CEOs Talk About Their 2015 Outlook

Not since 2007 have American CEOs held a rosier net view of the near-term future.

“I think the glass is half-full,” said Sally Smith, CEO of Buffalo Wild Wings, the fast-growing casual restaurant chain. “But we’ve been through five tough years, and it’s definitely still sitting right at the halfway mark.”

The biggest potential hiccup CEOs see? “Geopolitical craziness that would shut down entire markets to us if people get nervous,” said Bob Paul, CEO of Compuware.

Annually, Chief Executive magazine talks with a handful of CEOs, diversified by size, industry and geography, about their outlooks. This year’s group includes a wide swath of notable consumer and business-to-business companies. We asked them three questions: What is in your crystal ball for your company and your industry for the year ahead? What is your outlook for the U.S. and global economies? And what issue or challenge are you most concerned about? Here are synopses of what they said.

Wooing the Net-Conscious Shopper
Kathryn Bufano, CEO, Bon-Ton Stores

The economy is steadily improving but not as quickly as everyone would like. In the middle of the country, unemployment rates have improved in most markets, and—hopefully—our business will see an uptick in 2015. Also, if you look at how
shopping and GDP plummeted last winter because of poor weather, we should see the benefit in the first quarter in terms of relative performance.

We’ll benefit from some general lifts. Our home business right now is pretty strong. Gasoline prices have been falling on a relative basis, and that frees up money and helps consumer spending.

But the retailing business is evolving; and in the department-store sector, the influence of e-commerce and the Internet is very strong. So we’re initiating an “omni-channel” initiative called “Let us find it,” [so that] when a customer is in our store and wants an item, we’ll find it via Internet from anywhere within our store footprint or e-commerce and get it to her. Plus, everyone is competition now, not just department stores. So, we have to be very aggressive in terms of wooing and holding on to our consumer and making it exciting to shop in our stores.

Headquartered in Milwaukee and York, Pennsylvania, the company operates 273 stores in 26 states and had fiscal-2013 revenues of $2.8 billion.

Bullish On Housing Opportunity
Eduardo Cosentino, CEO, Cosentino North America

We’re continuing distribution and sales expansion in North America with a new product, called Dekton, which has more decorating capabilities than our well-known Silestone. We also are adding sales and service centers, with 27 now and estimating that we’ll have 34 open by the end of 2015. We expect to grow around 20 percent in the U.S. in 2015, faster than market growth, so we’ll pick up [market] share.

Housing remains full of growth opportunities in most parts of North America. We expect it will grow faster in the coming years, and we [plan to] tap into that both in the remodeling market and in new-home construction.

Our first market is the U.S. and our second is Europe. We have suffered in some countries in Europe during the last two years. But trends were changing markedly in 2014 because the economy is recovering, and we’re growing at a good level in Europe now.

With growth, however, one of our biggest issues is finding and developing the right professionals to staff our centers. Turnover of employees will be a challenge in coming years, too. With North American headquarters in Houston, the Almera, Spain-based company makes architectural surfaces and has global revenue of more than $450 million.

Can Middle Americans Afford Retirement?
Roger Crandall, CEO, MassMutual

The insurance industry has been going sideways partly because the industry is missing distribution opportunities. But sales of our core product, whole life insurance, were up 18 percent through the first half of the year because we’ve been investing in distribution, in career agents who are licensed to sell our products. We’ve been far exceeding industry growth rates and will continue to do so in 2015.

However, the unfortunate reality is that American consumers aren’t doing all that well. The recovery in real estate and equity markets has benefited wealthy Americans but not Middle America. So, there is general financial unpreparedness by Americans for retirement—less than $25,000 in savings, on average. That’s a little bit scary. We’re starting to see glimmers of recovery in the U.S. economy, and I’m optimistic that, next year, it’ll perform best of the major economies. But the challenge is there’s not enough growth to make a dent in the under-employment problem. And day-to-day headlines are problematic—from the cost of health care to the biggest international uncertainty we’ve seen since the Cold War.

I’m optimistic that the U.S. economy will perform best of the major economies, particularly compared with Japan and Western Europe.

Headquartered in Springfield, Massachusetts, the company is a leading mutual life insurer, with revenues of $27.6 billion in 2013.

