Unlocking Corporate Insights: The Power of Earning Calls in Fashion Industry Analysis
If you've ever delved into a bank's research department, you're likely aware of the treasure trove of information contained within quarterly earning calls from publicly listed fashion companies. Typically attended by the Chief Financial Officer and the CEO, these calls delve into the company's financial performance, key challenges, innovations, and future vision. Analysts from prominent investment banks pose insightful questions, providing a comprehensive overview of the company's landscape.
Listening to earning calls provides invaluable insights into a company's trajectory. From understanding the company's current position to gauging the CEO and CFO's strategic mindset, these calls offer a glimpse into the inner workings of fashion businesses. Whether the company is flourishing or facing challenges, earning calls shed light on the strategies employed and the leadership's response to adversity.
Take, for example, Stitchfix's Q3 FY23 earnings call, where interim CEO Katrina Lake outlined the company's strategy amidst bottom-line challenges. Despite initial success, Stitchfix encountered issues such as stagnant customer growth and international expansion setbacks. As interim CEO, Lake outlined plans to address these challenges, providing valuable insights into the company's future direction.
I enjoy listening to earning calls as it’s an excellent way to learn about a company:
Where is the company in its corporate journey?
What is on the CEO’s and CFO’s mind?
How do they defend their strategy?
If the company is currently struggling, what are the remedies?
When analysts fire off tough questions, how do the CEO and CFO react? Do they hold their stand in a sophisticated manner? Do their responses consist of empty phrases, or are they meaty?
Photo by Dane Deaner on Unsplash
For those unfamiliar with corporate lingo, earning calls can initially sound daunting. However, listening to a few calls and familiarizing yourself with terms such as "bottom line" and "adjusted EBITDA" can demystify the process and enhance your understanding of corporate dynamics.
Why should you tune into earning calls?
Demonstrate in-depth knowledge: Consultants and project managers can showcase their understanding of the businesses they serve.
Foster big-picture thinking: Gain insights into broader industry trends and strategic considerations.
Expand your industry expertise: Enhance your understanding of fashion operations, market sizing, and strategic decision-making.
Learn from leadership: Observe how senior executives navigate challenging situations and communicate strategic initiatives.
What did I learn from this specific earnings call for Stitchfix?
Leadership contemplates ending the international (= UK) expansion. The US warehouse network is getting consolidated. Stitchfix is focusing on what it seems to do best: leverage AI to know its customers’ preferences and try to re-activate “dormant” clients, to name a few. The measures proposed make sense to me because I am familiar with cost-cutting pressure from previous consulting assignments.
These are some of the concerns raised by the analysts:
Addressable market share: “How should we be thinking about just the way you think about the addressable market as we look at the number of addressable customers?” (Youssef Squali, Analyst, Trust Securities”
Retargeting customers and defining the customer base: “Like how do we think about potential bottoming of the customer base?” (Tom Nikic, Analyst, Wedbush Securities )
Retail category management: “ Is there a category realignment that you expect to manage the business on given the reduction in distribution center space that you expect Stitch Fix to be known for?” (Dana Telsey, Analyst, Telsey Advisory Group)
Leveraging AI more: “I just wanted to dig a little deeper into your comments about investing more around AI, just sort of any incremental color you can share there.” (Lauren Schenk, Analyst, Morgan Stanley).
By dissecting earning calls, you can glean valuable insights into fashion industry trends, corporate strategies, and leadership dynamics.
So, will you explore your favorite fashion company's earning calls and uncover the secrets behind their success? Share your thoughts and experiences in the comments below!
Sources:
BBC, Anne Cassidy: “The Boss: Male investors didn’t get my billion-dollar idea”. Published on 16 March, 2020. Link.
CNN, Parija Kavilanz: “Stitch Fix lays off 20% of workforce and its CEO steps down”. Published on January 5, 2023. Link.
Retail Dive, Daphne Howland: “Stitch Fix CFO to exit as declines persist”. Published on March 8, 2023. Link.
Stitchfix Investor Relations: Q3 FY23 earnings call, downloadable at https://investors.stitchfix.com/