Investor Engagement During the Tariff Swirl: Communicating Guidance Amid Market Volatility
As earnings season is now officially in full swing, management teams and Boards are wrestling with decisions regarding guidance, operational plans and relevant financial forecasts. Clearly and concisely communicating about impacts and outlook while the tariff picture, and associated market upheaval, is evolving on a day-to-day basis is imperative this earnings season.
We recognize that the longer the administration 1) goes without clarifying the “asks” of the negotiations with trading partners; and 2) expresses its willingness to tolerate short-term pain, potentially including a recession, the more challenging it becomes for public companies to build a full-year plan and provide guidance to investors. Our team is assessing the situation in real-time, and we have provided below a series of recommendations specific to guidance at times of extreme uncertainty.
- Articulate the ways high tariffs will affect your business – top- and bottom-line if possible. While they go hand in glove, try to parse the tariff-specific impacts from the consumer confidence-related impacts so that as tariffs change, investors understand how that can change your outlook.
- State your position on existing guidance. Silence can be perceived as re-affirmation of guidance.
- Tailor guidance to your situation. In some cases, near-term expectations have not changed, but longer-term outlook is impossible to peg. It is acceptable to adjust your guidance policy to current circumstances and return to an established policy when the situation normalizes.
- Disclose new thinking when you are able. Preannouncing due to concern alone adds to uncertainty. In most cases you can assess carefully and use your regularly scheduled earnings call to articulate the tangible impacts to your business.
- Share the philosophy and financial flexibility to manage through pricing shocks. Will you pass price increases to consumers? Will you absorb some of the extra costs? Can you?
- Ensure the Board and management are aligned. Engagement season ahead of annual meetings is fully underway. Prep directors regarding any short- and longer-term actions under consideration to navigate this new environment. Delivery of consistent messaging is essential.
- Remember internal stakeholders. Employees have anxiety about what this means for them. Be clear about what is being communicated to investors. Be honest about what is known and unknown. Reiterate commitment to the mission and confidence in the path ahead.