Macys 2Q17 Earnings Call Notes

Jeffrey Gennette – Macy’s, Inc.

I am confident that Macys will win again

“I also know that we operate in an environment of intense and disruptive competition, and that our customer has more shopping options than ever, and we need to provide her with a compelling and a unique proposition. So winning in this environment requires us to act with a great sense of urgency to make changes in how we operate and to move faster. And as we do this, I am confident that Macy’s will win again.”

Good signs so far on back to school

“On back-to-school, good signs so far. There’s a lot of good trends that are going on in the business. Charles, to your comment or question about we’re not seeing any differences really between how the southern stores are, outside of the fact that many of them have gone back to school. And so you’re seeing some lifts there that are encouraging for where stores go later around the east coast or in the northern states, but we expect they will all even out when the calendar is evened out.”

Going to remain promotional

“Let me just back up a bit and just say that when you look at the marketing strategy, we really wanted to reengineer the entire marketing machine at Macy’s and it has a lot of moving parts as we look at the fall season. Number one, we’re going to remain very promotional. And what we’ve spent a lot of time on is reducing the overlap of promotions, reducing the amount of overlap of discounts on top of each other. But we’re doing that all the way through the back half and that really is a big focus of ours.”

Omnichannel customer is clearly a potent one

“today, 25% of our entire digital demand could be satisfied in a door that is in the ZIP Code that is generating that online sale. And so that gives us huge fire power opportunity to convert that to a buy online pick up in store if that’s what the customer would like to do. We love that because when they’re in that store, they generally upsell about 25% of additional goods. The omnichannel customer is clearly a potent one when they buy in both channels, so all good things come from that. So the first thing was having the inventory availability to do that.”

Karen M. Hoguet – Macy’s, Inc.

Tourist sales were weak

“In the second quarter, international tourist sales were down approximately 9%, which was much worse than in the first quarter and negatively impacted our comp owned plus licensed sales in the second quarter by approximately 40 basis points.”

Macy’s 1Q17 Earnings Call Notes

Jeffrey Gennette – Macy’s, Inc.

We know that these trends are secular

“these are unusual and challenging times for retail, especially for mall-based department stores. And we certainly know that these changes that we’re seeing are secular and not cyclical. On the consumer side, we see continuing shifts in shopping trends, driven by the rapid adoption of technology, and for some of our customer segments, a greater emphasis on value and on experience. As for the retail industry overall, we’ve known for some time that the United States is over-retailed compared to other markets, so it’s not surprising to see the contraction in retail square footage. And it will take some time to tell how the consolidation and the closure of stores, and in some cases, entire brands will impact us.”

Macy’s 4Q16 Earnings Call Notes

Karen M. Hoguet – Macy’s, Inc.

Sales down 4%

” Sales were $8.515 billion, down 4% from last year. On an owned plus licensed comp basis, sales were down 2.1%, which was at the low end of our expectations when we started the quarter. Our digital sales continued strong, with double digit growth, while sales transacted in stores continued to be below what we had expected.”

We weren’t able to overcome secular changes

“we were not able to overcome the secular changes in the industry related to shopping habits. These changes appear to have had a bigger impact on our store business than we had expected. We recognize we need to make dramatic changes in how we operate the business. In some cases, we’re already executing our strategies, while other strategies are still in development, most notably our marketing strategy. This includes ideas also for testing how we can simplify our pricing and for improving the store shopping experience.”

Terry J. Lundgren – Macy’s, Inc.

Stepping down as CEO

“Thanks, Karen and good morning, everyone. This is going to be my last earnings call as CEO, as we announced this morning that I’ll be passing that baton to Jeff Gennette next month. And I wanted to join the call to provide my perspective on Macy’s 2016 performance, as well as share a few thoughts of what I’m seeing in the industry as a whole.”

Setbacks seem to happen every 5-7 years

“in my 14 years as CEO at Macy’s Inc. and my six years as CEO of Neiman Marcus before that, I’ve seen a series of setbacks that seem to happen every five to seven years in our industry.”…”now here we are seven years later and after 2008 and 2009 with another setback. And once again, we’re faced with challenges. These are different than before but the message is the same, and that is there’s lots of concern out there about our ability to bounce back, but yet internally, so many of the people that are on our team have seen this movie or some version of it in the past and get excited about taking on that challenge. So we anticipate that the challenging environment that we experienced in 2016 will continue, but we’re not standing still. We made a lot of strategic decisions this past year that are going to set us up well in 2017 and we’re going to continue to fine tune our strategy and vision forward to get ourselves in position to win in the future.”

At some point you’d think everyone would have a new car

“And so at some point in time you’ve got to believe that everybody’s going to have a brand new car, at some point in time. We just had record after record performance of automobile sales. At some point in time, there’s dollars that are going to be freed up for other categories of spending. And when they get to these categories we have to be a major consideration. ”

Have to make a greater effort to convert in store

“And then more and more, we’re convinced that the consumer is entering the store with their mobile device and making their decision where they’re going to shop before they leave their home or their car and making sure that we are able to convert those individuals once they choose to come to our store to make a purchase inside our store, as opposed to a search that might bring them to an alternative site where they believe they can get a similar or a same product for a better value. That can happen. And we have to be stronger, more aggressive on that subject to ensure that we are always very competitive. And that’s where it has to go for us.”

