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Summary: Supply chains remain challenged. Companies are trying to keep up with intense demand and are having trouble. Inflation is showing up in many markets including labor markets. Some members of the Fed may be starting to get concerned that the inflation could become more than transitory.
Macro:
Supply chains remain challenged
"My comment at this point is that the supply chain environment is stable in terms of its inconsistencies. I would not classify it as getting better, and I would not classify it as getting worse. It is consistently inconsistent...But I cannot predict for you today when the supply chain will improve back to normal, but I'm not also predicting that it is getting worse. It just continues to be a daily, weekly, monthly quarterly challenge now present in our business." - Winnebago Industries (WGO) CEO Michael Happe
“There’s substantive disruption occurring in the supply chain. I think we are going to see it this way for quite some time as we migrate through the second half of the year. This is going to be an issue for us for the foreseeable future." - Tractor Supply (TSCO) CEO Hal Lawton
"I don't expect the chip industry is back to a healthy supply-demand situation until 2023. For a variety of industries, I think it's still getting worse before it gets better." - Intel (INTC) CEO Patrick Gelsinger
Demand is intense
"The intensity of demand has not abated,..the demand cycle that we’re seeing, both domestically and internationally, continues to be extremely strong...there’s no short-term change in what we’re seeing. As a matter of fact, I’m seeing an intensification of that in our international business." - FedEx (FDX) President and CEO, FedEx Express Don Colleran
Inventories are low
"We're producing as much as we can, but we will still be in a very low inventory situation by the time we get through this year...So this is more about an inventory haul that was created last year in combination with just tremendous levels of retail demand." - Brunswick (BC) CEO David Foulkes
"I mean our inventory level right now, is I think. Obviously, we're below target the whole quarter, we're probably 40% lower than where we would like to be" - CarMax (KMX) CEO Bill Nash
Labor markets are tight
"The first half will still continue to be impacted by what we see, which many of you know, is difficulty in hiring...certainly the unemployment benefits being high until Labor Day, at least in most areas of the country, I think that’s one [reason why]. I do think there is still a lot of confusion about COVID and there is health concerns, you know that people are afraid like coming back, is everyone vaccinated or not, do I have to sit near someone, what’s the risks. I also think that there is still just a lot of childcare issues as well. We hear that from clients." - Paychex (PAYX) CEO Martin Mucci
There’s pronounced inflation in many markets, even labor markets
"Inflation certainly is pronounced. We see it in the labor market. We've got certain commodities that it's hitting." - Mondelez (MDLZ) EVP & President of North America Henry Glendon Walter
“It’s our obligation to try to keep the prices as low as we can...even as we navigate this inflationary environment that we are in that I suspect is more structural than transient, despite some of the other rhetoric. There is inflation in the market across almost all facets" - Tractor Supply (TSCO) CEO Hal Lawton
"I wouldn't be shocked if there was wage inflation looking at the year, it's hard to see that there would not be." - Korn Ferry (KFY) CEO Gary Burnison
There are some positive data points
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But some Fed officials may be beginning to worry that this isn’t transitory
"Inflation pressures will bleed out into a broader range of items, and will persist through 2022....No one really knows how this is all going to unfold,. We have to be ready for the idea that there is upside risk to inflation and for it to go higher. I think we’d be healthier, as we’re making progress in weathering the pandemic and achieving our goals, to start adjusting these purchases -- Treasuries and mortgage-backed securities -- sooner rather than later." - Dallas Federal Reserve President Rob Kaplan
International:
International economies are picking back up
"Consumer mobility shot through the roof and...we started seeing traffic increasing in our store...We now see that happening in Mexico, we're starting to see that happen in Europe. Every market around the world is going to see exactly what the United States has experienced here over the last 90 days..." - Starbucks (SBUX) CEO Kevin Johnson
Global trade volume is back to pre-pandemic levels
"Global trade volume has surpassed pre-pandemic levels and is on course for its fastest year of growth in over a decade." - FedEx (FDX) Chief Marketing Officer Brie Carere
Chinese travel is doing great
"I mean, China last week was up 40% to last year...Business travel is back. The only thing that is really lacking and missing, as we all know, and we're all talking about is that international inbound...I mean the May holiday travel was just huge for China and for the industry. I think it was stronger than most analysts predicted," - Wyndham Hotels & Resorts (WH) CEO Geoffrey A. Ballotti
Financials:
The unemployment rate should come down in the fall
"So people are feeling like they’ve got some financial wherewithal at least temporarily to probably get through the next couple of months. And then I think honestly, it’s going to open up pretty drastically in the fall, would be my take, because the unemployment is going to come back down, as well as the rules of looking for work. The schools should be back open full hopefully and daycares." - Paychex (PAYX) CEO Martin Mucci
