CEO INSIGHTS – Week Ending 17 February 2023

“We anticipate as the stock is starting to return to more normalised levels in the industry then we will see some of that on floor discounting start to build or continue to build” Terry Smart, CEO, JB Hi-Fi 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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Demographics

“Millennials are becoming the largest generation and are the first digital natives to enter core furniture and homewares buying years” Market Statement, Temple & Webster Ltd

“For retirees, higher interest rates provide additional income, so they’re not living off as much capital but rising inflation clearly creates cost of living pressures” Nick Hamilton, CEO, Challenger Financial Ltd

Human Resources

“It’s still early in the days of layoffs and other things at a lot of companies, but I haven’t heard that these [software] developers are not getting other jobs elsewhere” Scott Farquhar, Co-CEO, Atlassian Inc

Consumers

“The data does suggest that customers are becoming more value conscious” Rob Scott, CEO, Wesfarmers Ltd

Inventory

“We are very much getting the signal that [bicycle] inventory is going down, not as much as we would have liked or not as much as the retailers would have liked, but it's going down. But there is a clear fear factor now from many retailers” Magnus Welander, CEO, Thule Group AB

Supply Chain

“We're seeing steady improvement in global inventory levels as supply chains constraints sort of start to ease” Cameron McIntyre, CEO, Carsales.com Ltd

“In terms of gross margin, encouraging news is that inflationary pressure from supply chain has continued to moderate with freight costs retracing towards historic levels” Anthony Heraghty, CEO, Super Retail Group Ltd

Commodities & Resources

“The demand for steel and metal products globally in 2023 is expected to increase from levels observed in 2022, as business activity in China begins to recover from COVID-19” Market Statement, Vulcan Steel Limited

Consumer Electronics

“We anticipate as the stock is starting to return to more normalised levels in the industry then we will see some of that on floor discounting start to build or continue to build” Terry Smart, CEO, JB Hi-Fi Ltd

Finance & Lending

“We believe home loan pricing across the industry is below the cost of capital” Matt Comyn, CEO, Commonwealth Bank of Australia Ltd

“Our customers are in good shape. Employment is very strong in both countries [Australia and New Zealand]” Scott Baldwin, CEO, Solvar Ltd [formerly Money3 Ltd]

Domestic Economy

“The pandemic didn’t kick off the tree-change and see-change trend in Australia, and the end of lockdowns won’t end it either. In the five years prior to the pandemic, capital cities lost around 5400 people per quarter to the regions” Eliza Owen, Head of Residential, CoreLogic Research Australia

“I’ve got to contain inflation. I’ve got to convince the community that we’re serious about that. That’s our job and it’s unpopular and I accept that” Phillip Lowe, Governor, Reserve Bank of Australia

Macroeconomic

“At a macro level, and even if currencies should be less favourable in 2023, we see some patches of blue sky amongst the dark clouds. There are a few early signs of reduced inflation on some raw materials, recession is seen as less likely in many parts of the world, and China is reopening with a clear focus on economic growth” Nicolas Hieronimus, CEO, L'Oréal S.A

Health & Beauty

“We see longer hair, more diverse types of hair and great hair is increasingly a sign of health and youth. People invest in it with a strong appetite for professional products and premium mass products. So the [hair] market is premiumising” Nicolas Hieronimus, CEO, L'Oréal S.A

Financial Markets

“The IPO market remains subdued due to this ongoing [macroeconomic] uncertainty, which is also impacting cash market trading volumes. The rising interest rate environment has seen activity in interest rate futures continue to increase early in the second half” Helen Lofthouse, CEO, ASX Ltd

Agriculture

“Aquafeed supply is still structurally oversupplied” Quinton Hildebrand, CEO, Ridley Corp

“Farming conditions remain favourable for a good planting season” Jeanne Johns, CEO, Incitec Pivot Ltd

Food & Beverage

“Whilst the broader macroeconomic backdrop remains somewhat uncertain, global wine category trends have remained broadly consistent” Timothy Ford, CEO, Treasury Wine Estate Group Ltd

“People in Australia are inherently social…I think sociability is absolutely recession-proof” Steve Donohue, CEO, Endeavour Hospitality Group

Media & Advertising

“While conditions in advertising markets have softened in recent months, the pattern is not uniform” James Warburton, CEO, Seven West Media 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. It does not constitute an offer to purchase any security or financial product or service referred to herein. It does not take into account the investment objectives, financial situation or needs of any particular investor. Before making an investment decision, investors should consider obtaining professional investment advice that is tailored to their specific circumstances. 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.