Department stores still serve a purpose

“I’ve said this before, if the department store did not exist today, there’d be a group of smart people sitting in Silicon Valley inventing the department store today, because it will serve a purpose.”

Consumers visiting fewer stores once at the mall

“Two is that the consumer is just more organized today and so since they’ve already done their homework and done their searches for what they want to buy and where they want to buy it from, they are visiting fewer stores once they get to the mall. So I think there’s enough consumers in the mall. It’s just a matter of where they’re choosing to shop based on the searches that they’ve done. And so we have to be top of mind in that search process for them. And our technology team has worked very hard, along with our merchant team to make sure that we match up well.”

Macy’s 3Q16 Earnings Call Notes

Macy’s (M) Q3 2016 Results

Karen M. Hoguet – Macy’s, Inc.

Fashion watch trend did improve

“It’s actually was encouraging that our fashion watch trend did improve, as our expanded tech watch assortment hit our stores and websites late in the quarter, including products from brands like Apple and Michael Kors. The category trends were generally similar at both Macy’s and Bloomingdale’s.”

Worse than expected credit performance one reason for weak SG&A

“we actually had said early in the year that we expected it to be flattish, not down. I think now the year will be slightly up. But, again, if you focus on the annual, the increase feels reasonable, and that’s the way I would think about it, if I were you. The credit performance has been worse than we had expected, so that’s one piece of the reason for the increase”

Our buyers and store base are what will allow us to compete with Amazon

” I do think that our organization and, as you said, our merchants be able to curate the market, find the right product really is a competitive advantage relative to Amazon. And when you combine that with the really terrific store organization that we have, I do believe for fashion, customers still love going into the stores, trying things on. Even if they end up buying online from our apps, they still experience the store. And so I think both of those will allow us to always compete effectively against an Amazon; doesn’t mean that an Amazon won’t do a lot of business. I’m not saying that.”

Macys 2Q16 Earnings Call Notes

Macy’s (M) Q2 2016 Results – Earnings Call Transcript

Karen M. Hoguet – Chief Financial Officer

Sales down 4% but better than 1Q comp

Sales in the second quarter were $5.866 billion, down 4% from last year. On a comp owned-plus-licensed basis, sales were down 2%. This compares to the 5.6% drop we experienced in the first quarter. On a two-year basis, the first quarter was down 2.9% per year and the second quarter down 1.7%, representing a 1.2-point improvement in this trend. Both Macy’s and Bloomingdale’s experienced improvement in the second quarter.

Four factors contributed to the trend change: weather, better international, sales generating strategies and promotional events

We would cite four key factors contributing to this trend change. One, weather has been hot this summer and has contributed to the strong apparel sales and perhaps more shopping in general as a way to avoid the heat.
Two, international credit card sales were down 12% in the second quarter. This compares to a 20% drop in the first quarter. While this still negatively impacted our comp sales by approximately 60 basis points in the second quarter, it had less of an impact than it has had in recent quarters. As a result, our sales trend in the major tourist stores improved for both Macy’s and Bloomingdale’s in the quarter. Three, many of our sales-generating strategies are beginning to kick in. The investment in staffing in our best stores, our fine jewelry strategy, the Last Act clearance strategy, and home store improvements, this is very encouraging. And four, a few strong promotional events and sharper pricing helped in the quarter as well, and we were able to structure these events to both drive sales and preserve our gross margin rate.

Apparel was strong

The families of business that were strongest in the quarter included all of apparel, men’s, women’s, and kids’, as well as fine jewelry, shoes, fragrances, textiles, and housewares. Handbags and fashion jewelry and watches continued to be weak.

Strong back to school season

We are encouraged by the start of the back-to-school season. We are seeing strength in all categories, but are most excited by the strong trend in denim.

Closing stores

We decided to be proactive and to close a larger number of stores this year. This will bring the shopping experience to a consistently higher level and concentrates Macy’s stores in locations with better potential. We believe we can benefit from right-sizing the company. This will force us to make necessary overhead reductions to preserve profitability and ongoing cash flow. And while it will shrink the company somewhat, these closings will positively impact our return on invested capital and help us to accelerate our growth.

Believe they can retain sales

This potential sales loss is lower than the projected volume of these 100 roughly stores due to our ability to retain some of the sales in other stores as well as on macys.com. With the stores we’ve closed in recent years, we have greatly improved our ability to retain sales both through new targeted marketing efforts and by trying to make sure that we add specific merchandise, categories, and vendors that is in stores that are being closed into stores that are nearby.

“shrink to grow”

One of the reasons we feel it is right to shrink to grow is the success we’re beginning to have in our top doors. Our work with our top 150 doors gives us confidence that we can accelerate our growth in these strategically critical locations. We want to focus our financial resources and our talent to make this happen, along with fueling our digital growth.

There’s no doubt that retail is changing

Retailing is changing, there’s no doubt about it. Our company is committed to being tomorrow’s leader in omni-channel retailing. We will strike the right balance between stores and digital. And the closing of 100 locations will get us to where we think we need to be, all while maintaining a significant physical presence in virtually every major market across America.

