Urban Outfitters 2Q18 Earnings Call Notes

Richard Hayne – Chief Executive Officer

Performance far below expectations

“Thank you, Trish. Thank you, David and good afternoon everyone. Let me say at the outset that URBN’s overall second quarter performance fell far short of our expectations. A very slow start for the quarter led to disappointing results in Anthropologie and Urban Outfitters in North America. At the same time we saw excellent comp sales gains at both larger brands in Europe with the women’s apparel category particularly strong. In North America however, the underperformance was driven primarily by the women’s product. In addition, decreases in total comp store sales more than offset the positive sales delivered by the wholesale segment and the direct to consumer channel.”

Fashion/shoes sell a little better online

“I think in general what we can say is that we tend to sell fashion a little bit better online than in the stores, that’s just in general. But other than that, I don’t think there is any particular categories that did so extremely well. I guess you could say home, furniture, particularly in Anthropologie tends to sell online, but that’s largely because it’s not in stores. So, there are some categories that we don’t have represented in the stores as much. Shoes tend to sell a little bit better online than they do in stores, but I don’t think there is anything that we are doing this any different than what you see generally.”

It’s a hyper competitive environment

“I think we are in the time of hyper competition. People are out there trying to get market share. They are doing things that one typically wouldn’t do in a business. I guess, the elephant in the room there, you know who it is, is doing an awful lot of things without regards of the bottom line and is getting rewarded for it. And so there are an awful lot of other people trying to do the same thing. So yes, I think there is margin opportunity. I think we could get there, but I also am very, very aware of the hypercompetitive space that we are in.”

Trish Donnelly

We made some mistakes

Thank you, Frank and good afternoon everyone. This is the difficult quarter for the Urban Outfitters brands, it would be very easy to blame outside factors or disruptors, but frankly we made some mistakes and we own the results. I will spend the next few minutes talking to where we went wrong, what we learned and how we refine these learnings very quickly to get back to growth. And despite the negative 8 global comp, we did have some notable successes particularly in our international business that I will highlight at the end of my commentary. First what went wrong, at the end of last year the North America business started to see a slowdown in trends in our all important dress category which has previously been driving double digit comparable sales at high average unit retails and historically fast turns. Given the sudden softness in this category, we over-corrected in spring, planning the dress offering and the quantification down too dramatically. We focused too heavily on the separates trend, at the expense of dresses and our sales in separates didn’t make up for our loss in dresses. In addition, within separates, our product focus was too one-dimensional; it skewed too tomboy in sensibility and carried lower average unit retails. Although tomboy was definitely a trend in spring, we distorted its importance too much and the customer started to miss the well-balanced and the broader assortments we have been so successful at curating

Amazon 2Q17 Earnings Call Notes

Brian T. Olsavsky – Amazon.com, Inc.

Explanation of Whole Foods purchase

Sure, Colin. First, as far as Whole Foods is concerned, as Darin mentioned, it’s not included in this guidance since it hasn’t closed yet, but we are excited about that acquisition and looking forward to working with the team at Whole Foods. We think they are very customer-centric, just like us. They’ve built a great business, focus around quality and customer. So we’re really glad to join up with them. On your larger question about what the place of Amazon Fresh, likely Prime Now and some of our other efforts, I would say we believe there’ll be no one solution, so we’re experimenting with a number of the formats from physical pickup points in Amazon Go to online ordering and delivery to your door through Prime Now and Amazon Fresh.

Marks and Spencer FY 1Q17 Earnings Call Notes

Steve Rowe – CEO

Current state of the consumer

“The economic thing, the customer is quite volatile and what do I mean by that, they are shopping very much for today they quite lied at the moment. And to give you an idea without getting too granular, we’re seeing fluctuations on a weekly basis in departments like men’s knitwear from sort of plus 50 to minus 20 on a weekly basis, depending on weathers. So, they’re really are shopping for today. In terms of how they feel, our surveys are not dissimilar to the GfK one. And the consumer confidence overall, how they feel about themselves, is actually reasonably robust albeit it came down by about 5 or 6% over the last few weeks. I think the key thing about that is we’ll have to see how that pans out when we get back from the summer and the summer holidays. In terms of how they feel about the economic environment though, they still feel less robust about that as we move forward. And again that came down by about 4% or 5% in the last survey and we’ll keep a careful eye.”

