Latest / What the Flux / ANZ's profit spikes after job cuts | Temple & Webster gets punished for discounts | Hasbro & Mattel - same forecast, different fate

Transcript

ANZ's profit spikes after job cuts | Temple & Webster gets punished for discounts | Hasbro & Mattel - same forecast, different fate · What the Flux

• 0:05
  Speaker 1: This is what the Flux.
• 0:06
  Speaker 2: I'm Brett at Justin and it's Friday, the Spooky thirteenth,
• 0:09
  Speaker 2: the February does.
• 0:11
  Speaker 3: It boy, It's officially earnings season in Australia, which means
• 0:14
  Speaker 3: analysts and investors are dissecting every word coming out of
• 0:17
  Speaker 3: CEO's mouths. And if AI wasn't hot last year, it
• 0:20
  Speaker 3: is clearly hot now. In fact, We're quote used the
• 0:23
  Speaker 3: word AI eighty two times in their presentation, while Combank
• 0:26
  Speaker 3: used it.
• 0:27
  Speaker 1: Just over sixty times.
• 0:28
  Speaker 3: The thinking here is act as if you know AI well,
• 0:31
  Speaker 3: so it can't cut your lunch.
• 0:34
  Speaker 2: Fox Adam. If you hear a lot about investing and
• 0:36
  Speaker 2: it's getting stuck at the starting line of your investing journey,
• 0:38
  Speaker 2: we have got you because in this month's Academy Share
• 0:41
  Speaker 2: Market Basics from Zero to Investor, we break down share buying,
• 0:44
  Speaker 2: decoding a risk tolerance, and unlocking the secrets of ETFs.
• 0:47
  Speaker 2: So if you want to learn more about going from
• 0:49
  Speaker 2: zero to investor, make sure to download the Flux app
• 0:52
  Speaker 2: and check out the Academy this month.
• 0:53
  Speaker 3: Three splendid stories Today Josy Boy, Let's do it for
• 0:56
  Speaker 3: our first A and Z's profit has jumped six percent
• 0:59
  Speaker 3: to all two billion dollars after cutting three and a
• 1:02
  Speaker 3: half thousand jobs under its new an Z twenty thirty strategy.
• 1:05
  Speaker 2: Well well, well, it turns out trimming the payroll can
• 1:07
  Speaker 2: actually fashion the profit line, b Man, So tell me
• 1:10
  Speaker 2: more so.
• 1:10
  Speaker 3: Am Z is one of Australia's big four banks, founded
• 1:13
  Speaker 3: all the way back in eighteen thirty five and now
• 1:16
  Speaker 3: employing around forty two thousand people across the region.
• 1:19
  Speaker 2: Man in twenty twenty five and ZED brought in a
• 1:21
  Speaker 2: new CEO, Nunumatos, to take over the bank, and he
• 1:24
  Speaker 2: came in with a Portuguese bang.
• 1:26
  Speaker 3: He cut three and a half thousand jobs from the
• 1:28
  Speaker 3: AZD workforce, plus one thousand more contractors.
• 1:30
  Speaker 2: He shut down a z's venture capital arm eighteen thirty
• 1:33
  Speaker 2: five I, including one of their key companies cash rewards.
• 1:36
  Speaker 3: And ANZ has already shifted to quarterly reporting after previously
• 1:39
  Speaker 3: only reporting half year earning.
• 1:41
  Speaker 2: Man his where it gets interesting, because AMZ just announced
• 1:44
  Speaker 2: their cash profit rose six percent to one point ninety
• 1:46
  Speaker 2: four billion bucks for the first quarter of this year.
• 1:49
  Speaker 1: And what was the reason for the big uptick?
• 1:50
  Speaker 2: Well, no surprise here, largely driven by cutting those three
• 1:53
  Speaker 2: and a half thousand jobs. As part of his new
• 1:55
  Speaker 2: twenty thirty strategy, and investors they loved it.
• 1:58
  Speaker 3: ANZ shares jumped more than eight percent in early trading
• 2:01
  Speaker 3: after this news, bro So what is the key learning here?
• 2:03
  Speaker 3: When growth is hard to come by, companies often turned
• 2:06
  Speaker 3: to cost control.
• 2:07
  Speaker 2: Man Ancet didn't grow profits because lending exploded or their
• 2:10
  Speaker 2: margins searched.
• 2:11
  Speaker 3: No, it grew profits because it reduced its expenses. In fact,
• 2:15
  Speaker 3: its cost to income ratio dropped below fifty percent, but
• 2:18
  Speaker 3: in the previous reporting period it was over sixty five percent.
