NAOS CEO Insights

CEO INSIGHTS – Week Ending 12 June 2020 By NAOS Asset Management

June 12, 2020

“The demand for the brand and the demand for the [athleisure] category, I feel, has only strengthened through this pandemic” Calvin McDonald, CEO, Lululemon Athletica Inc

CEO INSIGHTS – Week Ending 12 June 2020 By NAOS Asset Management

“The demand for the brand and the demand for the [athleisure] category, I feel, has only strengthened through this pandemic” Calvin McDonald, CEO, Lululemon Athletica Inc

As part of the NAOS investment process, we pay particular attention to the comments made by company CEOs 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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Domestic Economy

“Quarter four this calendar year is going to be the hardest economic quarter this country has faced maybe ever, but certainly in 100 years” Tom Seymour, CEO, PwC Australia

“You can’t stop an economy in the way that we had to do because of a health crisis and expect it to bounce back overnight. It will take many, many months to get back” Ross McEwan, CEO, National Australia Bank Ltd

Global Economy

“We’re not thinking about raising rates. We’re not even thinking about thinking about raising rates. What we’re thinking about is providing support for the economy. We think this is going to take some time” Jerome Powell, Chairman, US Federal Reserve

Global Retail

“The demand for the brand and the demand for the [athleisure] category, I feel, has only strengthened through this pandemic” Calvin McDonald, CEO, Lululemon Athletica Inc

Residential Property

“We are not seeing the drop [in housing transactions] to the degree that was initially predicted. There has been a slowdown but nowhere near to the extent that had been suggested” Glenn King, CEO, Property Exchange Australia [national property lodgment system]

Housing & Construction

“The uptick in DIY demand ... was broad-based project activity ranging from outdoor landscaping and other beautification projects to essential indoor repair and maintenance work and long-deferred home projects, the to-do list that customers hadn’t previously tackled given their busy schedules” Marvin Ellison, CEO, Lowe’s Companies Inc [world’s second largest hardware chain]

“Significant demand growth has continued in Bunnings and Officeworks as customers continue to spend more time working, learning and relaxing at home” Market Announcement, Wesfarmers Ltd

Travel

“I am pleased to say, but I would not get overly excited about it, that we have seen nice growth coming into May” Peter Kern, CEO, Expedia Group

“We prepared the company for the worst possible scenario, that it might last for 12 or 18 months or more, but fortunately we’ve been surprised by how fast things are recovering” Nathan Blecharczyk, Co-Founder, Airbnb Inc

Aviation

Financially, 2020 will go down as the worst year in the history of aviation” Alexandre de Juniac, CEO, International Air Transport Association [IATA]

“After US$84 billion net losses this year, we forecast supplementary losses of US$15 billion in 2021. By comparison, airlines lost US$31 billion with the global financial crisis and oil price spike in 2008 and 2009. There is no comparison for the dimension of this crisis” Alexandre de Juniac, CEO, International Air Transport Association [IATA]

Transport & Logistics

“There is a time lag of about a month or more from production to sales. There is pent-up demand, but forecasts that we will be fully back in the fall and car sales will be stronger in October and November than last year are optimistic” Emanuele Grimaldi, MD, Grimaldi Group SpA [multinational cargo shipping conglomerate]

Workplace

“I sense the work from home dynamic is a permanent change... Over time people will continue to upgrade their home offices to ensure they can work productively from home — it has only just started” Richard Murray, CEO, JB Hi-Fi Ltd

“I think the office is going to become more and more about meeting rather than working” Bill Meaney, CEO, Iron Mountain Inc [workplace data/document storage multinational]

“Anyone that says they’re not going to return to offices, I think, is naive to how a culture [of a company] is built” Bruce Flatt, CEO, Brookfield Asset Management

“It's clear that the ways of doing business are changing. Remote work is here to stay, core business processes will only become more digital” Dan Springer, CEO, Docusign Inc

Education & Employment

“Today, most universities have been actually stunted by this. They're not making the long-term strategic decision [to move to online education]. They're making short term decisions on what the hell do I do to get my students back on campus” Brian Napack, CEO, John Wiley & Sons Inc [multinational academic/education publishing house]

Energy & Resources

“Demand for renewable energy, a key part of the energy transition, is expected to increase this year despite COVID-19 and we're seeing renewable projects continuing to be awarded” Chris Ashton, CEO, Worley Ltd

“As a result of the COVID-19 pandemic, demand from steel consuming sectors in certain regions has dropped by between 20 per cent and 40 per cent – an impact which is likely to continue for 12 to 18 months, compounding an already challenging market” Sanjeev Gupta, CEO, GFG Alliance [global energy & resources conglomerate]

Environmental

“We all know that tackling climate change is one of the biggest issues that we face and during the last year, awareness has grown more than ever… and the pace of change is really accelerated. This trend will only get stronger and may even be accelerated in the post-COVID world” Robert MacLeod, CEO, Johnson Matthey Plc [multinational specialty chemicals manufacturer]

Important information: This material has been prepared by NAOS Asset Management Limited (ABN 23 107 624 126, AFSL 273529) (NAOS) for general information purposes only and must not be construed as investment advice. Certain economic, market or company information contained in this material may have been obtained from published sources prepared by third parties. Nothing contained herein should be construed as granting by implication or otherwise, any license or right to use such third party content without the written permission of the owner.