy and we’ve got a lot a room to go. And some of the new shows like Ted was talking about, our movie out of Korea [indiscernible] has great global potential. So, we’re finding great talent around the world and that’s what drives up the viewing.”

We don’t see a wall that’s going to stop us from getting most people in the US

“A couple of years ago, Doug, there was a bunch of fear about the 30 million sub wall, with AOL had hit that and HBO would hit that. And the thing is everybody watches TV and nearly everybody has the Internet. So I don’t see anything that’s going to stop Netflix from getting to most people in the United States and then eventually hopefully most people around the world. But we’re not – we’re just going to focus on the everyday of making the services better and better.”

Competition doesn’t affect us

“Like at one level, Amazon is an amazing company and doing so many different things, it’s really incredible. And then you think of Jeff Bezos in addition to all of Amazon doing a Washington Post and Blue Origin Rocket. So, I will say, we do think about all of that and their tremendous track record. On the other hand, they’re doing great programming and they’ll continue to do that. But I’m not sure if it will really affect us very much, because the market is just so vast. Think about it when you watch a show from Netflix and you get addicted to it, you stay up late at night. You’re really – we’re competing with sleep on the margin. And so it’s a very large pool of time. And a way to see that numerically is that, we’re a competitor to HBOs and yet over 10 years we’ve grown to 50 million, and they’ve continued modestly growing, they haven’t trunk. And so if you think about it as we’re not really affecting them, the answer is, well, why? And that’s because we’re like two drops of water in the ocean of both time and spending for people. And so Amazon can do great work and it would be very hard for it to directly affect us. It’s just home entertainment is not a zero sum game. And again, HBO success, despite our tremendous success is a good way to illustrate that.”

CarMax FY 4Q17 Earnings Call Notes

Bill Nash – CEO


“remember, what we’re talking about is SEO, search engine optimization versus search engine marketing. Search engine marketing is what you pay for the ads. Search engine optimization, the way you — it’s not necessary that you’re paying for ads. The way we do it is, through this year, we’ve done a couple different things. One, it started with the website. Since the new website, we’ve also redesigned how the search engines crawl our website and make it so it’s more efficient for them to crawl. We focus on keywords, again keywords that aren’t related to CarMax, and building up pages and so that when the search engines search your website, they see keywords and like, okay, CarMax must be an expert on that, so we’re going to bring them into the organic search. Content, that’s another way we’ve increased our SEO, building relevant content that again when the search engines look at your website, it’s relevant to the questions that people are asking. So those are the levers that we pulled in and we will continue to pull to get the SEO or the organic search going for our customers.”

Tom Reedy

There’s not that much precision around recovery estimates

Yeah, let me answer your second question first, and that is, there’s not nearly that much precision around recoveries. As I mentioned I think a couple questions ago, we originate loans based on the knowledge that in the future we won’t know what recoveries are and we have a range of recoveries that we’ve experienced over time. And so we go into the equation contemplating a range of recoveries and hopefully it falls within that range. So there is really not much to be specific on that front.

Lululemon 4Q16 Earnings Call Notes

Laurent Potdevin – Chief Executive Officer

Slowing sales due to merch issues

“The slowing sales trend early Q1 has most acutely impacted eCommerce. We have clearly identified the issues, an assortment lacking depth and color for spring compounded with visual merchandising that did not powerfully translate our design vision. With focused urgency our teams have been cross correcting the issues, with early indications reflecting an immediate and positive impact on performance. We will see more color in selected style as early as next week.”

Celeste Burgoyne

Co-located and locals

“So as we’ve spoken about with our real estate strategy, co-located and locals, both continue to be something that we see as really exciting opportunities from 2016 and into 2017 in areas we’re focusing really hard on and they both allow us to really capture traffic in the most relevant ways for those communities. Co-located, expanding our square footage, for example, Mall of America and Somerset, two key U.S. co-located stores in 2016, we’ve driven more traffic in those locations and have grown the Men’s business in particular from 50% to 70% through more dedicated square footage. And then locals has also allowed us to go into smaller communities in a really locally relevant way and the results have been something we’re really proud of. Bend, Oregon and Fort Collins also, for example, have been two of the four that we’re really excited about and we’ll continue to really put into that strategy into 2017.”