Seeing some increase in credit card delinquencies

No, remember, we had expected credit income to be below last year when we started the year, so this is not a surprising trend. We are seeing some increase in delinquencies, as we had said. But remember, part of that is because we’re also trying to grow the portfolio. So there’s nothing concerning happening in the portfolio today, and it is happening as we had anticipated.

Macys 1Q16 Earnings Call Notes

Karen M. Hoguet – Chief Financial Officer

5.6% negative comp

“Sales in the first quarter were $5.771 billion or 7.4% below last year due both to the stores that we’ve closed in 2015 and the decline in comp sales. While we had planned comp sales to be below last year in the first quarter, our 5.6% decline on an owned plus licensed basis was worse than expected. On a two-year basis, the comp sales were down 2.9% per year.”

The business weakened considerably vs expectations starting in March and continued through April

“While the quarter started stronger, the business weakened considerably versus our expectations beginning in mid-March, and that trend continued through April. As Terry said in our press release, we are seeing weakness in consumer spending levels in apparel and related categories. The number of transactions declined 7% in the quarter, which is far worse than what was experienced last year. This is the proxy, as you know, for traffic.”

Digital was strong but also grew less rapidly than anticipated

” Digital sales continued strong, still growing double digits, but it too grew less rapidly than anticipated. Bloomingdale’s trends were also weak due to the same trends impacting Macy’s. ”

y/y comps get easier in 3Q

“Also, as you know, the year-over-year comparisons get easier in the third quarter and fourth quarter given the weakness last year. We also are hoping for a more normal winter.”

The retail industry is clearly in a rough patch but the consumer seems to be doing ok

“All of us have been reading the stream of negative news stories about various retailers over the past several weeks. Clearly, our industry is in something of a rough patch. We know we are not alone. But the consumer seems to be doing okay. Employment is steady and wages continue to rise. The consumer savings rate remains high and most macroeconomic indicators are better than flat. So it’s reasonable to conclude that the consumer will return to more aggressive discretionary spending at some point, hopefully sooner than later.”

We are not pulling our commitment to omnichannel

” we are absolutely not pulling back our commitment to digital and omnichannel retailing. Mobile remains a very high priority, and we continue to invest. ”

We are assuming that what happened in Q1 could continue but we’re hoping there was something fluky

” Look, I’m not going to comment on early May sales. We’ve done that before and usually the first couple of weeks of a quarter don’t necessarily predict it. Had I done that in February, the first quarter would’ve been very different. So, for now, we’re assuming that what we saw in the first quarter could continue on a two-year basis. Again, we hope we’re wrong and we hope there’s improvement and there was something fluky in the last six weeks of the quarter. But I don’t know enough to say that, and I don’t know about going back to 2008. I’ll do that and look more into it. I’m not sure. When you look at the economic trends, you would say that’s not the case, but I’m not sure.”

The competitive environment has gotten a lot more promotional

“Yes, I think the competitive environment has become a lot more promotional. I think part of this is a result of the Internet where every promotion happens across the country immediately. And also there’s a lot of price matching going out with some of the (23:59) with some of the competitors and there’s some irrational behavior that I think is giving us some challenges, and that’s in part why we lowered the expectation around gross margin a bit from what we had said earlier in the year.”

Don’t think that Q1 would have been a lot different if we had promoted more

” I don’t think, had we promoted more, the first quarter would’ve been a lot different, but that’s the question we’re certainly asking ourselves as we move forward. ”

Delinquency levels are somewhat elevated but still within normal range

“Delinquency levels remain somewhat elevated post our credit conversion, but the level is still within what I would call our normal range and certainly within the range of our other issuers. Also the level continues to come down, so I do not think it’s concerning at this point.”

Trying to fight price comparison with more exclusive merch

” One of the things we’re all focusing on is having more exclusive merchandise that you could only get at Macy’s and you can’t price compare it as easily, but also giving the customer just a better experience so that she’s more likely to come in and buy from us at regular price.”

We agree we need to make brick and mortar experience better

“we absolutely agree with you that we need to work hard to make the bricks and mortar experience a lot more exciting and we’re working on that and trying to test some concepts, one of which actually is the whole health and wellness. So we agree with you that making our bricks and mortar experiences even better is a very high priority, and we’re really focused on that. ”

We are puzzled about what we’re seeing with the consumer vs. traffic into stores

We’re frankly scratching our heads. We see the same economic data you all see and it would point to a customer that would be spending more. I think that gets to what he and she are spending it on. Savings rates are high, which tells you that either they’re purposefully saving more or that there’s some of that savings that can be used for discretionary spending if they get motivated to do so. Some of it is spending in different categories; health, restaurants, travel. I’m not sure, but I would say that we too are somewhat puzzled by the data that we’re seeing on the consumer and the traffic we’re seeing in the stores and on the site. ”

Macys 4Q15 Earnings Call Notes

Karen M. Hoguet – Chief Financial Officer

Decline in tourist sales did not lessen

“Unfortunately, the decline in international tourist sales did not lessen during the fourth quarter and hurt our comp performance by approximately one point. This was less of an impact than experienced in the third quarter, but that is because international tourism is less important for us in the holiday period.”