• 2:21
  Speaker 2: Wow, and its profit drop this period as well.
• 2:23
  Speaker 3: But here is the catch, Jazzy boy. Cutting cost is
• 2:25
  Speaker 3: within management's control. The growing revenue is a little harder
• 2:28
  Speaker 3: to come by.
• 2:29
  Speaker 2: Revenue growth depends on winning new customers, growing lending volumes,
• 2:32
  Speaker 2: and taking market share from its competitors. And right now,
• 2:35
  Speaker 2: while the broader banking system is seeing strong lending growth,
• 2:38
  Speaker 2: handes that is capturing only a small slider. So it
• 2:40
  Speaker 2: seems like phase one, the cleanup, looks to have been
• 2:43
  Speaker 2: executed successfully from a financial perspective.
• 2:45
  Speaker 1: Phase two, the growth part, that's a little bit harder.
• 2:48
  Speaker 2: For our second story, Temple and Webster's share prices plummeted
• 2:51
  Speaker 2: thirty percent, but it's promising to double down on its
• 2:54
  Speaker 2: discounts to compete heavily against Ikea and Harvey Norman.
• 2:57
  Speaker 3: Nothing quite like a thirty percent share price tumble to
• 2:59
  Speaker 3: test the nerves, don't you reckon, Josie Boy, tell me
• 3:02
  Speaker 3: more so.
• 3:02
  Speaker 2: Temple and Webster is Australia's largest pure play online furniture retailer.
• 3:06
  Speaker 2: It was founded in twenty eleven and listed on the
• 3:08
  Speaker 2: ASX in twenty sixteen.
• 3:10
  Speaker 3: Jose Boy, Temple and Webster has grown a lot over
• 3:12
  Speaker 3: the past decade.
• 3:13
  Speaker 2: That's true, But now they've just delivered a pretty ugly
• 3:16
  Speaker 2: quarterly update.
• 3:17
  Speaker 1: All right, give me the good parts first.
• 3:18
  Speaker 2: The good news is that its revenue still rose twenty
• 3:21
  Speaker 2: percent to over three hundred and seventy five mil, and
• 3:23
  Speaker 2: active customers jump fourteen percent to over one point three
• 3:26
  Speaker 2: million people.
• 3:26
  Speaker 1: Mm hmm. What's the bad news?
• 3:28
  Speaker 2: The bad news is that net profit fell thirty six percent,
• 3:31
  Speaker 2: just under five point eight mil for the half year.
• 3:33
  Speaker 1: Why is that?
• 3:34
  Speaker 2: It's pretty simple because they went for aggressive promotions and
• 3:38
  Speaker 2: aggressive discounting, which really hurt its margins. And while most
• 3:41
  Speaker 2: CEOs would pause for a second and choose to pull
• 3:44
  Speaker 2: back potentially on this margin compression. Temple and Webster is
• 3:47
  Speaker 2: doubling down. Yeah, its CEO says he won't back off
• 3:50
  Speaker 2: the discounting strategy.
• 3:51
  Speaker 3: In fact, he reckons that the grabbing market chare now
• 3:54
  Speaker 3: is key as millennials enter peak home furnishing years.
• 3:58
  Speaker 2: So what is the key learning here?
• 3:59
  Speaker 3: One of the biggest tensions in growth businesses is that
• 4:02
  Speaker 3: pesky trade off between market share and margins.
• 4:05
  Speaker 2: The market share is the percentage of total sales in
• 4:08
  Speaker 2: an industry it's captured by a company, and Temple westa
• 4:10
  Speaker 2: They've got two point nine percent of the Australian furniture.
• 4:12
  Speaker 1: Market, up from just one percent six years ago, and.
• 4:15
  Speaker 2: They maan to win more market share. Companies often need
• 4:17
  Speaker 2: to lower their prices or increase promotions.
• 4:20
  Speaker 1: And that has flow and effects.
• 4:21
  Speaker 2: It can squeeze their profit margins.
• 4:23
  Speaker 3: In Temple and Webster's case, its revenue increase twenty percent,
• 4:25
  Speaker 3: but net profit fell thirty six percent.
• 4:27
  Speaker 2: And the man investors tend to act pretty negatively when
• 4:30
  Speaker 2: profit shrink, even if the revenue grow strongly.
• 4:32
  Speaker 3: The long term bet is that once you've built enough
• 4:35
  Speaker 3: scale and customer loyalty, you can improve those margins.
