Aiera Investor Event Recap — Week of August 23, 2021
Retailers talk consumer confidence, spending, and vaccination policies as Q2 earnings season continues to wind down.
Companies Roll Out Varying Vaccination Policies for Employees Amidst Delta Surge
“Since the pandemic began, we’ve been clear that our priority is the safety of our associates and those who shop with us. We think it’s important that as many people in the U.S. get vaccinated as soon as possible and vaccines be made widely available around the world, as the Delta variant spread and as the potential for future variants persists, we made the decision to require our U.S. teams above store and club level to become fully vaccinated by October 4. At the same time, we doubled the cash incentive to get vaccinated for hourly associates in the U.S. to $150. We’re grateful to those associates that are already vaccinated.”
- C. Douglas McMillon, President, CEO & Director, Walmart Inc. | Q2 2022 Walmart Inc Earnings Call, Aug 17th, 2021
“Our highest priority continues to be the safety and well-being of our team members and members. As a result, we have tightened our COVID protocols around the chain in response to the resurgence of the virus, including the introduction of a vaccine mandate for our home office and field support teams.”
- Robert W. Eddy, President, CEO & Director, BJ’s Wholesale Club Holdings, Inc. | Q2 2021 BJ’s Wholesale Club Holdings Inc Earnings Call, Aug 19th, 2021
“The reason we started that way, we had 10% unvaccinated was we didn’t know how the vaccine was going to — vaccinated sections we’re going to sell at that time. Other sports teams, who had tried vaccinated zones, were miserable failures. So we really were the first of the kind. And so we started off with a little unvaccinated, little vaccinated and the vaccinated was selling, and we started hearing the consumer demands. So we said, let’s keep on going. And we were able to drive the capacity. And to be honest, we really were fine blind going into it. We just didn’t know what consumers were going to want. And it was very clear. We hoped, we did our survey — research. But again, until you actually do it, you never know the proof is in the pudding, and it was there. So we know that this market wants vaccinated fans.”
- Andrew S. Lustgarten, CEO & President, Madison Square Garden Sports Corp. | Q4 2021 Madison Square Garden Sports Corp Earnings Call, Aug 19th, 2021
“We are continuing to encourage all employees to get COVID vaccinations by providing them with paid time off when they receive the vaccine and providing them absence time to be used in the event they develop side effects. In June, we launched an employee sweepstakes with more than $100,000 in cash prizes to encourage our team members to get vaccinated. To show our appreciation for their hard work and ongoing efforts in the face of pandemic fatigue, we paid employee gratitude bonuses at the beginning of the quarter.”
- Corie Sue Barry, CEO & Director, Best Buy Co., Inc. | Q2 2022 Best Buy Co Inc Earnings Call, Aug 24th, 2021
“When it comes to vaccines, we follow local guidelines on a country by country or market by market basis in the U.S. When we’re talking about our U.S. organization, we do have a vaccine mandate where we expect all employees to be vaccinated by mid-October.”
- Timothy P. Walbert, Chairman, President & CEO, Horizon Therapeutics Public Limited Company | Horizon Therapeutics PLC at Handelsbanken Life Science Innovation Day, Aug 25th, 2021
“Meanwhile, our people are free to use our offices as long as they are vaccinated and keep each other safe and then we’ll continue with the essential workers in our facilities and with the rest working remotely or, if vaccinated, in our offices. And last I’ll say is that, we’ll see what encourages vaccination. Some folks are going as far as to mandate it. Ours is voluntary at this time and what we’re doing is incentivizing our people to get vaccinated through some cash incentives and some additional time off, especially around that second dose, where some people need the day to get through it.”
- Helen of Troy Ltd Annual Shareholders Meeting, Aug 25th, 2021
“And while rising vaccination rates have supported a strong recovery in economic and employment growth, new variants are challenging this forward progress and complicating reopening plans. That’s why last week, we announced that starting November 1, colleagues entering a TD workplace will need to be fully vaccinated or be subject to additional safety protocols. We believe vaccination is the best path out of the pandemic and the right way to protect the health and safety of our customers, colleagues and communities.”
- Bharat B. Masrani, Group President, CEO & Director, The Toronto-Dominion Bank | Q3 2021 Toronto-Dominion Bank Earnings Call, Aug 26th, 2021
Further Evidence of Consumer Strength Offered
DKS (+16%), WSM (+13%), ULTA (+5%) Report Strong Quarters
“We’re now more than 12 months into significant top line strength, following the reopening of our stores last year. A portion of this strength was driven by stimulus payments, but more importantly, we’ve seen a fundamental shift in consumer behavior. The importance of health and fitness has accelerated, participation in outdoor activities has increased, and there’s been a far greater propensity for athletic apparel and athletic lifestyle products. These new habits and behaviors have largely continued into 2021, and looking ahead, we believe these trends have staying power.”
