August 18, 2025 11:54 AM GMT M Idea Morgan Stanley & Co. LLC Christopher Snyder, CFA Equity Analyst Chris.Snyder@morganstanley.com +1 212 761-4470 Brandon Knutson Equity Analyst Brandon.Knutson@morganstanley.com +1 212 761-4168 Toby Okwara Equity Analyst Toby.Okwara@morganstanley.com +1 212 761-1693 Christine Yao Research Associate Christine.Yao@morganstanley.com +1 212 761-4193 Multi-Industry Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, invest ...

My next guest is tracking the impact of tariffs in retail and says there are several names positioned to mitigate tariff risk better than others. Here with his top retail defense plays is Brian Nagel, senior analyst at Oppenheimer. Okay, Brian, what are they.>> Well, good afternoon. So, look, we my as a retail analyst, as an analyst studying consumer, you know, I've spent a lot of time lately studying and watching tariffs and trying to make sense of what's happening out there. And you'll look before I talk ...

Financial Data and Key Metrics Changes - The company reported third quarter revenues of $635 million, reflecting a 16% growth in constant currency, within the annual guidance range of 15% to 17% [19] - Reported revenue growth was 12%, with B2B growth outpacing D2C, up 18% in constant currency [19][20] - Gross margin increased by 100 basis points to 60.5%, while adjusted EBITDA margin rose by 140 basis points to 34.4%, marking the best third quarter margin ever [8][22] - Adjusted net profit reached €116 million, a 26% increase year over year, with adjusted EPS rising to €0.62 from €0.49, a 27% increase [23] Business Line Data and Key Metrics Changes - In the Americas, revenue grew by 16% in constant currency, with both B2B and DTC channels showing double-digit growth [14] - EMEA experienced a 13% revenue increase, with B2B outpacing DTC, driven by strong sell-through at retail partners [15] - The APAC region saw a 24% increase in constant currency, with expectations for accelerated growth in the fourth quarter [16] Market Data and Key Metrics Changes - Retail revenue at the top 10 wholesale partners in the U.S. increased by 25%, while in EMEA, it was up 20% [10][11] - The company noted a shift towards in-person shopping, favoring the B2B channel over DTC, with over 90% of B2B growth coming from existing doors [9][20] Company Strategy and Development Direction - The company aims to maintain relative scarcity and manage distribution growth tightly, with plans to reach around 100 stores by the end of the fiscal year [12] - The strategy includes investing in automation, IT, and infrastructure to enhance production capacity and efficiency [32][70] - The company is focused on both B2B and DTC channels, with a commitment to high-quality distribution and full-price realization [46] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting growth and profitability objectives despite currency headwinds and tariff impacts [25][27] - The company anticipates that B2B growth will continue to outpace DTC for the fourth quarter and the full year [20][42] - Management highlighted strong demand across all product categories, particularly in emerging youth markets [13] Other Important Information - The company ended the quarter with cash and cash equivalents of €262 million after a share repurchase of €176 million [23][24] - Capital allocation priorities include investing in the business, reducing debt, and opportunistic share buybacks [25] Q&A Session Summary Question: Current demand trends and visibility for fourth quarter acceleration - Management noted exceptional demand in Q3, with capacity constraints being the main issue, and aims for continuous margin improvement as the business scales [31][32] Question: Market response to price increases implemented on July 1 - Management reported no negative impact on demand post-price adjustments, with strong sell-through during the back-to-school season [36][38] Question: Impact of increased EU tariffs on revenue and margins - Management indicated that the effective tariff rate is manageable, with pricing flexibility and other levers to offset impacts [42][44] Question: EMEA growth performance and future expectations - Management acknowledged challenges in capturing full demand due to production capacity but expects a return to mid-high teens growth in EMEA [51][53] Question: Insights on closed toe product growth - Management confirmed a 400 basis point increase in closed toe revenue share, with strong performance across various styles [60][62] Question: Factory expansion plans and supply evolution - Management is on track with factory expansion plans, expecting full absorption by 2026, and is investing in capacity to meet growing demand [70][71] Question: Confidence among wholesale partners - Management noted strong demand from wholesale partners, reflecting consumer behavior and a desire for more product breadth [73][74] Question: DTC business performance and customer trends - Management highlighted strong performance in DTC, with new stores delivering higher ASP and increased transaction values [102][105]