Housing-Driven, Credit-Wary
Jay Gould, CEO, American Standard Brands

We’re anticipating growth of about 9 to 10 percent next year, about two times the industry growth rate, so we’ll be getting market share. We’ve got expanded availability of products and a broader relationship with [wholesaler] Ferguson, which provides higher margins than our big-box retailers. Plus, we have two innovations that will be hitting the market over the next several months that I can’t talk about right now.

The industry will be mostly driven by continued increases in home prices. That curve seems to have flattened, but the most recent data suggests an 8-percent year-to-year increase [in 2014] in the top 20 metro markets, and that bodes well. The limiting factor is credit conditions; consumers’ ability to qualify for mortgages is still a real challenge.

We’re looking at 2.5- to 3-percent GDP growth next year with liftoff as early as mid-year. And we’re not expecting the weather-related challenges in the first quarter that we had in the 2014 first quarter, which alone would be a four-point swing in GDP.

Embedded in this [projection] is the expectation that the world political scene will remain unsettled. There could be short-term shocks, but our forecast can’t anticipate that. Based in Piscataway, New Jersey, the company manufactures bath and kitchen products and had 2013 revenues of $1.1 billion.

Demand for Transformative IT
David Goulden, CEO, EMC Information Infrastructure

The way businesses and consumers use information technology is undergoing a once-in-a-generation transformation. Companies and governments have huge investments in existing technologies. But they also need to adopt newer  technologies to stay relevant in this new era. So, they look to partner with technology providers who can help them run existing technologies more efficiently in order to free-up resources to invest in newer [solutions] to become more competitive.

Within the IT industry globally, enterprise spending on IT has lagged worldwide GDP growth for the last couple [of] years. This may be a first for a non-recessionary economic environment in my 30-plus-year career in technology. What makes me hopeful that this will change is the pace of new technologies that are coming to market and enjoying rapid adoption by early movers, who set the direction that others eventually follow.

I’m most concerned about geopolitical stability at the global level and political paralysis in Washington. The biggest drag on corporate capital investment is uncertainty about the future. We live in a world and an era that yearns for calm, pragmatic leadership to inspire confidence and investment in the future.

Headquartered in Hopkinton, Massachusetts, the company provides data storage, security and other IT services and is the largest part of EMC, which had 2013 revenues of $23.2 billion.

Getting the Itch to Build
David Hannah, CEO, Reliance Steel & Aluminum

Next year will be better than this year. We’re still in catch-up mode because so much of our business is non-residential construction—bridges, poles, water works, energy infrastructure and so on. It’s the laggard in terms of recovery from the 2009 recession. We’re still a good 20 percent off what we think “normal” should be in this area.

This year, we’ve actually started to see steel mills, our suppliers, talking more about big projects, which means that companies are having some confidence in business to invest in major projects out into the future. There have been a few attempts at that kind of recovery before, but they’ve always been sidetracked.

The U.S. industrial economy has been recovering since 2010 but plodding along at a very slow pace. If we can get some more bright spots like the auto industry, the economy should improve next year over this year.

My one concern is some crazy event that causes uncertainty. It could be related to what’s going on in the Middle East or something [that] happens here at home or our politicians create some mess that creates uncertainty going forward.

Headquartered in Los Angeles, the company is the nation’s largest metal-service-center operator and had 2013 revenues of $9.2 billion.

Stores Need Stuff to Sell
A.J. Khubani, CEO, TeleBrands

We’re looking very strong for 2015 because of our product lineup, which includes the Pocket Hose and the SpinMop. We also have a bunch of new products launching in December 2014 that will be a kickoff, including a software cleanup product called WinCleaner. The entire category of direct-response merchandise will do well, but I think we’ll pick up share. Most of our merchandise is sold in brick-and-mortar stores, and retailers are looking for stronger products.

Also, the economy seems to be improving, just using the stock market as a predictor. I don’t expect major progressions or sudden jumps in the economy but rather to continue on the slow-growth path we’ve been on, which is probably healthier. We sell to 100 countries around the world, too; and when the U.S. does well, it means the rest of the world does well.

My biggest concern is that TV viewership continues to decrease every year. But it’s mostly young people dropping off, and our biggest market is 40-year-olds and up.

Headquartered in Fairfield, New Jersey, the nation’s largest direct-response TV seller of consumer goods had 2013 revenues of more than $1 billion.