• 4:37
  Speaker 2: But the risk is that if competition never stops, it
• 4:40
  Speaker 2: becomes a race to the bottom.
• 4:41
  Speaker 1: And profits may stay thin for longer.
• 4:44
  Speaker 2: Longer than investors are willing to tolerate.
• 4:46
  Speaker 3: For our third and final story, Hasbro and Mattel have
• 4:49
  Speaker 3: both worn the market of a slowdown in the toy market.
• 4:53
  Speaker 2: Well well well, two toy titans, two gloomy forecasts, and
• 4:56
  Speaker 2: two very different share price reactions.
• 4:58
  Speaker 1: So tell me what we I know.
• 5:00
  Speaker 3: You're a big toy guy, So why don't you break
• 5:02
  Speaker 3: down who these two companies are?
• 5:04
  Speaker 2: Okay? So, Mattel's the US toy company found in nineteen
• 5:06
  Speaker 2: forty five and the brains behind Barbie and Hot Wheels.
• 5:09
  Speaker 3: Fisher Price sells in more than one hundred and fifty
• 5:11
  Speaker 3: countries and built its empire on toys. And what about
• 5:14
  Speaker 3: Hasbro will They date back even further back to nineteen
• 5:17
  Speaker 3: twenty three, and they own brands like Monopoly, NERF and Transformers.
• 5:20
  Speaker 3: But in recent years its real star has been magic
• 5:23
  Speaker 3: the Gathering, as well as dungeons and dragons.
• 5:25
  Speaker 2: If you don't mind, mm hmm, and the Man. Both
• 5:27
  Speaker 2: Hasbro and Mattel have just delivered their forecast for twenty
• 5:30
  Speaker 2: twenty six.
• 5:31
  Speaker 3: And both gave a pretty disappointing update on the demand
• 5:34
  Speaker 3: for traditional toys like NERF.
• 5:36
  Speaker 2: Mattel reckons their growth willay between three to six percent,
• 5:39
  Speaker 2: but adjusted earnings per share will drop as much as sixteen.
• 5:41
  Speaker 3: Percent, and similarly, Hasbro's expects toy growth of about three
• 5:45
  Speaker 3: to five percent, which is also below many analyst expectations.
• 5:48
  Speaker 2: But then, man, here's the interesting part. Because Hasbro's share
• 5:51
  Speaker 2: price jumped eight percent, but Mattel's that plummeted twenty five percent.
• 5:55
  Speaker 1: What is the reason for this?
• 5:56
  Speaker 2: Hasbro is a lot more than a physical toy company
• 5:59
  Speaker 2: these days. It's we've got digital games that are booming interesting.
• 6:02
  Speaker 1: So what's the key learning here?
• 6:03
  Speaker 2: Sometimes the biggest upgrade isn't what you sell, but how
• 6:06
  Speaker 2: you make the money.
• 6:07
  Speaker 3: Hasbro shift into digital games has changed the quality of
• 6:10
  Speaker 3: its earnings, and not.
• 6:12
  Speaker 1: Just the size of them.
• 6:13
  Speaker 2: Yeah, traditional toys or a physical product business, you design them,
• 6:16
  Speaker 2: you manufacture them, you ship them, you store them.
• 6:18
  Speaker 1: And discount them if they do not sell.
• 6:20
  Speaker 2: In other words, the man, every single additional NERF gun
• 6:23
  Speaker 2: has real production costs attached to it.
• 6:25
  Speaker 3: But digital games work a little bit differently to a
• 6:26
  Speaker 3: NERF gun, don't they they do.
• 6:28
  Speaker 2: They require a big upfront investment, but once the game's built,
• 6:31
  Speaker 2: the cost of delivering an extra download or purchase is
• 6:33
  Speaker 2: almost zero.
• 6:34
  Speaker 3: That is why Hasbro's digital gaming division delivered a forty
• 6:38
  Speaker 3: five percent operating margin, almost double what it was the
• 6:40
  Speaker 3: year before, and.
• 6:41
  Speaker 2: Hasbro's digital gaming has become a key to their financial
• 6:44
  Speaker 2: performance and share price. Fux dam If you want to
• 6:47
  Speaker 2: learn a little bit more about how to get into
• 6:48
  Speaker 2: the share market, how to buy and sell shares, the
• 6:50
  Speaker 2: Flex Academy this month is your go to. Download the
• 6:53
  Speaker 2: Flex app and check out the Academy this month. Thanks
• 6:55
  Speaker 2: for listening and we'll see you on Monday.