Helen Weir

Hong Kong has been difficult market with reduction in mainland tourists

“We’ve also seen a slight improvement comeback in Hong Kong, which has been a difficult market for some time. You’ll be aware with the reduction in Mainland tourists going over to Hong Kong. But we’re seeing good growth coming through there in part also because we’ve expanded our chilled food offer. So, we’ve seen strong growth coming through there and what’s interesting, I was hearing yesterday, I think we’ve recently started shipping bacon over to Hong Kong, and we’ve done a 1,000 packs a week and stuff like that. So, what we found is quite a strong market is we’re able to expand our chilled food offer in Hong Kong. So, those are probably the two markets I’d call out is being to give a little bit of color to where we’ve got some of the strongest performance.”

Bed Bath and Beyond 1Q17 Earnings Call Notes

Steven Temares – CEO

*We’ve had to make a lot of investments that have just maintained market share

“The general answer is that investments we’ve made been essential for us. And to the degree that they have been good investment they have been necessary and good investment. And if you look at where we would be without these investments, you are looking at the people that we were consider best in class with 7, 8, 9 years ago across all the big boxes, many of them don’t exist today. So it’s unfortunately from a bottom line perspective is that as the world evolves these investments aren’t producing growing earnings but they are sustaining our relative position in the landscape. So we remain when we look across now 46 different competitors, one of the most successful retailers out there with some of the best return. But we are not satisfied with that but these investments need to be made. If we didn’t make these things, we won’t exist today. ”

Susan Lattmann

We are keenly aware of the free shipping threshold

So I’ll take the first part of that. So regarding the free shipping threshold, we did anniversary for Bed Bath & Beyond the $29 free shipping threshold. For this particular quarter the entire quarter was at $29, where compared to last year about half of the quarter was at $49. In terms of competition, obviously that’s something that we are keenly aware and we look to see what’s the free shipping threshold is for others. It’s considered part of a value prop and we realized that the customer look to that when making their purchasing decision. But for now we feel the $29 for Bed Bath is a good spot to be in it, a sweet spot and that’s where we are for now.

Wal Mart at DB Access Conference Notes

Brett Biggs

We have 50m SKUs online

“So back about a year ago, we had around 10 million items online. Now, we have over 50 million items online. Now, 50 million still not as much as some of our competitors would have. The difference between 10 million and 50 million is a big difference. Over time, I think, we’ll figure out what the right number of skews would be online.”

There will always be places where stores make sense

“So I’ll start with the kind of the square footage strategy. So today in the U.S. about 90% of U.S. population lives within 10 miles of one of our stores. So we’re very close to the customer. And we think that’s a benefit for us going forward whether that’s brick-and-mortar, or whether that’s eCommerce. We’ve talked about that we’re building fewer stores in the U.S. We’ll have a couple of handfuls of Supercenters that will open and about the same number of neighborhood markets. We want to – I think there will always be places where stores will make sense. ”

United Natural Foods’ (UNFI) Q3 2017 Results

Steve Spinner – Chairman & CEO

Same store sales under pressure

“Same-store sales at many of our retail customers were under pressure or negative during the quarter. Our retail customers are facing competitive pressure not only from other food retailers, but also from many channels now carrying assortment of better for you products.”

Deflation being experienced

“We continue to experience deflation…This was an improvement from the second quarter; however, reflects a headwind compared to the year ago period when we had inflation of 1.25%.The general lack of inflation also caused what we believe to be a short-term pressure on gross margin dollars…Deflation has continued but is moderated.”

Retailers facing growth headwinds

“…when you look at general same-store sales year-over-year, quarter-over-quarter, many of the retailers across most of the channels are facing some real headwinds in terms of growth. And as part of that, we’ve seen certainly a fair number of store closing as retailers are coming together and so in the near term that’s been a real headwind for us, but inflation will return.”

Michael Zechmeister – CFO

Lack of inflation is a headwind

“In the third quarter fiscal 2017, we experienced deflation of approximately 17 basis points excluding the impact of the recently converted Haddon House warehouses. The result was a slight improvement versus the second quarter of this year, but the lack of historic levels of inflation continues to be a headwind to our net sales growth and to our margins.”

Wal-Mart Stores’ (WMT) at Robert W Baird Conference

Targeting different audiences

“the way I think about it is really there is two main sites in Jet and Walmart, both mass sites going after different audiences, but sharing the same back end. So we get leverage on the retail teams, on the logistics. But from a consumer standpoint, we get access to more customers. We are sort of able to now push Jet more premium, going after the higher income urban customer, which is not the typical Walmart.com shopper and Walmart.com with everyone else.”

More  focused on organic growth

“We are really focused on organic growth. We have got store number eight, where we are incubating start-ups that are ring-fenced with the store organization. We are building that from scratch. We will be partnering with folks, but primarily organic.”

