The elec­tion ate their home­work? CEOs blame race

Kuwait Times - - ANALYSIS -

Ap­par­ently, Amer­i­cans are too dis­tracted or dis­traught by this year’s wild pres­i­den­tial cam­paign to think about get­ting a dish­washer, buy­ing an RV or open­ing a dough­nut shop. And the topsy-turvy race could be crimp­ing fur­ni­ture sales, ho­tel book­ings and even tem­po­rary help hir­ing. At least that is the word from a clutch of cor­po­rate ex­ec­u­tives in re­cent weeks who have laid at least some blame for their com­pa­nies’ rocky per­for­mances or un­even con­sumer de­mand at the feet of con­stantly bick­er­ing White House con­tenders Hillary Clin­ton and Don­ald Trump.

Since the start of Oc­to­ber, ex­ec­u­tives from more than 80 US com­pa­nies have made some men­tion of the US elec­tion dur­ing quar­terly con­fer­ence calls with Wall Street an­a­lysts and in­vestors, based on a Reuters anal­y­sis of call tran­scripts. In many cases, their re­marks have come in re­sponse to spe­cific ques­tions from call par­tic­i­pants about whether the long cam­paign sea­son has had an im­pact on re­sults. Some, though, have specif­i­cally pointed to the elec­tion as a fac­tor in their earn­ings, in­clud­ing by damp­ing con­sumer or busi­ness spend­ing. For ex­am­ple, ap­pli­ances maker Whirlpool and cof­fee and dough­nuts chain Dunkin’ Brands have di­rectly blamed the elec­tions as a drag on their busi­ness. Shares of both com­pa­nies fell af­ter their re­ports. In Whirlpool’s case, CEO Jeff Fet­tig pointed to ap­par­ent “tem­po­rary soft­ness in in­dus­try de­mand” in the United States in ex­plain­ing why sales dipped around 0.5 per­cent from a year ear­lier, un­der­shoot­ing Wall Street’s fore­casts. “We be­lieve this is due to con­sumer con­fi­dence weak­en­ing, pri­mar­ily due to the fo­cus around the US elec­tions,” he told an­a­lysts on the ap­pli­ance maker’s con­fer­ence call last month.

At Dunkin’ Brands, CEO Nigel Travis cited a hes­i­tance by fran­chise op­er­a­tors to open new stores un­til they get a grip on how the elec­tion out­come will af­fect reg­u­la­tions and min­i­mum wage laws. Ex­ec­u­tives at other com­pa­nies, such as fur­ni­ture chain Ethan Allen, staffing firm Robert Half In­ter­na­tional and ho­tel op­er­a­tor Hil­ton World­wide, have cited the elec­tion as a pres­sure point as they dis­cussed the busi­ness cli­mate. The elec­tion “re­ally has im­pacted cus­tomers and clients. It’s taken a tremen­dous amount of at­ten­tion from es­pe­cially dis­cre­tionary bud­gets,” said Fa­rooq Kath­wari, chair­man, pres­i­dent and CEO of Ethan Allen In­te­ri­ors.

Dose of Skep­ti­cism

But just as vot­ers of­ten take cam­paign prom­ises with a healthy dose of skep­ti­cism, some in­vestors and even a few ex­ec­u­tives them­selves are not tak­ing the talk of risks from the elec­tion sea­son se­ri­ously. “I think com­pa­nies with un­der­whelm­ing re­sults are look­ing for con­ve­nient ex­cuses, and the at­ten­tion be­ing paid by the Amer­i­can pub­lic to this elec­tion is cer­tainly a timely and read­ily avail­able ex­cuse,” said Michael James, man­ag­ing di­rec­tor of eq­uity trad­ing at Wed­bush Se­cu­ri­ties in Los An­ge­les. “Whether or not that’s true is de­bat­able. I’d be tak­ing it with a grain of salt.”

The vit­ri­olic race be­tween Repub­li­can Trump and Demo­crat Clin­ton has been tight, and some ex­ec­u­tives said con­sumers ap­peared to be wait­ing on de­ci­sions un­til to­day’s Elec­tion Day passes. “As we near an elec­tion date in early Novem­ber, there’s no doubt that I think con­sumers are, cer­tainly with all dis­cre­tionary pur­chases, maybe just tak­ing a look at what’s go­ing to hap­pen here in the next cou­ple of months,” said Win­nebago In­dus­tries CEO Michael Happe on the com­pany’s con­fer­ence call last month. His ob­ser­va­tion came even as mo­torhome maker Win­nebago’s sales and earn­ings for the quar­ter ended in late Au­gust topped Wall Street es­ti­mates.

Hil­ton, mean­while, cut its out­look for a key rev­enue met­ric, cit­ing weak busi­ness travel. “This cy­cle of elec­tion ... I think it’s been an un­usual cy­cle and as a con­se­quence I think it has slowed down the econ­omy prob­a­bly more dra­mat­i­cally than I’ve seen cer­tainly in my adult life,” Hil­ton CEO Christo­pher Nas­setta said on a con­fer­ence call last month. Ever­core ISI an­a­lyst Rich Hightower, who cov­ers lodg­ing com­pa­nies in­clud­ing Hil­ton, said the elec­tion was a “rel­e­vant” point for ex­ec­u­tives to bring up, but he was not fac­tor­ing any elec­tion im­pact into his fi­nan­cial fore­casts.

US con­sumer spend­ing did fall in both Au­gust and Septem­ber, the lat­est gov­ern­ment data showed, and a key gauge of re­tail sales has posted a de­cline of around 0.1 per­cent on av­er­age over the three months through Septem­ber. Still, Paul Nolte, port­fo­lio man­ager at Kingsview As­set Man­age­ment in Chicago, ques­tioned whether the cam­paign was hav­ing an ef­fect on con­sumer be­hav­ior. “I can’t imag­ine it’s cre­ated a kind of cata­tonic state for con­sumers to stop buy­ing,” said Nolte.

And some C-suite denizens have no pa­tience for such ex­cuses. Pa­trick McHale, CEO of pumps and spray equip­ment maker Graco, told his con­fer­ence call lis­ten­ers he had not heard of “a sin­gle cus­tomer” hold­ing off on an in­vest­ment be­cause of the elec­tion. McHale con­tin­ued: “In fact, if I heard some­body at Graco tell me that they were go­ing to make an in­vest­ment in some­thing but they weren’t be­cause they want to see what was go­ing to hap­pen with the elec­tion, I’d prob­a­bly fire them.”

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