Closely monitoring a rise in delinquency levels

“Going forward, we are closely monitoring a rise in delinquency levels that could generate some increase in losses in 2016, as I’ll discuss later.”

Credit profitability expected to decline

“Credit profitability is expected to decline slightly in 2016 from 2015 as sales decline and the profitability of our portfolio stabilizes at a historic high rate or possibly declines slightly with higher interest rates and potentially higher delinquency trends.”

Store base and supply chain are competitive advantages vs. Amazon in apparel

“Well, I think a lot of it is, as I said is the store base and having the ability for customers to interact with us in different ways. The second, I think is our talent in the whole fashion arena, from picking, editing the assortments, presenting it, and the vendor relationships. I think that is a huge competitive advantage to date, vis-à-vis, Amazon. But I think it starts with the store base, and our understanding of the fashion customer, which is different.”

Should have some benefit from anniversarying west coast port

“Well, we have factored in some improvement in the first half as a result of the receipt disruption last year with the port strike. So we’ll see if, in fact, that happens. But we have thought about that. And in terms of the impact of the restructure, that was something that we believe we felt through the whole year. So it wasn’t just a first-half disruption.”

Weather was a standout issue but energy not great either

“in terms of the energy markets, they were not as weak on the West Coast, but obviously weather was less of a factor there. So weather was a standout for us, but we didn’t do great in the energy markets either.”

Miscellaneous Earnings Call Notes 11.19.15

El Pollo’s (LOCO) CEO Steve Sather on Q3 2015 Results

We’ve seen reduced visits from some of our more price conscious consumers

“it was reduced the visits from some of our more price conscious consumers.”

It’s going to take some time for consumers to come back in and see these value initiatives

“I think it’s going to take some time to as consumers come in and see these value initiatives that are on the menu now as well as the service improvements that we’re making. And I think that’s just going to take more time to bring those consumers back. Let them experience that both on the price side and the service side and regain those customers.”

We’re fortunate that minimum wage headwind is being offset by lower commodity prices

“In terms of then managing pricing versus margins, I’m not ready to get into a full discussion about 2016 margins. One thing I will highlight is obviously we do have a minimum wage impact. Fortunate thing is on the commodity side, as we highlighted it worked 3% to 4% deflation, which were actually offset the minimum wage impact on our business”

Value conscious consumer is trading down

“when we did the research what we found is that we saw that the fact — the frequency has declined in our business, especially among we call more value conscious consumers. And we ask them where do you go instead of El Pollo Loco, it was pretty clear where they’re going, which was down to the lower end called the Taco Bells, In-N-Out Burgers and McDonalds.”


Burberry Group’s (BURBY) CEO Christopher Bailey on Q2 2015 Results

Impacted by weaker Chinese Consumer

“given the importance of the Chinese consumer to the luxury sector, our retail sales were affected by a slowdown in total Chinese spending. This reflected weakening consumer sentiment following the stock market turbulence and economic uncertainty over this summer.”

The US slowed markedly in the second quarter

“the U.S. slowed markedly in the second quarter. This reflected uneven demand from both the domestic and tourist consumer. The drivers here remain hard to read against a backdrop of a generally positive economic picture. However, we believe recent stock market volatility may have influenced local sentiment, and that the strong dollar discouraged tourist spend.”

The fundamentals of the luxury industry are changing. Growth is slowing

“current macroeconomic uncertainty, notwithstanding, there is no doubt that the fundamentals of the luxury industry are changing. Growth in Chinese luxury spending is moderating, competition in digital is intensifying, pricing leverage and space growth are tempering and customer behavior is rapidly evolving. For these reasons and more, sector growth is now forecast at just 1% to 2% in 2015 compared with 7% just a couple of years ago.”


Xinyuan Real Estate (XIN) Q3 2015 Results

Xinyuan Real Estate says that Chinese government policies continue to favorably impact business

“With respect to our operational effort on the government policies to continue to favorably impact our business. In the fourth quarter, we remain committed to driving performance of our shareholders with our quarterly cash dividend program. We will execute our sales purchase program as appropriate based on valuation.”


Bancolombia (CIB) Q3 2015 Results

Saw a significant depreciation of the Colombian peso against the US dollar

“During this period, we saw a significant depreciation of the Colombian peso against the U.S. dollar, which caused Bancolombia balance sheet to grow faster when presented in pesos. Let’s remember that the depreciation on an annual basis, it is 53%; and in a quarterly basis, it is 19%.”

Minimal impact though because operations are dollarized

“Nevertheless, despite every expression of assets and abilities into Colombian pesos, the impact in shareholders’ tangible equity is very small. This is due to the fact that all of our operations in Central America are dollarized and the assets that we have in U.S. dollars in Colombia are funded with liabilities in U.S. dollars as well.”