- Lee J. Belitsky, Executive VP & CFO, Dick’s Sporting Goods, Inc. | Q2 2021 DICK’S Sporting Goods Inc Earnings Call, Aug 25th, 2021
“While recent trends continue to track positively and we are highly encouraged by consumer demand over the rest of the year, our sales outlook balances this enthusiasm with the impact from the global supply chain challenges impacting product flow and availability, and it could affect our ability to capture the kind of upside sales we’ve had so far this year.”
- Lee J. Belitsky, Executive VP & CFO, Dick’s Sporting Goods, Inc. | Q2 2021 DICK’S Sporting Goods Inc Earnings Call, Aug 25th, 2021
“The acceptance of remote work is gaining traction with a number of remote hybrid workers expected to nearly double in 5 years from pre-COVID metrics. In addition, our growth strategies are gaining traction faster than we predicted, and our key differentiators are further distancing us from our competition. Therefore, we see a clear path to beating our previous revenue and profitability targets, and we are raising our full year revenue outlook again with revenue growth now expected to be in the high teens to low 20s and operating margins now expected to be in the range of 16% to 17%.”
- Laura J. Alber, President, CEO & Director, Williams-Sonoma, Inc. | Q2 2021 Williams-Sonoma Inc Earnings Call, Aug 25th, 2021
“Given our increased optimism, we now expect to achieve our long-term goal of $10 billion in revenues in 2024, 1 year faster than previously expected and with higher profitability, which will now be at or above our increased FY ’21 operating margins.”
- Laura J. Alber, President, CEO & Director, Williams-Sonoma, Inc. | Q2 2021 Williams-Sonoma Inc Earnings Call, Aug 25th, 2021
“The beauty category is recovering faster than we expected, and the investments we’ve made over the last year to adapt to the market disruption and strengthen our leadership position are delivering results…As consumer confidence, optimism and comfort to shop in physical stores continues to increase, we are seeing more of our members return to stores.”
- David C. Kimbell, CEO & Director, Ulta Beauty, Inc. | Q2 2021 Ulta Beauty Inc Earnings Call, Aug 25th, 2021
“We’re encouraged by what we see. And I think it’s just a testament that the other categories had been strong, skin care, hair care, bath, fragrance. And they remain strong. There’s a high level of engagement. But makeup, the trends that we’re seeing are encouraging. While it was slightly below 2019 levels in Q2, we had weeks and times during the quarter that it was positive versus 2019. Our mass business, we talked about in Q1, was above 2019 levels, and it accelerated in Q2, also above 2019. And our prestige business is improving. We’re bringing in newness. Our biggest brands are performing well. New brands are performing. So I think it’s just consumer behavior as we recover if there’s a high level of engagement, high level of excitement about makeup, more usage occasions and the momentum is building. Time will tell exactly when we get back to steadily being above 2019 levels and growing from there, but we’re encouraged by what we see.”
- David C. Kimbell, CEO & Director, Ulta Beauty, Inc. | Q2 2021 Ulta Beauty Inc Earnings Call, Aug 25th, 2021
Freight Costs, Delays Emerging as the Next Wave of Supply Chain Challenges for Retail
ANF (-14%), BURL (-10%), BIG (-13%) Fall, Citing Ongoing Pressures
“What I would tell you is we have seen, as we mentioned, seen increased pressure from freight. And so that is the limiting factor here in terms of the ability to take that up. We did — as others saw, we did see heightened pressures around transportation to a lesser extent. We mentioned with our LIFO provision, we did see higher costs in terms of product costs, and that’s largely a function of some transportation costs being passed through.”
- John W. Garratt, Executive VP & CFO, Dollar General Corporation | Q2 2021 Dollar General Corp Earnings Call, Aug 26th, 2021
“As we develop this outlook, we considered a number of scenarios, carefully balancing the benefits related to our brand strength, new product offerings and loyalty program against the near-term expense from inflation and supply chain pressures, including sizable investments in air freight to partially mitigate longer lead times and shipping delays so that our inventories will be well positioned to compete during back-to-school and holiday.”
- Katrina O’Connell, Executive VP & CFO, The Gap, Inc. | Q2 2021 Gap Inc Earnings Call, Aug 26th, 2021
“As you know, the lead times with ocean freight and freight in general have extended.”
