Doing Pretty Well
Inflation has moderated but wage inflation is still sticky
Summary: The economy continues to do relatively well. Inflation has moderated but wage inflation is still sticky and lower-income consumers are especially pressured. Interest rate volatility is making it difficult for many companies to plan ahead. The market is watching the Fed.
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Macro
The economy is doing well overall
"Why do we believe this economy is doing pretty well? We are basically in full employment. Grocery inflation is coming down. So quarter versus quarter the consumer should start to see net disposable income coming up slightly, feel a little bit richer, and feel a little bit like, yes, what I can treat myself and come a little bit more often into the restaurant." - The Wendy's (WEN 0.00%↑) CFO Gunther Plosch
"In North America, consumer spending in aggregate is holding up well." - Coca-Cola (KO 0.00%↑) CEO James Quincey
Inflation has moderated
"Another important fact that I highlight is the inflationary pressures, which are moderating or stabilizing across most of our markets." - The Coca-Cola (KO 0.00%↑) CEO James Quincey
"There were two types of inflation over the last couple of years. One was inflation in the products that we buy, which turn -- in turn become the meal that has stabilized. And a lot of products actually are starting to come down. So food cost should not be an issue. And we are now seeing between the downward movement in prices and us engineering our menus to have better food cost components, we're seeing our food costs, by and large, in very good shape." - Ark Restaurants (ARKR 0.00%↑) Chairman & CEO Michael Weinstein
"The general outlook on the macro economy seems increasingly consistent with our own long-held view that inflation is on the wane and that significant unemployed risk in this labor market is unlikely." - Upstart (UPST 0.00%↑) CFO Sanjay Datta
But wage inflation is proving sticky
“The other inflation was in labor. That is not coming down. Legislation is underway, especially in Las Vegas right now, but also in Florida and New York, to increase the minimum wage. And there is no offset that we can garner from that, other than to raise menu prices." - Ark Restaurants (ARKR 0.00%↑) Chairman & CEO Michael
"Moving on to macroeconomic type of headwinds, wage inflations are here to stay, perhaps a bit more tamed than they were in the last couple of years, but nonetheless...With this inflation situation, luckily because of the wage which -- the wage inflation, which has tailed with our service contracts, we're still going to have some sustained pricing opportunities." - Schindler Holding AG ($SHLAF) CEO & Chairman Silvio Napoli
Many CEOs are still feeling uncertain about the economy
"But there seems to be an uncertain year in front of us every time we come to this point. We don't know exactly what the economy is going to do. Some days I feel great about the economy, other day is not so great…But we do feel really good about the way we finished the year and honestly the way we've started the year so far through January." - Waste Management (WM 0.00%↑) President & CFO James C. Fis
"The uncertainty around macroeconomic conditions we faced in Q4 did result in a slow finish to the year, but also with our clients hiring fewer people…we did see a slower ramp-up [in January] than usual, also impacted by holidays strikes and increasing supply chain disruptions. We are being cautious and expect Q1 to be challenging with revenue growth trends in line with Q4 continuing into Q1 2024." - Randstad N.V. ( $RANJF) CFO Jorge Vazquez
Lower-income consumers are under pressure
"…you’re right, the consumer is definitely under pressure, and continues to be under pressure. The trend that the lower-income consumer, which we define as somebody with a household income of less than $75,000. Traffic is down with them. Our share is unchanged. So we are not losing there. Same thing on the higher household income consumer. Traffic there is up. And again, our share is unchanged. That’s my overall in the quarter. Our dollar and traffic share was unchanged." - The Wendy's (WEN 0.00%↑) CFO Gunther Plosch
"What we see is low-income consumers are actually shopping more at places like Dollar Stores, higher-income consumers, more club stores. But mostly, we are seeing them looking for overall, smaller trips to stretch their dollar further." - The Kraft Heinz (KHC 0.00%↑) CEO Carlos Abrams-Rivera
All eyes on the Fed
"The market's belief that the Fed is done tightening and will start to ease in 2024 is welcome news and very constructive for the commercial real estate industry. Yet there are clearly questions around when and by how much the Fed will ease and the answer to those questions will have a dramatic impact on the market. We are currently seeing a slow start to the year as investors and developers try to incorporate rate cuts or not into their business planning." - Walker & Dunlop (WD 0.00%↑) CFO Willy Walker
"In my 40-plus years in the industry, I've observed that regardless of whether rates are going up or down, our volumes are typically higher during periods when the change of rates is uncertain, as is the case today. I've never seen such a disparity in opinions on what the Fed may or may not do, and I believe that is a tailwind for CME Group and our rates products" - CME Group (CME 0.00%↑) CEO Terrence A. Duffy
International
5 Quotes – The Red Sea is impacting businesses. China’s recovery continues to lag, but one company saw strong comps there.