Conversational commerce is the future

“I think in order to think about the future, you have to kind of look to the past a little bit and make sure you are looking through the right lens….I think two big areas. One is conversational commerce with the advances in artificial intelligence, machine learning.  It won’t be long before you are able to have a much richer experience and talk in a very conversational way, where you have the – you are talking to as much an expert in a particular product category like you would if you walked into a specialty retailer and talk to the expert on the floor. ”

Laser focused on offering unique value

“it’s really just about getting more customers to shop with you and have them come back more often and buy more when they do. And that’s what we saw in Q1. We saw a lot more new customers come in. We saw existing customers shop more frequently and buy more. So at the end of the day, comes down to the value proposition that you offer customers….that’s where we are maniacally focused right now.”

At Home Group’s (HOME) on Q1 2018

Lee Bird – Chairman, CEO and President

A strong quarter

“Each quarter we have seen strong new performance and for the first quarter of fiscal 2018 with no exception with openings in markets …This strong performance is especially notable in a quarter like Q1 where six of our seven openings were in brand new markets. Again underscoring affordability of our concept and validating the substantial store growth opportunity that lies ahead.”

Comp stores sales to be higher

“We expect that comp store sales through the second quarter will be higher than our full year outlook with lower comp performance in the second half of the year as we lapped strong third and fourth quarter results.”

Judd Nystrom – CFO

Strong top-line growth

“We increased first quarter net sales by 23.1% to $211.8 million representing our 12th consecutive quarter of 20 plus percent net sales growth. Our Q1 comp of 5.8% delivered our 13th consecutive quarter of positive comp store sales. Strength was broad based across product categories, geographies and vintages with stores greater than 5 years old comping in line with the teen average….”

No choppiness in retail

“We did not see the choppiness that other retailers have highlighted…. We exited on a strong note and we said that the momentum has continued into the second quarter and we are very pleased with our business through the first 4 months of the year.”

Increased inventory levels

“net inventory increased 43.7% over the same quarter last year….New store growth…drove two-thirds of the increase. The remaining third of the increase was driven by our investments in incremental low price inventories during the second half of last year including the associated transportation costs that will turn through profit sales in the upcoming second quarter of fiscal 2018.”

There are several closures and they are picking some pieces up

“There is a whole lot of news out there about closures and so that creates great opportunities for us. I would tell you our pipeline has never been deeper. I like the quality of the pipeline and deeper the pipeline the more picky you can be against it…the deeper the pipeline gives you more flexibility against landlord “

Restoration Hardware 1Q17 Earnings Call Notes

Gary Friedman – Chairman & CEO

We don’t compete with Wayfair or Amazon

“Yes. We don’t really see any kind of meaningful threat from Wayfair or Amazon at this time. Those are very different businesses and presenting their goods in a completely different way and in many ways targeting the different customers. So I think I said that in my letter here if you step back and consider we’re really building a brand here and creating a customer experience that cannot be replicated online and we’ve got total control of our content from concept to customer.”

I think our retail experience is going to leap frog the entire industry

“So I think our retail experience is going to leap frog the entire industry and as it is today, I can’t tell you how many people from all over the world are traveling to Chicago and seeing that gallery and taking pictures and trying to understand what we’re doing there. I really think there’s nothing like the customer experience we’ve created in Chicago and our ability to recreate that experience and that energy and that fully integrated customer experience is going to further differentiate our brand in a such a much more meaningful way then even that design galleries that we opened over the last three four years and these are going to be very hard to replicate. It’s going to be very very hard for anybody to replicate it.

Sears Holdings (SHLD) Q1 2017

Rob Riecker – CFO

They are closing unprofitable stores to save costs

“In April, we increased our annualized cost savings target from our ongoing restructuring program to $1.25 billion from $1.0 billion. Based on the significant progress we delivered during the first quarter, including $700 million in annualized cost savings action to date. As part of the program, we completed the previously announced closure of 150 nonprofitable stores and initiated the closure of 92 underperforming pharmacy operations in certain Kmart stores and 50 Sears Auto Center locations.”

They extended maturity of debt

“During the first quarter of 2017, we were able to pay down approximately 418 million of our term loan debt outstanding. And as previously announced, we reached an agreement to extend the maturity of 400 million of our $500 million 2016 secured loan facility from July 2017 to January 2018”

The retail headwinds persisted

“the retail headwinds persisted in the first quarter with continued softness in the store traffic and elevated promotional markdowns due to competition. We reported total revenue of $4.3 billion in the first quarter of 2017, compared to $5.4 billion in the same quarter last year, representing a decrease of $1.1 billion. This was largely driven by having fewer stores in operations, which accounted for $557 million of the sales decline, and declines in our comparable store sales due to industry headwinds I just mentioned, which accounted for $417 million of the decline.”