CEO INSIGHTS – Week Ending 5 May 2023

“And in our developed markets, we have had some labour challenges that have been well publicised, not only in the restaurant sector, but in all sectors over the last couple of years. Those labour challenges are abating. We're seeing application rates increase, retention rates continue to increase, and our staffing levels are back to, at or near 2019 levels” Christopher Turner, CFO, Yum! Brands 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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Retail & Hospitality

“It is a great time to be in convenience [retail]. COVID reinforced a lot of habits in people in terms of not wanting to travel far and so the close proximity of our stores has been perfect for us” Angus McKay, CEO, 7-Eleven Australia

“We’re certainly seeing more people visiting pubs” Steve Donohue, CEO, Endeavour Group

“Remarkably, store traffic has surpassed pre-pandemic levels in our busiest dayparts” Laxman Narasimhan, CEO, Starbucks Corp.

Inflation

“In inflationary markets, we're mindful of the risk of consumers trading down to lower-priced brands…They're consolidating trips given higher gas [fuel] prices and seeking the convenience of one-stop shopping for groceries and other essential products” Michael Casey, CEO, Carters Inc [major children’s clothing company]

“Australia is trailing the U.S. by a quarter or 2 in terms of impact on inflation and interest rates is how we're seeing it play out” Stephen Bratspies, CEO, Hanesbrands Inc [multinational clothing brand company inc. Bonds and Sheridan]

“Early signs that inflation is moderating are encouraging, and we remain optimistic about the outlook” Ross McEwan, CEO, National Australia Bank Ltd

Financial Services

“Key aspects that contribute to this environment are a world of ever-growing uncertainty, a sticky inflationary environment, and conditions for raising interest rates, all of which are resulting into a constant increase of volumes” Javier Vázquez, CFO, Prosegur Cash

Manufacturing

“Over the medium term, the inability of Airbus and Boeing to deliver any meaningful increase in production means capacity is going to continue to be challenging for the next two, three, five years” Michael O’Leary, CEO, Ryanair

Corporate Sector & Labour Market

“Clients are telling us there are 2 primary areas where they're urgently looking for a competitive advantage: Risk and People” Gregory Case, CEO, Aon Insurance Plc

“And in our developed markets, we have had some labour challenges that have been well publicised, not only in the restaurant sector, but in all sectors over the last couple of years. Those labour challenges are abating. We're seeing application rates increase, retention rates continue to increase, and our staffing levels are back to, at or near 2019 levels” Christopher Turner, CFO, Yum! Brands Inc

 Agricultural & Commodities

“Market prices have fallen continually for the last 2 quarters, both for finished products and for raw materials. At the same time, orders and deliveries have been reduced as a result of farmers delaying purchases amid falling prices” Svein Holsether, CEO, Yara International ASA [one of the world’s largest crop nutrition companies]

“So look, overall, it's been a bit of a wild ride in gas markets over the last year. And we've seen prices extraordinarily strong. If you go back 2 years ago, they were extraordinarily weak. And they've certainly moderated…Certainly, inventories both in Europe and in the U.S. are much healthier than people were concerned about at one point in time” Michael Wirth, CEO, Chevron Corp

Supply Chain Shortages

“Last fortnight, we ran a survey to quantify supply chain disruption and shortages of CO2 [carbon dioxide] in Australia. Members from across beef, small stock and pork supply chains highlighted a serious shortfall in the eastern states, with the most common impact being the disruption to dry ice production” Patrick Hutchinson, CEO, Australian Meat Industry Council

Domestic & Global Economy

“It does feel like the consumer in Europe is a bit more stretched,” Ron Delia, CEO, Amcor Plc

“Population growth, immigration has picked up again. This is going to drive underlying growth and shield Australia from the extent of the downturn peers are going to have” Shemara Wikramanayake, CEO, Macquarie Group Ltd

Supermarkets

“It is possible the supermarkets are facing a scenario of 3 per cent comparable sales growth with 6 per cent wage rate growth by January 2024” Steven Cain, CEO, Coles Group

Commercial & Residential Property

“Our property portfolio continues to demonstrate its resilience with high portfolio occupancy, despite the challenging macroeconomic environment” Darren Steinberg, CEO, Dexus

“Although listings supply remains constrained, we are seeing a recovery in auction clearance rates to match last year, and open for inspection visits…remaining above last year. Domain’s total listings views have begun trending up, reaching the highest level since the market peak in late 2021” Jason Pellegrino, CEO, Domain Holdings Australia Ltd

Infrastructure

“What has typically happened over time is they [governments] turn to the private sector for the ability to fund and deliver infrastructure” Scott Charlton, CEO, Transurban Group

Freight & Shipping

“It’s clearly going to be bumpy because there are quite a few [new ships] coming this year and quite a few coming next year, too. The volumes are coming back after, but it’s not like the macroeconomic backdrop points to a lot of growth to take care of this” Vincent Clerc, CEO, AP Møller-Maersk

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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.