Financials
2 Quotes – Delinquency rates for prime borrowers are rising.
Consumer
Inventory levels have healed a lot
"Our inventory continues to trend to be in a much better place for Under Armour." - Under Armour (UA 0.00%↑) CEO Stephanie C. Linnartz
"...we entered 2024 with inventories down over 50% year-over-year, which is well below 2019 levels...While we think Hasbro's retail inventory is in a healthy position, across the industry a lot of older discounted inventory still remains in the market." - Hasbro (HAS 0.00%↑) CEO Chris Cocks
The activewear business is struggling
"So I would say the basic demand in Activewear is overall close to where it was a year ago, which was not overly strong. I think channels of distribution have changed somewhat. You can see where different types of retailers have reduced inventory and the order flow is more structured and ordinary and other channels of distribution." - Delta Apparel (DLA 0.00%↑) CEO Robert Humphreys
"And in our U.S. Activewear business, sales decreased 24% as compared to last year. The decrease was driven by the continued combination of challenges within the Activewear apparel category and the expected top-line headwinds from the strategic actions we have taken to strengthen the Champion brand and position it for long-term profitable growth." - Hanesbrands (HBI 0.00%↑) CFO Scott Lewis
Coca-Cola has become digital-first in its marketing
"To recruit the next generation of drinkers, our marketing has shifted from a TV-centric model to a digital-first organization that balances local intimacy, scale, and flexibility. Our digital mix has gone from less than 30% in 2019 to approximately 60% of our total media spend" - Coca-Cola (KO 0.00%↑) CEO James Quincey
Ad spending on traditional TV fell 11% y/y in Q4
"In Q4, ad spending on traditional TV decreased 11% YoY, and traditional ad scatter decreased 9% YoY (according to SMI)." - Roku (ROKU 0.00%↑) CEO Anthony Wood
The streaming industry is maturing
"One of the trends that's happening right now in the streaming world is that the streaming industry is maturing. So if you take AVOD, for example, I mean, a couple of years ago, all the streaming services were just very focused on driving subscribers, at almost any cost. Now the industry is very focused on building sustainable, thriving businesses. And one of the tools that's being used is to add ad-supported, entry-level ad-supported tiers to the streaming service. It's a mainstream solution. It's something that's been, the industry has done since the beginning of television. So it's not new, but for me, it's a sign that the industry is really starting to mature. And I think the streaming industry, and I think if you, another example of, I think, evidence that the streaming industry is starting to mature is sports. I mean, we're seeing new sports services launched. Used to be that you couldn't get access to sports content without having a subscription to traditional pay TV. That's really changed. Almost all sports, if not all sports, are now available on lots of different channels on streaming. It's very fragmented. It's hard for viewers to figure out where to watch it, but it's there, and it's an opportunity for us. So I think both of these examples, more sports coming to streaming, the rise of AVOD tiers in streaming, are examples of the industry maturing." - Roku (ROKU 0.00%↑) CEO Anthony Wood
Swifties are generous tippers
"If you look at stadiums, year-on-year, we're up 37%, just trips to stadiums. When you zoom in, and now we'll talk directly about Taylor, it's incredible. Nashville, our rides were up 25% when she came to town. If you look in Cincinnati, rides to the hotel, because a lot of people are visiting from out of town, were up 60%...There's a crazy stat that blows my mind. I think it actually speaks very highly of Taylor Swift fans. They tend to Tip three times higher than average." - Lyft (LYFT 0.00%↑) CEO David Risher
Airbnb’s revenue grew by 70% in Q4
"We had 99 million Nights and Experiences Booked in Q4, marking our highest fourth quarter ever. Revenue of $2.2 billion grew 70% year-over-year. Net loss was $249 million. But when excluding nonrecurring tax items, adjusted net income was $489 million, representing an adjusted net income margin of 22%. For the full year, our free cash flow was $3.8 billion, our highest ever" - Airbnb (ABNB 0.00%↑) CEO Brian Chesky
Technology
5 Quotes – AI GPUs only represent X% percent of leading-edge wafer starts. Airbnb is attacking AI from a slightly different angle than other large tech companies.
Healthcare
Biopharmaceutical companies have been cautious with spending
"We accomplished this despite the pipeline reprioritization activities and more cautious spending by many of our biopharmaceutical clients, and also by successfully mitigating the impact of the NHP supply disruption in the United States. We are anticipating that constrained clients spending will persist into 2024, but that demand will stabilize during the year. At the top end of our financial guidance range, we expect that demand trends will begin to modestly improve later this year. These trends are expected to result in organic revenue that is flat to 3% growth in 2024." - Charles River Laboratories International (CRL 0.00%↑) CEO James Foster
Industrials and Transport
9 Quotes – Lithium prices are down ~80% y/y, but demand for EVs is still growing at X% per year.
Materials & Energy
U.S. rig activity has been flat and there has been limited new rig deployment
"We continue to work to expand our presence in oil basins and with the public E&P operators particularly. This has been a little more challenging than we expected as US rig activity has been essentially flat for several months with very few new rig deployment opportunities. There continues to be some contract churn and some operator high-grading and our team has been tightly focused on those limited opportunities." - Precision Drilling (PDS 0.00%↑ ) CEO Kevin Neveu
Real Estate
4 Quotes – A lot of CRE debt needs to be refinanced.
Nuggets of Wisdom
The CEO is ultimately responsible for a company’s actions
"Well, first of all, it's on me. There are a lot of eyes on this press release, but at the end of the day, my bad...It was a clerical error..the buck stops with me..And to be very clear, this was it was a bad error, but it was one zero in a press release and, you know, a lot of other pages. And of course, we corrected it within seconds of finding it. So I think, you know, like with any mistake, I think it's not so much about the mistake itself. It's also about how you correct for it. And we've corrected for it, obviously in the moment, putting out new materials, but also doing a really deep process, including having our own internal audit team, a separate team look and figure out how we can make sure we never make a mistake like this again." - Lyft (LYFT 0.00%↑) CEO David Risher
Make bets on long-term things
"And this is what Jeff Bezos always used to tell me. He said, don't make bets on short-term things. Make bets on long-term things." - Lyft (LYFT 0.00%↑) CEO David Risher