Core Insights - Procter & Gamble (PG) has relied on price increases to mitigate inflationary pressures but faces challenges in sustaining this strategy as consumer behavior shifts towards seeking value [1][2][3] - The company aims to achieve $1.5 billion in annual savings while managing $1 billion in tariffs and $200 million in commodity costs expected in 2026 [3][8] - PG's brand superiority and innovation are crucial for maintaining pricing power, with successful examples in products like Pampers and Swiffer [2][8] Pricing Strategy and Market Dynamics - PG's pricing strategy has been effective in balancing volume and pricing gains, but category growth has slowed in key markets, particularly in North America and Europe [1][8] - Competitors like Colgate-Palmolive and Church & Dwight are also using price increases and premium innovations to offset rising input costs, but face limitations in pricing power [4][5][6] Financial Performance and Projections - PG's shares have declined approximately 7.5% year-to-date, underperforming the industry average decline of 4.3% [7] - The forward price-to-earnings ratio for PG is 22.01X, compared to the industry average of 19.79X, indicating a premium valuation [9] - The Zacks Consensus Estimate projects year-over-year EPS growth of 2.3% for fiscal 2025 and 6.3% for fiscal 2026, although estimates have been revised downward recently [10][11]

pointed out yesterday, rising beef prices could create another problem down the line. Let's bring in Kate Rogers to discuss. Kate I think Chipotle to the Brian Halo is gone.I don't know if Starbucks I don't know if they got it over at Starbucks, but it's a little bit gone from Chipotle now. >> So it's so interesting. You mentioned those two names Kelly Chipotle and Starbucks.They've long had pricing power. And that's one of the things we're going to be really watching for this quarter. Which brands have it ...

Inflation & Tariffs - Tariffs are contributing to inflation, with import prices (excluding food and energy) rising 04% in May after a 05% increase in April [3] - Companies with pricing power will pass tariff costs to consumers, while those without will absorb costs via margin cuts [4] - Helen of Troy plans to raise consumer prices by 7% to 10% this summer, while ConAgra faces 7% cost increases due to commodity, labor, steel, and aluminum inflation [4][5] - Levi's anticipates only a 2% to 3% price increase, mitigating most tariff impacts, suggesting a separation of winners and losers based on pricing power [6] - Even if Levi's absorbs costs, someone in their supply chain is still bearing the tariff burden [7] Commodity & Industrial Metals - The CRB raw industrials index matched its March level, the highest since January 2023, indicating rising industrial metal prices [10] - Silver reached its highest level since 2011, and platinum is up about 30% in the past few months, reflecting a global rise in industrial metals [10][11] - The rise in metal prices is attributed to preemptive buying ahead of potential tariffs and the strategic importance of critical minerals in a multi-polar world [11] - Higher metal prices will flow through the supply chain, impacting inflation regardless of whether consumers absorb the costs [12] Company Strategies - Some companies can mitigate tariff effects, while others face margin pressure or need to raise prices [6][7] - Companies are trying to get their hands on metals ahead of potential tariffs [11]

Core Insights - Colgate-Palmolive Company (CL) is effectively utilizing its pricing power to drive growth and alleviate external cost pressures through a multifaceted pricing strategy [1][10] Pricing Strategy - The company employs competitive pricing, value-based strategies, and price segmentation to cater to diverse consumer needs while optimizing value [1][2] - Colgate's pricing actions, combined with its funding-the-growth program and productivity initiatives, are enhancing efficiency and expanding margins [2] Financial Performance - In Q1 2025, Colgate's adjusted gross margin increased by 80 basis points (bps) and operating margin expanded by 120 bps year over year, resulting in a 6% growth in adjusted earnings per share (EPS) [3] - The company anticipates pricing gains of 2.5% for 2025, with an expected flat gross margin and low single-digit EPS growth [3][4][10] Competitive Landscape - Major competitors in pricing power include Procter & Gamble (PG), Clorox (CLX), and Church & Dwight (CHD) [5] - Procter & Gamble's pricing strategy focuses on value-based pricing to maintain market share and reduce reliance on promotional discounts [6] - Clorox has achieved a 240 bps expansion in gross margin year over year, driven by strategic pricing and cost-saving measures [7] - Church & Dwight is enhancing its market position through strategic pricing and innovation, gaining market share in nine of its 14 major brands [8] Valuation and Estimates - Colgate's shares have increased by 0.7% year to date, contrasting with a 3.2% decline in the industry [9] - The company trades at a forward price-to-earnings ratio of 24.17X, higher than the industry average of 20.19X [11] - The Zacks Consensus Estimate predicts year-over-year EPS growth of 1.7% for 2025 and 7.3% for 2026, with stable EPS estimates over the past 30 days [12]

