Global Companies and the Influence of European Macroeconomic Conditions

Regulatory Changes

Global companies face significant impacts from European regulatory changes, such as the EU MDR, which JNJ considers a major one-time event. Compliance risks, as highlighted by GOOG, and the influence on regulatory credits demand, noted by TSLA, underscore the broad implications of evolving regulations.

"As the regulatory landscape continues to evolve globally, failure to comply with relevant regulation may lead to significant risk to the company." --- (GOOG, event transcript, 2024/06/07)

"The Company considers the adoption of EU MDR to be a significant one-time regulatory change and is not indicative of on-going operations." --- (JNJ, press release, 2024/04/16)

"On net, our auto margins remained flat sequentially. It is important to note that the demand for regulatory credits is dependent on other OEMs plans for kind of vehicles they are manufacturing and selling as well as changes in regulations." --- (TSLA, earning call, 2024/Q2)

"And so I'm confident that we'll continue to be able to navigate. Okay. As long as we're on legal and regulatory items, the big MDL settlement, it seemed relatively similar to the one that was passed some years ago and then was kicked out on appeal." --- (V, conference, 2024/05/15)

"Governments around the world consider various proposals to make changes to tax laws, which may include increasing or decreasing existing statutory tax rates." --- (JNJ, sec filing, 2024/Q2)

Currency Fluctuations

Currency fluctuations have varied impacts on global companies: Johnson & Johnson experienced a 1.9% negative impact, while Microsoft reported no material effect. Visa and Google highlight the need to measure growth excluding currency impacts, and Tesla noted favorable changes due to currency fluctuations on intercompany balances.

"Currency fluctuations had a negative impact of 1.9% for the fiscal six months of 2024." --- (JNJ, sec filing, 2024/Q2)

"(7) Growth on a constant-dollar basis excludes the impact of foreign currency fluctuations against the U.S. dollar." --- (V, sec filing, 2024/Q2)

"Fluctuations in the U.S. dollar relative to certain foreign currencies did not have a material impact on reported revenue and expenses from our international operations for the three and nine months ended March 31, 2024." --- (MSFT, sec filing, 2024/Q3)

"The favorable change was primarily due to fluctuations in foreign currency exchange rates on our intercompany balances." --- (TSLA, sec filing, 2024/Q1)

"Use of Non-GAAP Constant Currency Information International revenues, which represent a significant portion of our revenues, are generally transacted in multiple currencies and therefore are affected by fluctuations in foreign currency exchange rates." --- (GOOG, sec filing, 2024/Q1)

Supply Chain Disruptions

Global companies like Ford, GM, Nike, Starbucks, and Tesla are proactively managing supply chain disruptions by stockpiling materials, strengthening supply chain resiliency, managing inventory, reducing costs through improved procurement, and integrating upstream in the supply chain.

"In response to, or in anticipation of, supplier disruptions, we may stockpile certain components or raw materials to help prevent disruption in our production of vehicles." --- (F, sec filing, 2024/Q1)

"Mary Barra: Yes. Just in general, with everything that's happened over the last several years with COVID and then with the supply chain issues around the chip shortage and then just broad supply chain issues, we have worked and really strengthened the resiliency of our supply chain, and we'll continue to do that." --- (GM, earning call, 2024/Q1)

"• Supply Chain Conditions: During the first nine months of fiscal 2024 and as of February 29, 2024, our inventory levels were healthy and reflected our proactive actions taken to manage our inventory supply." --- (NKE, sec filing, 2024/Q3)

"Additionally, we saw meaningful reductions in product and distribution costs, driven by supply chain improvements in procurement, transportation and sourcing." --- (SBUX, earning call, 2024/Q2)

"So we're basically inserting ourselves in the upstream supply chain by doing that." --- (TSLA, earning call, 2024/Q1)

Consumer Demand Shifts

Consumer demand in Europe is shifting towards value-oriented and at-home channels, driven by economic pressures. Companies like Coca-Cola and Amazon note increased focus on affordability and forecasting challenges. PepsiCo and Starbucks observe a rise in e-commerce and occasional customer engagement, while Apple highlights consumer preference for premium yet affordable products.