NIM was impacted by a raise in rates by the central bank

“A third topic that drove, and is driving the business environment today is of the monetary policy in Colombia. The Central Bank increased rates by 75 basis points over the last couple of months, which currently proceeds at a level of 5.25%. These increase coupled with our lower growth in deposits in the Colombian system and the higher stock of long-term debt caused the cost of funds to increase during the third quarter. As a result, we experienced a compression in the net interest margin during the quarter.”


Cresud’s (CRESY) CEO Alejandro Elsztain on Q1 2016 Results

Low commodity prices affecting our portfolios

“The low commodity prices are affecting all of our portfolio in all the region and there was a big drop that we saw on the prices mainly on the corn and soybean is effecting margins in all region too. ”

Good weather conditions for crops

“we can see how good weather condition in the region allows a positive start during this planting moment. Rainfall for this summer is above average as we’re going through a New Year. As we can see in the map Argentina presents good weather conditions in general particularly good in the Northeast of the country. In Brazil, even though the rainy season got delayed, the rains went back to the average levels along the normal soybean and corn productions.”


Copa Holdings SA (CPA) Pedro Heilbron on Q3 2015 Results

Latin America continues to be affected by slower economic growth

“Financial results for the quarter were in line with expectations, as Latin America continues to be affected by slower economic growth and weaker currencies. We expect the situation to continue in the short to medium term.”

We expect things to stabilize next year, but not expecting dramatic improvement

“we’re not building into our guidance an economic – an improvement in the economics of our region, we are expecting currencies to be stable, to stabilize, but we’re not building in a dramatic improvement to the economies.”


The Coca-Cola’s (KO) Management Discusses on Morgan Stanley Global Consumer & Retail
Sandy Douglas – President-Coca-Cola North America

Now expecting 4 point worse headwind from FX than expected on 3Q call

“Since our third quarter earnings call, the U.S. dollar has continued to strengthen. So while our business results are on track, we now expect a greater headwind from currency. After considering our hedge positions, current spot rates, and the cycling of our prior year rate, we now expect a seven point headwinds on net revenue and 11 point headwind on income before taxes for the quarter. Now, this is a four percentage point worse than the guidance that we provided.”

Consumers are moving to smaller packages which is higher revenue per volume

“The consumer is now changing. The consumer is moving to smaller packages. A 12-ounce can traded to a 7-ounce can is a 30% reduction in volume, but it’s an increase in revenue.”


TJX Companies’ (TJX) CEO Carol Meyrowitz on Q3 2016 Results

Carol Meyrowitz – Chairman and Chief Executive Officer

We like competition

“there is always competition and our job is to be outrageous value every day and have a very unique eclectic mix and that’s what we strive for. We don’t harp on we move forward, we don’t harp on the competition, we like competition, we like when we are next two, I won’t name certain stores, but we’re fine with it, it brings traffic and our job is to do a better job.”


JPMorgan Chase’s (JPM) Management Presents at the Bank of America Merrill Lynch
Daniel Pinto – Chief Executive Officer, Corporate and Investment Bank

IN fixed income trading you need to have scale and diversification

“when I look at the fixed income business, I think that, in my view the key of success in fixed income is scale. It’s a relatively expensive business to run and if you have scale, you can make it profitable. The other component that is important to me is to have diversification because when you look at what has happened for the last couple of years, two, three years, one of the challenges in business was the rate business. This year is doing very well. So credit has done very well in the last few years even though the climate this year has a bit more challenge than before.”

I do believe the Fed will move in December

“I do believe that the Fed will move in December. I think that, as you look at where the market is pricing today, is probably pricing 75% probability of that were to happen. So I think that the impact in trading will be not very relevant at all. I think that the Fed is starting to cycle.”

M&A is still healthy. Companies have to show growth somehow

“The M&A process is still very healthy and will continue to be so in the sense that companies will – the S&P earnings growth this year is zero when you look at the evaluation. So you would argue that companies need to demonstrate some growth. At this level of growth, in the United States for the economy, there will have to be a bit more inorganic than organic, so therefore the M&A will continue as long as funding and capital is available. I think that funding and capital is available. I think that the risk appetite overall has dropped recently.”


Walgreens Boots Alliance’s (WBA) Management Presents at Morgan Stanley Global Consumer & Retail Brokers Conference
George Fairweather – Chief Financial Officer

This whole industry is going to see reimbursement pressure

“I think specialty like other parts of market will continue to come under reimbursement pressures. I don’t think there is any part of the market that’s going to escape. And this is just the way of – the way of our industry. The healthcare expenditure here in the United States is still a high proportion of GDP versus perhaps what you might see in Europe where I come from. And I believe that what we are going to see in our market is continued pressure on growth in healthcare expenditure. We will see pressures in various reimbursements and then what we have got to do is continue to drive efficiency, drive the front-end profitability.”


Micron Technology Presents at UBS Global Technology Brokers Conference
Ernie Maddock – Chief Financial Officer and Vice President, Finance

It would be pretty silly for the Chinese to try to compete in DRAM

“I would tell you that if you aren’t in the DRAM space, it’s kind of tough to imagine finding that a particularly appealing space to want to deploy a lot of capital and a lot of effort in and certainly as has been released in the press over the last couple of days, I think there’s been some commentary made about at least one particular Chinese entity having not being interested in DRAM per se. But it’s a business that is quite mature. It’s hard to envision that capacity expansion will be required based upon what we know of bit growth and where we think folks would be on the technology curve. And I think whether your perspective is that DRAM technology is very near the end of its technical capability or not quite to near the end. I think there is at least some amount of finite lifetime that certainly [indiscernible] if I were thinking about a rational economic investment in an industry, it wouldn’t be one that is in this state of maturity, because I think the opportunities for success there would be pretty low.”