Core Insights - Philip Morris International Inc. (PM) demonstrates strong pricing power as a key driver of profitability, reporting 10.2% organic net revenue growth and 16% organic operating income growth in Q1 2025, with a gross margin expansion of 340 basis points [1][7] - The smoke-free segment, including products like IQOS and ZYN, achieved 670 basis points of organic gross margin expansion, exceeding 70%, which is over 5 percentage points higher than combustibles, indicating a favorable product mix and premium positioning [2][3] Revenue and Pricing Dynamics - Pricing contributed 6 points to net revenue growth, with an 8% increase in combustible pricing and around 3% in smoke-free products excluding devices [1][7] - The company's ability to implement effective pricing strategies across both combustible and smoke-free categories highlights strong brand equity and consumer loyalty [3] Competitive Landscape - Altria Group, Inc. (MO) also exercises pricing power, achieving a 10.8% net price realization in the smokeable segment, but faces challenges with growing price sensitivity among lower-income consumers [4] - Turning Point Brands, Inc. (TPB) focuses on brand strength and market positioning rather than aggressive pricing, showing volume resilience amid consumer trade-down trends [5] Market Performance and Valuation - Philip Morris shares have gained 18.4% in the past three months, slightly outperforming the industry growth of 18.2% [6] - The company trades at a forward price-to-earnings ratio of 22.43X, higher than the industry's average of 15.36X [9] Earnings Estimates - The Zacks Consensus Estimate for PM's earnings implies year-over-year growth of 13.7% for 2025 and 11.7% for 2026, with current estimates of $7.47 for 2025 and $8.34 for 2026 [11][12]

Investment Rating - The investment rating for Jiangsu Changshu Automotive Trim Group is Equal-weight [4] Core Views - The report indicates a price target reduction from Rmb15.60 to Rmb14.70, reflecting updated revenue forecasts and margin expectations [1][3] - Revenue forecasts for 2025 and 2026 have been raised by 4.6% and 7.9% respectively, following a 4% revenue beat in 2024, attributed to steady customer expansion [1][2] - Gross profit margin (GpM) forecasts for 2025 and 2026 have been lowered by 2.2 percentage points and 1.7 percentage points respectively, due to pricing pressure and increased competition [2][3] - Net profit forecasts have been reduced by 13.1% and 10.3% for 2025 and 2026 respectively, reflecting the adjustments in revenue and GpM [3] Summary by Sections Financial Forecasts - The report introduces financial forecasts for 2027, with EPS estimates for 2025, 2026, and 2027 at Rmb1.36, Rmb1.52, and Rmb1.66 respectively [4][17] - The DCF-based price target is set at Rmb14.70, which is a 6% decrease from previous estimates, indicating expectations of more stable long-term profitability despite near-term challenges [3][8] Market Position and Strategy - The company is expected to experience superior growth compared to peers, albeit at the cost of narrowing gross profit margins [11] - There is a tight balance sheet amid a slowing industry, which may limit capital expenditure capabilities to capture growth opportunities [11] - The report suggests that growth is likely to moderate, with potential for client base diversification into local players and deeper cooperation with key customers like Tesla and Li Auto [15][11] Risk and Reward Themes - The report identifies positive themes in electric vehicles but negative themes regarding pricing power, indicating a mixed outlook for the industry [12] - The company is expected to actively seek new orders and solidify its position within the supply chain of major automotive players [12][15]

Core Insights - Nomad Foods Limited (NOMD) is facing increasing input cost pressures, particularly in protein categories such as chicken and red meat, due to heightened demand and disruptions related to Asian flu in Europe [1][7] - The company's management indicated that pricing actions are being implemented but will likely lag behind cost inflation in the near term, leading to a revised lower adjusted EBITDA growth guidance for 2025 [2][3] Financial Performance - In Q1 2025, Nomad Foods reported a gross margin increase of 90 basis points year-over-year to 27.8%, but adjusted EBITDA declined by 1.8%, indicating early signs of margin pressure [2][7] - The updated guidance for adjusted EBITDA growth for 2025 has been revised downward to a range of 0% to 2%, from a previous range of 2% to 4% [2] Market Position and Strategy - Nomad Foods has a history of pricing to recover cost increases, but prolonged inflation in protein inputs may challenge consumer elasticity, particularly in value-seeking markets like the UK [3] - The company must balance cost recovery with demand retention while maintaining brand strength to offset margin pressure in the upcoming quarters [3] Peer Comparison - Conagra Brands (CAG) is also facing elevated protein and input costs, resulting in a 389-basis-point adjusted gross margin decline in Q3 fiscal 2025, and is focusing on portfolio restructuring [4] - Lamb Weston reported 9% global volume growth in Q3 fiscal 2025 and is executing over 30 strategic projects, despite a 5% decline in price/mix due to strategic pricing adjustments [5] Valuation Metrics - Nomad Foods shares have decreased approximately 5.5% in the past month, compared to a 1.7% decline in the industry [6] - The company trades at a forward price-to-earnings ratio of 7.89X, significantly lower than the industry average of 15.77X [9] Earnings Estimates - The Zacks Consensus Estimate for Nomad Foods' current financial-year sales and earnings per share implies year-over-year growth of 4.6% and 7.3%, respectively [11] - For Q2 2025, the consensus estimate for sales is $892.71 million, reflecting a year-over-year growth estimate of 5.54% [12]