- William J. Lynch, President & Director, Peloton Interactive, Inc. | Q4 2021 Peloton Interactive Inc Earnings Call, Aug 26th, 2021
“Freight charges are also going to be significant in the back half of the year on a year-over-year basis. We’ve got the incremental $6 million of supply chain expenses we talked about, which is essentially a pull forward from 2022, which will hit in Q4. The opening investments of the 4 distribution centers is also something incremental in the back half of the year. That’s absolutely the right thing to do, and we’ll support our future sales growth, but it does impact our expense structure in the back half of the year. in a way that we didn’t have that impact in the first half of the year.”
- Jonathan E. Ramsden, Executive VP, CFO & Chief Administrative Officer, Big Lots, Inc. | Q2 2021 Big Lots Inc Earnings Call, Aug 27th, 2021
“I would like to spend some time talking about the extraordinary freight and supply chain expense pressures that we are seeing. For several quarters now, there has been a significant imbalance in global transportation systems between demand and available capacity. This has caused unprecedented volatility and disruption in deliveries of merchandise across all sectors of retail. And it has caused a significant spike in international and domestic freight rates. As we move into Q3 and the peak period for retail deliveries, the situation is getting much worse. Again, this is not at all unique to Burlington. These conditions are affecting all retailers. Based on our experience and success so far this year, we are confident that despite these issues, we will be able to get timely receipt of the merchandise that we need to support our trend. But in doing this, we expect to incur significantly higher freight and supply chain expenses.”
- Michael B. O’Sullivan, CEO & Director, Burlington Stores, Inc. | Q2 2021 Burlington Stores Inc Earnings Call, Aug 26th, 2021
“Gross profit rates to be up at least 300 basis points to 2019 level of 60.1%, including an expected negative impact of approximately 300 to 400 basis points of freight cost pressure.”
- Scott D. Lipesky, Executive VP & CFO, Abercrombie & Fitch Co. | Q2 2021 Abercrombie & Fitch Co Earnings Call, Aug 26th, 2021
“On the supply chain constraints, yes, I’d say, right now, it’s tough out there. All the articles you read are real, and we’re all — those of us on this side of the fence are living through it every day. So those costs are in our inventory.”
- Scott D. Lipesky, Executive VP & CFO, Abercrombie & Fitch Co. | Q2 2021 Abercrombie & Fitch Co Earnings Call, Aug 26th, 2021
Peloton Drops 6% After Cutting “Original” Bike Price, Gross Margin Weakness
“Today, we announced our latest step on the journey to broaden the accessibility of our products. We are lowering the price of our original Bike by $400 to $1,495. Applying our 39-month 0% APR financing option, this equates to a hardware cost of just $39 per month. Adding our all access membership comes to just $78 per month, a monthly spend that scales across an entire household, creating an incredible value versus almost any other fitness offering. For a 2-person household inclusive of the All-Access Membership, that’s under $40 per person per month during the finance period and less than $20 per person per month thereafter.”
- John Paul Foley, Co-Founder, Chairman & CEO, Peloton Interactive, Inc. | Q4 2021 Peloton Interactive Inc Earnings Call, Aug 26th, 2021
“Gross margin for the quarter was 27.1%, which came below our expectations. This was entirely due to our Connected Fitness Product segment, which had a gross margin of 11.6%, below our 21% guidance. As I mentioned a moment ago, initial Tread and Tread+ return rates were higher than our forecast as of the third quarter call. We are now recognizing a higher-than-anticipated expense associated with actual returns and have updated the return reserve rate accordingly.”
- Jill Woodworth, CFO, Peloton Interactive, Inc. | Q4 2021 Peloton Interactive Inc Earnings Call, Aug 26th, 2021
“The year-over-year gross margin compression reflects the following factors: one, the impact of our price reduction on the original Bike that we announced this afternoon; two, the sales mix impact from launching Tread, which currently carries a lower margin than our Bike portfolio; and three, significantly elevated cost of certain commodities, including steel and semiconductors as well as freight rates multiple times higher than normal.”
- Jill Woodworth, CFO, Peloton Interactive, Inc. | Q4 2021 Peloton Interactive Inc Earnings Call, Aug 26th, 2021
Bill.com Rises 27% Reporting Sales/Guidance Ahead of Expectation
“As we look ahead, we’ve never been more excited about the large market opportunity we’re pursuing and the momentum we have helping SMBs automate their financial operations. The pandemic has been a wake-up call for businesses of all sizes, and SMBs are increasingly realizing that investments in digital capabilities for the financial back office are mission-critical and can no longer be deferred. We plan to capture more of this addressable market by increasing our investment levels and leveraging our strong unit economics to acquire new customers and drive adoption of payment products.”
- John R. Rettig, CFO, Bill.com Holdings, Inc. | Q4 2021 Bill.com Holdings Inc Earnings Call, Aug 26th, 2021
Note: All excerpts, highlights, and insights in this email were generated entirely using the Aiera platform.
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