“Anecdotally, we have seen a little bit of an improvement in the trend of applicant flow, but we've seen it all across the country, not just states that have eliminated the UI, but even states that haven't yet. It could be because the states that haven't yet are actually starting to open and so you're going to see applicant flow. But we feel really good about our applicant flow into our restaurants.” - Darden Restaurants (DRI) President & COO Ricardo Cardenas
Businesses are being created at a phenomenal rate
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Consumer:
Half of Carnival's fleet is back in operation
"So far, we've announced the resumption of operations for 42 ships across eight of our nine brands by fiscal year-end, and that represents over half of our fleet capacity returning to guest cruise operations." - Carnival (CCL) CEO Arnold Donald
Leisure travel demand is very strong
"I mean all we have to do is just look at the continued off-the-hook leisure demand that's out there in the Smith Travel data. It's just stunning. I mean the economy segment just keeps getting better. It is certainly leading the way. It was great to see last week ending June 12 from mid-scale becoming the second segment to surpass 2019 full week RevPAR at being up 2%. I mean economy has been doing that for a while since we reported our last earnings on Smith, and it's great to see mid there. I think the other stat we continue to -- the data point is just the drive to travel. I mean the drive to Memorial Day traffic, again, was just off the charts. And more people are driving than flying in." - Wyndham Hotels & Resorts (WH) CEO Geoffrey A. Ballotti
Technology:
Digital is reaching 80% of advertising budgets in some countries
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Materials & Energy:
Oil supply/demand to return to more balanced levels
"In general, what we're seeing is potential to return to a more balanced kind of supply/demand. Let's put it this way, as far as demand returning to kind of pre-COVID levels, maybe '19 levels, maybe as soon as the end of this year, but more than likely in the next year. What we're seeing right now on the inventory side, our inventories are down to right around the five-year average, the historical five-year average, but obviously with a little bit softer demand out there. The days of supply is still running a little bit high." - EOG Resources (EOG) President Ezra Yacob
Transportation fuel demand is improving as vaccines roll out
"…you think about the story of transportation fuel demand has really followed COVID vaccination rates and reopening of economies. And clearly, as we've come into the summer, we've seen demand improve. There's no question that there's been strong fundamentals. Probably on the gasoline side, we're starting to approach 2019 levels." - Phillips 66 (PSX) Chairman & CEO Greg Garland
Mining companies struggling to produce enough metals
"We’ve developed most of the easy projects and now we go into the more difficult regions of the world where there isn’t infrastructure, it’s a harder political environment and I think the mining industry is not ready to add massive new tonnes to the market. With green energy demand, I believe the mining industry will struggle to keep pace.” - Glencore (GLNCY) CEO Ivan Glasenber
The Chinese have been trying to push down commodity prices
"I know recently the Chinese have tried to push it down to bring it back to lower levels. I think that’s a short term game because the underlying fundamentals will keep it at these levels. They’re taking some materials from the strategic stockpiles and putting that in the market. Now how big the stockpiles are we don’t know exactly – they can do it for a while but eventually they’ve got to restock. They can’t keep it at these low levels. So they’ll come” - Glencore (GLNCY) CEO Ivan Glasenber
Real Estate:
Housing demand is going from “extremely, extremely hot” to just “extremely hot”
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But these are still the best of times
"…from a macro perspective, the housing market remains very strong as these are the best of times. Demand has continued to strengthen, while the supply of new and existing homes has remained constrained. New home construction cannot ramp quickly enough to fill the void of the production deficit that has persisted over the past decade. And while some question whether that deficit is 1 million homes or 5.5 million homes, the bottom line is that supply is short." - Lennar (LEN) Chairman Stuart Miller
It may take many years to bring home supply into balance
"As is evident in our results, the desire for homeownership is strong, and we believe will remain so for the foreseeable future. There are 2 primary factors informing our view. The first is an acute shortage of supply stemming not only from limited resell inventory, but also from the underproduction of new homes over the past 15 years. This deficit will take many years to correct." - KB Home (KBH) CEO Jeffrey T. Mezger
Nuggets of Wisdom:
Don’t follow your passion
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If everything seems under control, you’re not going fast enough
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Substack makes you smart
"So much of legacy media, due to the technological limitations of distribution technologies like newspapers and television, makes you stupid. Substack is the profit engine for the stuff that makes you smart." - VC and tech pioneer Marc Andreessen
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