Still in the very early stages of understanding the potential of 3D X Point

“because it is arguably the first new memory technology in 20 years, we’re having to learn how that market is going to develop. And of course, there is a relationship between how quickly the market develops, how quickly output ramps up and what happens to cost as a result of that. So there are still a lot of variables at pay that are quite different than the visibility, the understanding and comprehension we have of the NAND business or the DRAM business. So we are at the very early stages of learning here”


E-House’s (EJ) CEO Xin Zhou on Q3 2015 Results

Next year’s real estate market wont be much different from this year’s in China

“Overall, we don’t think next year’s real estate market will be very different from this year’s. The main theme is still efforts encouraged by the government to reduce inventory, reduce the overall level of inventory. And we continue to believe the Tier 1 and Tier 2 market overall will be healthier relative to the Tier 3 and Tier 4 business, which will continue to experience difficulties.”


Staples’ (SPLS) CEO Ron Sargent on Q3 2015 Results
Ron Sargent – Chairman and CEO

Markets softened across all categories early in the quarter

“Early in the quarter, the markets softened across all categories relative to the trends we had seen during the first half of 2015. We also saw deceleration in our contract print business as we cycled a couple of large customer wins from last year and continue to feel pressure from the ongoing digitization of our forms business.”

I don’t know if there’s been a lot of change in corporate spending behavior

“from my perspective, I don’t know if there’s been a lot of change or differences in corporate spending behavior. I know in general, technology has been weak and we have had great success in selling products beyond office supplies.”

Office supplies down to only 45% of sales mix

“You look at the total company mix, gosh, it wasn’t that long ago, we were probably 75% to 80% office supplies and today I think that number for the whole company is probably about 55% office supplies and 45% BOS or beyond office supplies, and obviously, as BOS continues to grow, at some time point those lines will cross and will be more non-office supplies than we are office supplies.”


Macy’s Management Presents at Morgan Stanley Global Consumer and Retail Broker Conference
Karen Hoguet – Chief Financial Officer

Clearly the consumer isn’t doing as badly as our industry

“clearly the consumer isn’t doing as badly as what my industry, our industry is doing, because of some of the shifting in spending patterns of the customer. But that didn’t change between Q2 and Q3.”

Top malls are still going to be fabulous shopping experiences

“one of the thought from the industry that I hear most often is what is the future of malls? And we kept hearing ourselves saying, we have absolutely no doubt that the top malls are going to continue to fabulous shopping experiences.”


Wells Fargo’s (WFC) Management at BAML conference
David Carroll – Senior EVP, Wealth and Investment Management

I’m bullish on financials

“Personally, I’m very overweight financials; I have it for a long time. But seriously, I’m pretty bullish on the sector. I think institutions are very positively positioned relative to raising rates. I think if we do get any kind of economic expansion, financials are going to be the beneficiary of it. But, we are better capitalized more liquid than we have been in a decade. I think in our case, given the breadth of our business mix, whatever parts of the economy, you are experiencing growth we are going to benefit from it.”

DOL proposals on fiduciary standard have unclear impact

“Again we don’t know. There is speculation that this could be the catalyst for the demise of 12b-1 fees and other types of network — networking fees. We don’t know. So it’s kind of pointless to speculate on it. At the end of the day, we have enough confidence in our platform and in our client relationships. We think we’ll be successful.”


Tractor Supply Company’s (TSCO) CEO Gregory Sandfort Presents at Morgan Stanley Global Consumer and Retail Brokers Conference

There’s a lot of things that can’t be delivered to a customer via drone

“Omnichannel for us is a growing business but there are a lot of things that can’t be sold on omnichannel and delivered to the customer through a drone or through an easy methodology. And some of these things are things that are unique to Tractor and we have to find ways to get it to our customer.”


Philip Morris International (PM) Management Presents at Morgan Stanley Global Consumer and Retail Brokers Conference
Jacek Olczak – Chief Financial Officer

Russian market responding to price increases reasonably well

“So far the total industry volumes are responding to the price increases within the sort of acceptable elasticity ranges, but we’ll have to – I think Russia will remain one of the least of the countries to watch the next year. I mean so far everything seems to be working well. There is some down trading, but with the price increases which we are taking there, I mean obviously you will have some down trading.”

No Macro environment that really concerns me

“Nothing today stands in the least which would worry me. There are few places to watch, but I think it’s pretty manageable going forward.”


General Motors’ (GM) CEO Mary Barra Presents at Barclays 2015 Global Automotive Conference

More change in this industry in the next 5 years than we’ve seen in the last 50

“I believe that we’ll see more change in this industry in the next five to 10 years than we’ve seen in the last 50, but we are not waiting to follow, we are not waiting to be disrupted, we are disrupting ourselves because with all these changes and challenges there is also opportunity whether it’s the strength in the U.S. market whether it’s the growth potential in China although China is moderating and even with the non-traditional entrants coming in the space when you look at the assets that we have and I’ll cover them as we go through the presentation, we feel we are well positioned.”