"Like the U.S., we see the lower income consumers remaining under pressure and at the margin slightly more shift towards value orientated channels, at home orientated channels and lesser the away from away from home, and clearly that's related to our focus, not just on the marketing and the innovation, but the RGM and affordability and driving premiumization." --- (KO, earning call, 2024/Q1)

"In addition, changes in fuel, utility, and food costs, interest rates, and economic outlook may impact customer demand and our ability to forecast consumer spending patterns." --- (AMZN, sec filing, 2024/Q1)

"We have seen and expect to continue to see a further shift to e-commerce, online-to-offline and other online purchasing by consumers." --- (PEP, sec filing, 2024/Q2)

"This shift is geared towards are more occasional customers to attract and inject them to our stores and apps." --- (SBUX, earning call, 2024/Q2)

"And I think it's a combination of consumers wanting to purchase the best product that we offer in the different categories and our ability to make those purchases more affordable over time." --- (AAPL, earning call, 2024/Q2)

Impact on Revenue and Profitability

European macroeconomic conditions, particularly currency fluctuations, have a notable impact on global companies' revenue and profitability. Apple and Microsoft report foreign exchange headwinds affecting revenue growth, while Johnson & Johnson highlights a significant negative currency impact on sales. These conditions necessitate strategic flexibility to manage global challenges effectively.

"After that, we'll open the call to questions from analysts. Please note that some of the information you'll hear during our discussion today will consist of forward-looking statements, including, without limitation, those regarding revenue, gross margin, operating expenses, other income and expense, taxes, capital allocation and future business outlook, including the potential impact of macroeconomic conditions on the company's business and results of operations." --- (AAPL, earning call, 2024/Q2)

"First, FX. Based on current rates, which reflect the recent strengthening of the U.S. dollar, we now expect FX to decrease total revenue and segment level revenue growth by less than 1 point." --- (MSFT, earning call, 2024/Q3)

"Sales by international companies were $9.9 billion, a total increase of 0.2%, which included operational growth of 5.1% and a negative currency impact of 4.9%." --- (JNJ, sec filing, 2024/Q2)

"We expect our June quarter total company revenue to grow low-single-digits year-over-year in spite of a foreign exchange headwind of about 2.5 percentage points." --- (AAPL, earning call, 2024/Q2)

"Tim Schmid: Sure. And Danielle, we are fortunate to have a global business with more than 50% of our revenue already out of the U.S. And I think that gives us the flexibility to really manage a number of challenges that occur on a quarterly and yearly basis across the world." --- (JNJ, earning call, 2024/Q2)

Geopolitical Risks

Global companies like Amazon and Microsoft highlight that geopolitical conditions can amplify risks and dynamically affect aggregate demand for their products and services.

"In addition, global economic and geopolitical conditions and additional or unforeseen circumstances, developments, or events may give rise to or amplify many of these risks." --- (AMZN, sec filing, 2024/Q1)

"Aggregate demand for our software, services, and devices is also correlated to global macroeconomic and geopolitical factors, which remain dynamic." --- (MSFT, sec filing, 2024/Q3)

"and productivity. In addition, global economic and geopolitical conditions and additional or unforeseen circumstances, developments, or events may give rise to or amplify many of these risks." --- (AMZN, sec filing, 2024/Q1)

Technological Advancements

Technological advancements are crucial for businesses and governments to stay competitive, as emphasized by Google. IBM's initiatives and partnerships are driving innovation and high-tech manufacturing. Tesla's advancements in 4680 cell technology, Apple's Anvil engine and Apple Silicon, and Microsoft's industry-shaping innovations highlight the global push for technological progress.

"The people on this call know that if a technological advancement is not the focus of every business and government, they will be left behind." --- (GOOG, earning call, 2024/Q2)

"Through initiatives like the CHIPS and Science Act and partnerships like this one, we are paving the way for a future of innovation and high-tech manufacturing here in our Capital Region – ensuring our communities remain at the forefront of technological advancement." --- (IBM, press release, 2024/04/05)

"They're great partners, and they've done great development work with us and a lot of the advancements in technologies and chemistry we found 4680, they're also putting into their cells." --- (TSLA, earning call, 2024/Q1)

"Intricately detailed scenes like this are possible, thanks to our next generation Anvil engine supporting the latest advancements in metal, enabling us to leverage the full power of Apple Silicon with a gaming experience that delivers blistering frame rates and high resolutions." --- (AAPL, event transcript, 2024/06/10)

"Judson Althoff highlights recent advancements that are shaping the future of industry: https://t.co/zz3M9X05nB" --- (MSFT, twitter, 2024/04/10)