Glistening Gullets
Kevin Klock, CEO, Talking Rain

We’re really bullish on our growth. Usually, with a brand of this size, by now you’ve saturated the category. However, there’s so much category opportunity remaining for us, including convenience stores, which now are only 6 percent of our retail sales—but should be significantly higher. And we’ve gone against competitive threats and we’re winning.

We’ll continue to see a steady decline in consumption of carbonated soft drinks. But more interesting is how high can the energy-drink category go? For a long time, consumers drank soft drinks for two purposes: as a pick-me-up and as refreshment. Energy drinks are capturing those looking for alternatives for a pick-me-up, and we’re capturing those looking for refreshment.

We also see a great opportunity to go global. There’s a tremendous amount of money but not a lot of places for companies to put their cash. Yet, my concern will always be the consolidation of distribution in our industry. You look out there and see that it’s getting more and more consolidated; you’ve got Monster Energy now, for instance, moving into the Coca-Cola system. That further reduces the opportunity for small companies to expand their availability.

Headquartered in Preston, Washington, the company is best known for selling its Sparkling Ice beverages and had 2013 revenues of more than $400 million.

Consumers Feeling Tailwinds
Jim Lillie, CEO, Jarden

We see three- to five-percent organic growth for Jarden next year and expansion of our margins. We expect capital expenditures to be two to three percent of revenue. Because of the seasonal nature of many of our products, we tend to have a four- to six-month visibility curve on their future. And I’m not pessimistic. If you look at the U.S. economy in general, unemployment is down, real wages are going up, consumer-credit availability is good and the mortgage-default rate is plummeting. So, a lot of the headwinds are behind us.

Consumers are coming off a couple of years of frugality fatigue. They’re just kind of tired of saving and holding back. You can look at the glass as half-empty or half-full, but a lot of people saw the worst economy in their lives and now people are cautiously getting back into the water.

In Western Europe, it’s evolving nicely but remains a couple of years behind the U.S. We are happy with our progress in Asia. And there are other areas of the world that are healthy, such as many Latin American countries.

Headquartered in Boca Raton, Florida, the company sells consumer brands ranging from Nuk pacifiers to Holmes air purifiers had 2013 revenues of $7.4 billion.

Hiring Leads the Way
Harley Lippman, CEO, Genesis10

We’ve just had close to the best two months we’ve had in almost three years, and we have a lot of growth in all of our core clients—which is a good sign. To a certain degree, our industry is a bellwether for the overall economy, and they’re hiring a lot of our people.

What’s happening with the economy is complicated. Full-time jobs have declined significantly; what’s increased is part-time jobs. One reason for this [phenomenon] is that employers have cut workers below the threshold for coverage under the Affordable Care Act.

That’s very disturbing. President Obama has ignored the real issue here. It’s not sustainable. And the longer people are out of full-time work, the harder it is for them to get back into work. That can only be debilitating for our economy in the mid- and long-term.

Worldwide, we have somewhat of a recovery, but it’s complex. Europe is stagnating and some of that is due to China’s grabbing some of its growth. And we have greater challenges than in a long time—especially in the Middle East—with ISIS and the Iran nuclear threat.

The New York-based company specializes in IT consulting and staffing and had 2013 revenues of about $200 million.

War for Talent Rages Again
Susan Marks, CEO, Cielo

We’re seeing 25-percent growth this year for our company and I think we can continue to keep up that compounded annual growth rate next year. We have a really strong team and business model and provide a lot of value to our customers. It’s the right strategy and the right execution.

I’m extremely bullish about the domestic economy, too, and generally globally. Certainly, in many markets, the war for talent is back—if it was ever gone. Companies are starting again to really find that they’ve got to work harder in that area than ever. There are horrible pockets of the U.S. economy; but generally, the unemployment rate for people with college degrees is only about 3 percent.

I’m more cautious about some of our foreign markets. Europe has been slower than the U.S. but is starting to recover somewhat, and we grew even through the worst of the European recession. One challenge for our industry is that as the economy improves, some customers are deciding, “We’ll build this function internally.” But we also like to urge people to pay attention to their own internal-development programs and help them. Smart companies do that.

Based in Milwaukee, the company—most recently known as Pinstripe—is a “talent solutions” provider and had 2013 revenues of more than $100 million.

