Real Time Notes from Acuity Investor Call. Strategy–Invest in Price, Take Disproportionate Share

October 8, 2020 [addtoany]

Below are real time notes from the investor call with Acuity Brands CEO Neil Ashe and President Rickey Reese. Both mentioned several times “investing in price.”

Raw notes from call:

  • Solid execution of gross profit.
  • Strong quarter; sales only down 5%.
  • Strong share repurchase.
  • Highest degree of forecast uncertainty in 15 years.
  • School Season was good. Hospitality was extremely slow, retail is slowing down and heavy industrial is soft.
  • Neil:  want to be strategic about investment in price. Not a blanket activity.
  • Contractor Select up 11% as respond to discretionary opportunities.
  • Digital Transformation:  Better, Smarter, Faster.
  • Generated $505M in net cash for year ended 31 AUG.
  • As everyone thinks about where they will have their folks, there will be a lot of change, and that is good for us.
  • Believe in post-coved ere, we will see opportunities for renovation–restaurants, offices, clearly opportunity in traditional renovation and broader renovation other than just energy savings.  Bit of an opportunity around a soft new construction market.
  • Major opportunities in warehouse and logistics space.  Participation in Residential and C&I channel is an opportunity. DIY at home has been a big opportunity.
  • Negative price mix of 4%.  Pricing in 1Q was 3% favorable (because of prior price increase).  3rd quarter was flat.  Price did drop each quarter this year.  Overall flat for the year.
  • As enterprises make mitigation for risks, (UV), don’t think it will lead to broad retrofits like LED did.
  • Position ourselves however the market shakes out. Want to take disproportionate share.

Something has spooked the market. Stock price was around $118 in premarket, $112 at 9:40 EST and one hour later is less than $105????

  • Definitely positioned to take a disproportionate share of what is out there.
  • Price mix was positive 4Q last year and 1Q this year, so we are flat on price for the year. We are strategic on where we invest to ensure we are taking share.  Expect going forward, that there is a consistent amount of supply and an inconsistent amount of demand, so we will invest in price while maintaining gross margin.  Believe that we can manage in this mix. Will be a aggressive as we need to be to drive position in the market.
  • Demand is uneven around the country. Slow down in renovation, delay in new construction. Retailers don’t want people in their space.

Ashe Conclusion: We performed really well in the quarter, demonstrated ability to generate cash in all markets. Well positioned regardless of how market shakes out.  Well optioned for inevitable bounce back. Compliment our team on course of last 2 quarters.  Everyone has rallied to deliver what we believe is a solid performance.