The election ate their
homework? CEOs blame campaign for weakness
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[November 07, 2016]
By Caroline Valetkevitch and Lewis Krauskopf
YORK (Reuters) - 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 U.S. companies
have made some mention of the U.S. 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 <WHR.N> and
coffee and doughnuts chain Dunkin' Brands <DNKN.O> 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 U.S. 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
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
The vitriolic race between Republican Trump and Democrat Clinton has
been tight, and some executives said consumers appeared to be waiting on
decisions until Tuesday's Election Day passes.
[to top of second column]
Republican U.S. presidential nominee Donald Trump shakes hands with
Democratic U.S. presidential nominee Hillary Clinton at the
conclusion of their first presidential debate at Hofstra University
in Hempstead, New York, U.S., September 26, 2016. REUTERS/Mike Segar/File
Photo - RTX2S3QH
"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
"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.
U.S. 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
Still, Paul Nolte, portfolio manager at Kingsview Asset Management in
Chicago, questioned whether the campaign was having an effect on
"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 <GGG.N>,
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."
For a related snapshot of CEO comments on the election, click.
(Additional reporting by Lisa Baertlein in Los Angeles; Editing by Dan
Burns and Alistair Bell)
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