Autos Keep On Chugging
James O’Sullivan, President and CEO, Mazda North American Operations

We see a slight increase next year on the retail side because the car “park” in the U.S. continues to age significantly. Cars are lasting a lot longer, but there are pressures to replace them. Financing is readily available. Also helping growth is strong sales of small crossovers, which is getting a lot of outflow from sedans.

On top of industry volume, we’re also seeing our average transaction prices go up. Customers come in and want a lot of content, which is good news. The mix keeps improving. Fuel prices are still top-of-mind with consumers, but the best news for the U.S. economy is what we’ve been able to do with oil production domestically and how it affects energy strategy. That helps dramatically. Of course, we’re still trying to push the envelope on fuel economy to meet CAFE standards.

[Certainly], there are headwinds, especially challenges in Europe. There’s also a big worry bead on what’s happening in China, which is a big driver of the overall global economy. The company is headquartered in Irvine, California, and is the
U.S. arm of Mazda, a Japanese automaker with revenues of more than $26 billion in 2013.

Unlocking Capital for Growth
Bob Paul, CEO, Compuware

We are splitting off the slow-growing mainframe-services part of our business and going private through acquisition by an equity company for $2.5 billion. We’re now the market leader in applications-performance management, one of the hottest IT categories out there.

Due to the level of focus on going private and the work we’ve done on innovation for future growth, I’d be very disappointed if all we did is clear the 20-percent-sales-growth milestone next year.

I think it’ll be steady-as-she-goes for the economy. Mid- to low-single-digit growth is our expectation for next year. It’s all about how capital is used. It is available for organizations to invest and grow, and what is the rate of innovation that drives new opportunities and value for business?

What concerns me is [that] expectations around shareholders of public companies are changing, whereby investors want more short-term use of capital—meaning, are you going to provide a dividend or be doing share repurchasing to artificially prop up the share price? In our case, it’s been more than $100 million a year in dividends. That’s capital that isn’t being put to use for innovation.

Based in Detroit, this IT provider focuses on helping companies optimize applications and had fiscal-2014 revenues of $721 million.

Beware of Undertow Issues
Sally Smith, CEO, Buffalo Wild Wings

We have a very robust three-year strategy, as well as for the longer term. We’ll continue to open about 90 to 100 new restaurants a year from 2014 through next year, and we’ve invested in some new fast-casual, small brands: PizzaRev and Rusty Taco, which are great concepts. Fast-casual, in general, will continue to grow and do so against traditional casual-dining restaurants.

One concern is growing government policies and regulations coming at a greater pace, especially the Affordable Care Act. It’s a challenge because more than 40 percent of our employees are under age 21 and aren’t even looking for health-care coverage. But we’ve always provided health care and we’ll figure out a way to do it.

The minimum-wage issue is big, too. If that brought additional pressures on our wages, we would look for different ways to automate. We’d probably hire more experienced people and I’m afraid [that possibility might] price high-school students out of jobs.

The economy will remain at about its current pace—not robust growth in 2015. Consumer demand is coming back, but every economic report seems to send a mixed message. The Minneapolis-based company operates 1,030 casual-dining restaurants and had fiscal-2014 revenues of $1.3 billion.

CEOs Need Transformation Help
John Veihmeyer, Global Chairman, KPMG

We’re really optimistic and confident about at least the next year and beyond in our business. We’re seeing stronger growth in our non-audit businesses, tax and advisory; we’ve been investing heavily and taking market share, and the marketplace is healthy. The audit business is more of a GDP-growth type of business.

Almost [all CEOs indicate] that they’re in the midst of, or soon will be embarking on, a transformation. We have the broad expertise and skills to help them do that—to deal with regulatory matters and disruptive technologies—and to outperform their competitors.

But we’re in a talent business, and competing for it will always be a primary issue. Also, we need to make sure we’re putting new technologies into our service, as well as helping clients adjust. The U.S. economy is well positioned for moderate but steady growth. There’s an upside if D.C. can settle some things like immigration reform, trade agreements and tax reform.

Globally, it’s a very mixed picture. Europe will be in very slight recovery, but there are still some risks on that front. And in China, there’s significant growth, but it’s slowing.

Headquartered in New York, the global audit, tax and advisory firm reported fiscal-2013 revenues of $23.4 billion.

Dale Buss: Dale Buss is a long-time contributor to Chief Executive, Forbes, The Wall Street Journal and other business publications. He lives in Michigan.
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