Will be launching the Bolt 200 mile range

“And we’re very excited about the next generation Volt which is the foundational technology that enables us to be able to be launching the Bolt, and the Bolt will go 200 miles on a charge, this really starts to change the equation in all electric, remember the Bolt is extended range electric vehicle because once you get to 200 miles you really get to a point for most drivers most days even with unexpected, you’re not going to create range anxiety”

You could make the argument that sharing cars will expand the market

“”when you look at sharing you can look at it and say, hi that’s going to be less cars sold. But you can also say it’s going to enable people either the use or people who have some impairment or at an age where they are not able to drive. And so I think it expands the market.”


Macys 3Q15 Earnings Call Notes

Retail industry is going through a tough period

“We believe that the retail industry is going through a tough period that we seem to experience something like this every five years to seven years or so, and this one feels familiar in that regard.”

Not happy with our results and committed to fixing it

“know just that I’m just not happy with our current overall results and I’m committed to fixing it.”

International tourist sales down

‘First, sales performance in our tourist doors weakened versus the second quarter, with a significant decline in international tourist sales. Using international credit card sales as the proxy, we estimate the impact of the lower international tourist sales to be approximately 1.5 points in the third quarter, which compares to the one point that we talked about for the first quarter and the second quarter.”

Warm weather hasn’t helped

“Second, the weather has not helped with the warm temperatures experienced across the country. Our sales of cold weather merchandise, such as coats, sweaters, boots, et cetera were significantly below last year in the quarter.”

Active continues to be very strong category

“Active continues to be a very strong category for us across the store, whether it be in men’s, women’s, or kids.”

Our industry can be cyclical and it’s wise to maintain investment grade flexibility

“Our industry can be cyclical and you don’t have to look far back for evidence that swings in leverage can be material through this cycle. We’ve lived through enough downturns and bankruptcies to know that there is a real benefit to the retailer of maintaining the flexibility of an investment grade rating and having access to capital in all markets, particularly when the industry is in flux.”

We’re modeling easier comps as we anniversary weak tourist spend, but other than that not expecting much improvement

“as difficult as the 2% to 3% it is, it’s a slight improvement versus how we have been in the third quarter. And frankly I think part of that is the fact that we will anniversary the weakness of the international tourist business which we felt in the middle of December last year and throughout January. But we’re not expecting any major trends and change, as you can tell, other than that. So I wish I could say it’s going to get ice cold across the country, I wish I could say that tourists are going to begin to show up and start spending, but you can see in our forecast for fourth quarter, we’re not expecting that.”

I’m not selling lumber, I can’t carry inventory over to 2016, I have to take markdowns

“of course all retailers who are in the fashion business like us, we’re not selling lumber, so I can’t carry the lumber over to 2016 and sell it at the same price next year. We’re selling fashion apparel and so we’re going to mark that inventory down. That will be good for consumers, but it will obviously put pressure on our own margins in the fourth quarter”

You have to shoot when the ducks are flying

“you have to shoot when the ducks are flying, and they’re flying in November and December. That’s when the traffic is there.”

Eventually it’s going to get cold and hopefully before we mark down inventory

“You want to believe that eventually it is going to get cold, and so when it does, that consumers will, and traditionally, they have reacted to that. So you don’t necessarily need to mark all of that inventory down. At some point, we will; but you’d like to be able to get some of that business in the higher margin and at the higher average retail early when the weather does break before you have to mark down.’

Data indicates that consumers still have money to spend we’re just waiting to see if they will. I think the state of the consumer is actually reasonably ok

“First of all, one of the things that you mentioned about the consumer is that the nature of the consumer is that they’re (46:24) first quarter they were spending in categories such as automobiles, in home improvement, certainly in technology and healthcare. You could find the specific categories where the consumer was spending and that did demonstrate that there is reason to believe in the GDP forecast. However, that dropped off, we all saw how that dropped off in the third quarter and yet some of those categories continued to perform. So, they have – and their savings accounts still indicate – well they’re a little less than they were in second quarter, they still indicate that there is money to spend if the consumer chooses to do so in the fourth quarter. We’re just waiting now to see if, in fact, they will. So, I think the state of the consumer is actually reasonably okay”

It’s hard not to talk about the weather

“I hate complaining about the weather but in a quarter like this it’s really hard not to talk about it.”

Omnichannel complicates measurement of sales by channel

“One of the complicated things about our business is that we’re going to continue to aggressively support omnichannel shopping, but in many cases the customer is actually looking at her phone first, deciding where to go, coming in to the store, spending time inside the store, talking with our associates, maybe even trying the product on and then buying the product from us later, either that day or putting it in her basket and buying it a day or two days later. And so we don’t necessarily believe that that sale would take place if they didn’t have the store experience, but when you look at the store impact, that’s a negative for the store in terms of time invested, expense invested versus – and a positive for the online business, who is getting the credit for the sale.”

