NAOS CEO Insights

CEO INSIGHTS – Week Ending 6 December 2019 By NAOS Asset Management

December 6, 2019

"Landlords have incentivised international retailers into this space, they have diluted the market and killed companies” Mark McInnes, CEO, Premier Investments Ltd

CEO INSIGHTS – Week Ending 6 December 2019 By NAOS Asset Management

"Landlords have incentivised international retailers into this space, they have diluted the market and killed companies” Mark McInnes, CEO, Premier Investments Ltd


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 Retail

“Landlords have incentivised international retailers into this space, they have diluted the market and killed companies” Mark McInnes, CEO, Premier Investments Ltd

“We are in a tough and competitive retail environment and consumer sentiment in our core markets remains low” Solomon Lew, Chairman, Premier Investments Ltd

“Retailer confidence is improving” Jeff Adams, CEO, Metcash Ltd

Food & Beverage

“I think the other thing that is really helping us at the consumer level is this idea of new consumers entering into cooking. So [there’s been] a lot of discussion around millennial's over the years and the reality is that as millennial's age, we are finding them participating more and more in in-home preparation, we call it ‘quick scratch cooking’, which is essentially assembling several components to make a meal” Mark Clouse, CEO, Campbell Soup Company

“When you look at the statistics in the U.S., per capita coffee consumption is around 300 cups. In China, it's fewer than four cups. So there's significant headroom for growth” Pat Grismer, CFO, Starbucks Corporation

Technology

“Our largest [Australian] companies are really, really threatened by these globally driven software business models that in industry after industry are solving big problems on a global, not a local basis. And our companies are responding by paying 80 to 90 percent dividend payout ratios, seemingly responding by under-investing in systems and processes” Paul Bassat, CEO, Square Peg Ventures/Co-founder, Seek Ltd

Education & Employment

“I see companies playing a more active role in [employee] upskilling and reskilling” Rob Scott, CEO, Wesfarmers Ltd

“The higher ed [education] industry we serve has significantly transformed over the past few years, including a rapid shift to digital” Mike Huseby, CEO, Barnes & Noble Education Inc [global book publishing company for education industry]

Automotive

“The automotive industry is undergoing the greatest transformation in its history [referring to electric vehicles]” Market Announcement, Daimler AG [German automotive conglomerate/owner of Mercedes-Benz]

“The industry has been looking for a lift for some time now and has activated multiple levers to achieve some stimulation, including incentives, sales and special vehicle editions. However, the appetite for new vehicles remains suppressed” Tony Weber, CEO, Federal Chamber of Auto Industries

Domestic Economy

“The low level of interest rates, recent tax cuts, ongoing spending on infrastructure, the upswing in housing prices and a brighter outlook for the resources sector should all support growth” RBA Statement, December, 2019

Global Economy

“Our international business faced a number of escalating macro headwinds in our key markets, including the uncertainty around Brexit continuing to negatively impact sales in the UK, which is our largest international market. Beyond Brexit, ongoing protests in Europe and Asia also negatively impacted results. Specifically, Hong Kong continue to be a drag with intermittent store closures throughout the quarter” Fran Horowitz, CEO, Abercrombie & Fitch

Mining & Resources

“Strength in global capital expenditure on metals and mining projects [is] expected to continue” Market Statement, ALS Limited

“We have a large amount of renewal ahead, we have six major projects in the conceptual or order of magnitude phase, and a further eight in the pre-feasibility and feasibility stage, this is on par with the number we had during 2010” Chris Salisbury, President, Rio Tinto Iron Ore

“So if you look at the markets today, where do we see the markets today, what's happening in the markets; it's clear the markets are pretty well balanced, the markets look very tight and we've seen a large amount of destocking of the inventories” Ivan Glasenberg, CEO, Glencore PLC

“Inflationary pressures in all quarters of our business are quite significant and are, at time, a multiple of these low national average numbers that we constantly hear spoken about” Paul Flynn, CEO, Whitehaven Coal Ltd

Payments

“Nothing in this industry moves fast, right, because it's the network effect. You've got a chicken and egg problem” Vasant Prabhu, CFO, Visa Inc

“The reason you shouldn't underestimate the potential of that [our core] business is that it has never been easier, cheaper or faster to digitise cash than it is today. And that applies in developed markets, and it applies in emerging markets” Vasant Prabhu, CFO, Visa Inc

Telecommunications

“It [the industry] has to simplify ... I think there are so many [obsolete regulations]” David Teoh, Executive Chairman, TPG Telecom Ltd

 

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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.