CEO INSIGHTS – Week Ending 7 October 2022 By NAOS Asset Management

“While traffic at quick-service restaurants has held up relatively well, it’s come at the expense of casual dining and full-service restaurants as consumers increasingly choose less expensive options when dining away from home” Thomas Werner, CEO, Lamb Weston Holdings Inc [One of the World’s Largest Producers of Frozen French Fries]

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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Residential & Households

“Australia’s brief love affair with fixed rate mortgages during the height of the pandemic has well and truly ended, with customers opting for a fixed rate product plummeting to 3.6% [of our total mortgages in Q1 2023] - the lowest level since we commenced reporting” David Bailey, CEO, Australian Finance Group Ltd

“There’s a lot of evidence out there that things are not as bad as we’re led to believe. Our sales are good, so they’re not reflecting anything like a recession or anything like that” Gerry Harvey, Exec. Chairman, Harvey Norman Holdings Ltd

Commodities & Resources

“Large and mid-cap resource companies continue to increase exploration budgets, including CY23 commitments” Market Statement, Imdex Ltd

“The Group is well positioned in the current environment and the long-term outlook for our commodities, particularly copper, is very robust. Copper remains pivotal to the global green energy transformation, with a looming supply deficit as the move towards global Net-Zero Emissions gathers pace” Karl Simich, CEO, Sandfire Resources Ltd

Tourism & Travel

“Turning now to the current tone of business. Pricing for our 2023 book business is currently at considerably higher levels than 2019...At the same time, we have seen a notable improvement in cancellation trends” Josh Weinstein, CEO, Carnival Cruise Corp plc

Freight & Logistics

“What we are seeing is definitely a significant decrease in freight surcharge, not yet at the level of pre-COVID, but significantly lower than what we experienced in the most dramatic part of [COVID]” Antonio Achille, CEO, Natuzzi Group [Major Multination Furniture Manufacturer]

Students & Children

“We are quietly confident barring any major world conflict that 2023 will be even better [than this year]. We are confident of achieving a significant uplift in rents” Stephen Scutts, MD, Castle Student Accommodation [University Student Accommodation Provider]

“Toys are a resilient category in bad times” Chris Cocks, CEO, Hasbro Inc

Retail

“For the first time in almost five years now, we’ll have…more new stores opening in the U.S. than closures” Brian Kingston, CEO, Brookfield Asset Management Property Group

“Retail sales growth in physical bricks and mortar stores is actually growing faster than e-commerce this year” Brookfield Asset Management Property Group

“Individualisation [of products] is a key trend across high-net-worth individuals and Gen Z” Kristian Tear, CEO, Bang & Olufsen

Media & Advertising

“As noted at the half year, challenging external operating and macro conditions have resulted in weaker digital advertising revenue and a slowdown in spending by some of our major customers” Market Statement, Appen Ltd

Inflation

“Consumers are less financially healthy than before in general…the inflation is nobody's friend” Julien Mininberg, CEO, Helen of Troy Ltd [Owner of Brands Including Braun and Vicks]

Supermarkets

“In June, we said that we were starting to see some small changes in customer behaviour, but that it was difficult to separate them from the effects of post-pandemic normalisation. We can now see tangible changes in behaviour purely relating to increases in the cost of living” Ken Murphy, CEO, Tesco Plc

“There have been reports even today that some people are seeing signs of a slowdown in grocery, [but] we’re not seeing that” Steven Cain, CEO, Coles Group Ltd

Food & Beverage

“We actually think the premiumisation trend will continue. People still want to treat themselves. Beverages have been quite resilient to recessionary environments” Robert Iervasi, CEO, Asahi Beverages

“While traffic at quick-service restaurants has held up relatively well, it’s come at the expense of casual dining and full-service restaurants as consumers increasingly choose less expensive options when dining away from home” Thomas Werner, CEO, Lamb Weston Holdings Inc [One of the World’s Largest Producers of Frozen French Fries]

“The fry attachment rate, which is the rate at which consumers order fries when visiting a restaurant or other food service outlets, remains above pre-pandemic levels” Thomas Werner, CEO, Lamb Weston Holdings Inc [One of the World’s Largest Producers of Frozen French Fries]

Health & Beauty

“Shopping for beauty is different. As any beauty consumer will tell you, these products are used daily, frequently re‑purchased, and are considered essential. Beauty is a particularly resilient category even in times of economic downturn, often referred to as the ‘lipstick effect’, where consumers buy small, everyday luxury items, rather than big‑ticket purchases” Marina Go, Chair, Adore Beauty Ltd

For all enquiries please contact enquiries@naos.com.au

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.