Newspaper article St Louis Post-Dispatch (MO)

Quarterly Earnings Debate Pits CEOs against Investors

Newspaper article St Louis Post-Dispatch (MO)

Quarterly Earnings Debate Pits CEOs against Investors

Article excerpt

Ron Shaich has been preaching about the evils of quarterly capitalism, and it turns out that President Donald Trump shares his concern.

Trump asked the Securities and Exchange Commission last week to study letting companies report their earnings just twice a year instead of quarterly. Shaich, the chairman and former chief executive of Panera Bread, thinks it's a great idea.

In a series of speeches and interviews since selling Panera to JAB Holding last year, Shaich has criticized CEOs and investors alike for an excessive focus on short-term results. He told me Thursday that when he was running the restaurant chain, analysts and investors rarely asked about transformative bets such as his customer loyalty program.

They wanted to know why Panera missed its quarterly guidance by a penny per share, or how sales were trending last week. "They're not actually buying an ownership interest in the company, they're buying the stock looking for a short-term pop," he said.

He sees the earnings-season routine as part of the problem. "When you're being notched every 12 to 13 weeks on those metrics, people get a very short-term focus," Shaich said. "That moves into the boardroom, and it moves into the minds of the CEOs."

Other CEOs also think the quarterly reporting requirement puts too much focus on short-term results. Indra Nooyi, who's about to retire from running Pepsico, suggested the six-month alternative to Trump.

Investors hate the idea. "We live in the information age, and I think quarterly reporting is reasonable," says Norman Conley, chief investment officer at JAG Capital Management in Ladue.

"If it was only twice a year, the incentive to game the numbers would increase," Conley worries. "If I'm given six months of flexibility in how I'm going to report on a new product or service, there might be some incentive to be less than fully transparent. …

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