“it does create a complication for us in making sure that we understand just how many stores we need, how far will the customer drive to, try on this product once they’ve discovered it on their mobile device or their tablet device.”

This is absolutely not like 2008 or 2009

“Someone asked me just earlier this morning, is this similar to 2008 and 2009, and my answer is absolutely no. It’s not similar because then it was a crystal-clear massive pullback by consumers and we literally saw them stop shopping the day of the Lehman Brothers collapse. The next day business dropped dramatically, we just saw consumers stop spending for a strong period of time. So this is different. This is what we’ve seen, a slowdown, as you said, in transactions particularly in this last quarter. We also here can see that the fundamentals of the economy are in much better shape than they were in 2008 and 2009. ”

There was no major difference in upscale vs. mid household income

“there was no major difference in the more upscale consumer of Bloomingdale’s than there is for the more mid-household income consumer of Macy’s. It was really the swing was more along the lines that I’ve just described with that international tourism and the concentration of our business in the Northeast.”

Andrew Sohn Notes: KORS, SHAK, M

Andrew Sohn, a junior at Columbia University, has started to contribute to Avondale’s company notes database. Below are quotes from some of the calls that Andrew has read this week.

 

KORS

 

Cannibalization of mall traffic

“In North America, we experienced a high-single-digit comp decline, reflecting a channel shift to online purchases and the continuation of reduced mall traffic.” –Michael Kors (KORS)

 

Store traffic future looks bleak

“Near term, we expect continued pressure from macroeconomic headwinds, including currency fluctuation, lower store traffic due to channel shift, reduced tourism in select markets and geopolitical issues.” –Michael Kors (KORS)

 

Ready to pivot for new tastes, newness is key

“Newness is without a question what is driving her interest, and I just might add, on that point, if you look at what’s happening, there’s some really good things starting to happen in the handbag business. Backpacks are starting to trend, and I think we’re a leader in that category. I think we’ve caught it pretty early on. There’s a very big shift towards smaller handbags and then crossbodies and small leather goods, particularly the millennial customer. It’s the way that she’s shopping. It’s the way that she’s wearing the product.” –Michael Kors (KORS)

 

Luxury companies should have strong balance sheets

“We believe that having a company that operates with a strong balance sheet is the right way to build a luxury company. Other companies don’t run their businesses that way, but we think a luxury company should be run with a strong balance sheet, of which we’ve done from the date that we really went public.” –Michael Kors (KORS)

 

Reducing inventories for department stores

“as we see the department store channel in North America slowing down because you know that, you know the department stores here are not posting robust results. We’ve decided to reduce the amount of inventory that we’re starting to put into that channel because we don’t want to have a lot of markdowns showing up inside the channel.” –Michael Kors (KORS)

 

Odd things happening in Europe

“You know, it’s so funny because while Greece doesn’t mean anything, while that was going on, all of a sudden business softened up. And the minute that that kind of got past whatever was in the consumer’s mind, our business in this quarter has really accelerated. So there’s some funny stuff going on over there.” –Michael Kors (KORS)

 

 

SHAK

 

Pursuing cluster growth

 

“We continue to execute our strategy to cluster growth in existing markets, opening our third Shack in New Jersey, at the village of Bridgewater Commons; and our second Shack in Chicago, on Michigan Avenue, on the ground floor of the impeccably restored Chicago Athletic Association, a boutique hotel overlooking Millennium Park.” -Shake Shak (SHAK)

 

Increasing pace of growth due to favorable environment

 

“Development conditions remain favorable for Shake Shack. And as a result, our team has been able to increase our pace of openings to exceed our originally stated guidance of at least 10 new domestic company-operated Shacks in 2015. We are confident that we will now open 12 new domestic company-operated Shacks in 2015.” -Shake Shak (SHAK)

 

Commodity prices going to be a problem for the foreseeable future

 

“As you know, we follow the market in our major baskets of beef and dairy. So beef is still up, high-single digits from last year for us, even in Q2. So we’re being conservative about what that means for the rest of the year. And we just don’t see the light at the end of the tunnel there just yet for sometime. We’ve been winning on dairy as of late, but then as Jeff noted starting to get a little more expense. Eggs are up. Our dairy costs have gone up” -Shake Shak (SHAK)

 

 

M

 

Consumer spending restricted to certain categories

“The overall growth in the economy is modest at best and we are seeing customers gravitating to restaurants, recreational services, healthcare, and electronics rather than to traditional general merchandize apparel and furnishing category.” -Macy’s (M)

 

Cautious expansion in China

“Our game plan is to start small and use a test and learn approach as we move forward. We also believe that by increasing the presence of Macy’s in China, we will actually help our business here as well both with the Chinese tourists as well as Chinese residents.” -Macy’s (M)

 

Must maintain financial flexibility

“the key here is maintaining financial flexibility, so that if the business hits a bump, we would still have the access to the financial markets that we need to operate the business as a proxy for that. That is why we talk about remaining investment grade as being so important to the company because we want to be a strong retailer for many years to come, and so we do need to have that flexibility for the speed bumps that do happen or the cyclical nature of retail.” -Macy’s (M)