NAOS News & Insights



April 13, 2017

CEO INSIGHTS – Week Ending 13 Apr 2017 BY NAOS Asset Management

“Nearly every home in this country is either in build, design or construction” Peter Ryan, Chief Network Engineering Officer, NBN

As part of the NAOS investment process, we pay particular attention to the comments made by company CEO’s and business leaders in order to gain a greater understanding of the current investment environment and key trends that may be emerging. Below are quotes from the week which in our view detail some of the most important and prominent industry trends and economic factors impacting their businesses.

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“Trading conditions in Australia and New Zealand continued to be challenging and same store sales were relatively flat for the third quarter”
Michael Hill International Market Announcement

“We’re planning as if the environment is not going to improve…We are aggressively positioning [Hudson’s Bay Company] to adapt to the changing retail environment”
Jerry Storch, CEO, Hudson’s Bay Company

“The [retail] pioneers that made that street [Manhattan’s Bleecker Street] are pulling back…it really casts a shadow. I haven’t seen a cycle like this before”
Faith Consolo, Chairwoman of Retail Leasing, Douglas Elliman

“This is absolutely the reality of our new retail economy. It's going to be a challenging cycle. You could lower prices right now and I'm not sure demand would flow back in at the same velocity that it did historically”
Gene Spiegelman, Vice Chairman, Cushman & Wakefield

“Getting older product off the floor is taking longer than expected, despite the markdowns that we've taken”
Charles Bergh, CEO, Levi Strauss & Co

“As far as retail is concerned, we're actually continuing the rationalization of our network with some select openings and some closures. Most of the closures are due to the fact that landlords asked for illogical rental increases”
Patrizio Bertelli, CEO, Prada

“In our core business, the U.S. retail landscape is increasingly challenged. Our largest U.S. wholesale customers have announced over 200 planned store closures in total for the year”
Charles Bergh, CEO, Levi Strauss & Co

“Selective Retailing [achieved] organic revenue of 11% in the first quarter of 2017. Sephora gained market share around the world and continues to record revenue growth. The US market is growing well, China confirmed the trend already observed at the end of 2016”
LVMH Market Announcement

“Most of the key regions saw improving trends in the second half of the year, with some particularly strong performance in a number of areas, including Mainland China, UK and Latin America. Performance in Asia Pacific was very dynamic in H2”
Alessandra Cozzani, CFO, Prada

“In Europe, we saw double-digit growth in H2 in the UK, driven by tourists taking advantage of the weaker sterling and also by local consumption. Russia also outperformed with double-digit growth throughout the year”
Alessandra Cozzani, CFO, Prada

“U.S. wholesale remained challenged and declined mid single-digits reflecting the soft environment”
Harmit Singh, CFO, Levi Strauss & Co

"We had very strong results in women's and tops globally, which is really what's fueling the growth"
Charles Bergh, CEO, Levi Strauss & Co

Tourism & Leisure

“It is pleasing to see the combination of solid [Total Transaction Value] and margin improvement, particularly in the wholesale division. Our agency network is reporting very strong trading in the March quarter and our own transactional businesses have also performed well”
Andrew Burnes, CEO, Helloworld

“We are still incredibly bullish on Chinese tourism in the future”
Justin Fung, CEO, Aquis Australia

“Main Event experienced competitive pressure in several markets and a challenging consumer discretionary spending environment in Texas”
Ardent Leisure Market Announcement

“The Gold Coast experienced a 159% increase in total rainfall versus pcp [1st of March to the 24th of March], including greater rainfall occurring on weekend days. This unfavourable weather negatively impacted the general recovery trend since the Dreamworld tragedy. The Group believes the overall recovery of Theme Parks remains on track”
Ardent Leisure Market Announcement

Energy Investment

“Investors will look to the predictability and stability of Australia’s regulatory environment to assess the risk of making new investments in Australia’s energy sector, with a strong merits review regime being a key element of this assessment. Uncertainty about the ‘rules of the game’ will only increase the rate-of-return required by investors who fear material changes affecting their investment performance over time”
Brendan Lyon, CEO, Infrastructure Partnerships Australia 

Tax Policy

“While it is too early in the process to comment about potential impacts for Rio Tinto, a significant lowering of the corporate tax rate and simplification of the tax code would make the US a more attractive investment location. If Australia remains with a 30 per cent corporate tax rate, this will come at a cost to investment and jobs, as other nations leave Australia behind”
Chris Lynch, CFO, Rio Tinto

Global Economy

“India is showing it can grow at a rapid rate; that is offering enormous opportunity for Australia. Our trade with India has a lot of untapped potential”
Malcom Turnbull, Prime Minister, Australia

NBN & Telecommunications

“Nearly every home in this country is either in build, design or construction”
Peter Ryan, Chief Network Engineering Officer, NBN

“Across our [Multi Technology Mix] suite we are very much scaling the build at a rapid rate. We are now at over 4.3 million premises ready for service and will be halfway built by midyear. Between now and June 30 we will be making 1 million more premises ready for service”
Peter Ryan, Chief Network Engineering Officer, NBN

“The current allocation of NBN Co is good as it serves a purpose, but the biggest challenge with 5G will be in the metro areas”
Inaki Berroeta, CEO, Vodafone Australia


“We saw double-digit declines in average domestic business fares from early 2015 through last fall. Since then, fares have recovered roughly half of that lost ground”
Glen Hauenstein, President, Delta Air Lines


“If people are kept out of the market because of the rules, and they see prices continuing to go [up], and they say 'I can afford a 15 per cent deposit but if you make it 40 per cent, like they have done in New Zealand, I can't get in' - that is going to be interesting”
Andrew Thorburn, CEO, NAB

Media & Advertising

“We are supremely proud of running a [newspaper publishing business] that is profitable. In a world where digital disruption is always there, you are never done with the transition. It’s continuous and may even end up accelerating. I am supremely optimistic about our future even if naturally there is quite a lot of work to get done”
Nick Hugh, COO, Telegraph Media Group

Housing Construction Boom in the US

“When we’re trying to compete [for loans], we see term sheets coming through with interest-only transactions, terms going out longer and longer, some loosening in guarantees”
Chandler Howard, CEO, Liberty Bank (US)

“We’re being very wary of it right now. The wound has healed, the scab is gone, and we [as an industry] are thinking this isn’t such a bad asset class after all – but we often have shorter memories than we should”
Mary Ann Scully, CEO, Howard Bank (US)


“Our analysis shows that diversification does not lead to superior risk-adjusted returns for companies like BHP”
Elliot Management Corporation


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