Friday 03/07/20

  1. In MACROECONOMIC NEWS, we look at the state of US, European and UK jobs, quarantine dismantling and Sunak managing expectations
  2. In HIGH STREET NEWS & CONSUMER TRENDS, the Casual Dining Group goes into administration, Pret a Manger has a new idea, Primark sticks to offline and gun sales rise
  3. In INDIVIDUAL COMPANY NEWS, Tesla delights and Facebook reckons the ad storm will blow over
  4. AND FINALLY, I bring you a home-made swimming pool and a DIY fail…



So we look at US, European and UK jobs while the UK dismantles quarantine and Sunak manages tax cut expectations…

Trump celebrates record jobs rise despite new threat (The Times, Simon Duke) shows that American companies hired at a record rate last month as employers added 4.8m staff as bars and restaurants were among the businesses coming back to life. This was significantly above the 3m that were expected and the breakdown was quite interesting: leisure and hospitality added 2.1m, retailers added 740,000 and manufacturers added 356,000 people. This job data was gathered in the second week of June and does not include falls in employment in states that reimposed lockdown. * SO WHAT? * This is a positive sign but these sorts of numbers will be vulnerable in the event of more lockdowns. Fingers crossed that there isn’t too much of that.

Slowdown in EU job losses defies economists’ predictions (Financial Times, Martin Arnold) cites the latest data from Eurostat which shows that the rise in unemployment slowed down in May – it was up by 6.7% across the EU, which is an eight month high but it’s lower than economists were expecting (so that’s a good thing). * SO WHAT? * Big consumer spending rises in Germany and France show that a willingness to spend is there and IF most people on furlough schemes can return to work, albeit potentially on

reduced hours, the economic impact may not be so bad. However, you could also argue that Europe has just been putting off the inevitable by putting over 40m workers on furlough schemes and that there will be a wall of major job losses if/when these furlough schemes come to an end.

In the UK, Three-quarters of UK manufacturers set to cut jobs this year (Financial Times, Valentina Romei and Daniel Thomas) cites the results of a survey by Make UK, a trade body that represents manufacturers. The industry is warning that there will be big-scale redundancies when the government’s furlough scheme winds down, putting more pressure on the government as it prepares to announce a package of economic stimulus measures next week. Sunak damps hopes of big tax cuts (Financial Times, George Parker) shows that next week’s announcement will disappoint those hoping for a tax cut-powered economic boost. The announcement will mark a change from a “support” phase that we’ve seen so far to the “stimulus” phase where the government will encourage households and companies to return to normal spending patterns. Meanwhile, UK to begin dismantling its quarantine policy (Financial Times, Jim Pickard and Mure Dickie) signals imminent announcements on 70 destinations where people can travel to without having to self-isolate for 14 days upon return. Boris Johnson is expected to announce a new “traffic light system” for countries, allowing free travel to countries designated as green or amber. A list of “safe” countries was to have been published on Wednesday, but there has been a delay. * SO WHAT? * The balancing act between minimising risk and getting the economy going again continues…



Restaurant carnage continues, Pret has a new idea, Primark sticks to its guns and US gun sales increase…

Café Rouge owner falls into administration, with loss of 1,900 jobs (The Guardian, Zoe Wood) shows that Casual Dining Group (CDG), owner of chains including Bella Italia, Café Rouge and Las Iguanas has fallen into administration resulting in the instant loss of 1,900 jobs. Advisory firm Alix Partners is now handling the administration which will no doubt involve the break up of the group. Although there are many interested buyers, none of them want to take on all the existing sites and 91 of its 250 outlets will not reopen. Bella Italia and Café Rouge will see the most cuts, but Belgo will close three out of four of its venues and airport brands Huxleys and Oriel will also be shut down. * SO WHAT? * CDG said in May that administration was a possibility – and, unfortunately, this proved to be correct. This follows on from 5,000 job losses announced on Wednesday as SSP, the owner of Upper Crust and Caffé Ritazza, and the 3,000 job losses announced by The Restaurant Group, owner of Frankie & Benny’s and Garfunkel’s in June. Tough times for casual dining, but over-expansion in the last few years prompted by over-eager private equity owners has well and truly come home to roost.

Meanwhile, Pret a Manger serves up new dinner menu for home time (Daily Telegraph, Laura Onita and Hannah Uttley) highlights a new initiative where it will start to offer things like salad bowls, lasagne and fish pie for dinner from next week. It will start trialling deliveries from some of its shops in Bristol, Cambridge, Nottingham and London. The new menu items will be available from 5pm and is aimed at people working from home all the time. * SO WHAT? * This is just another example of a company fighting to adapt to the challenges presented by the coronavirus. It sounds like a decent enough stab, but I’m not sure whether targeting people who are working from home is that much of a great idea – especially as they will have so many other options open to them as well. I think that the reason why Pret is

successful is that it has been in the right places (near offices) until the coronavirus hit, but they are now the wrong places. I hope that this initiative can help Pret to survive long enough to see the return of office workers, but surely it is going to have to shut down at least some outlets over the next few months.

Although Pret might be looking at new initiatives, Online still not the right fit, insists Primark (The Times, Ashley Armstrong) shows that the retailer wants to stick with its existing strategy of being offline-only despite losing over £1.5bn in sales while its shops were shut under lockdown. Primark’s owner, Associated British Foods, said yesterday that like-for-like sales fell only 12% year-on-year in the last seven weeks and that it was seeing an encouraging rebound since the reopening of its shops. * SO WHAT? * FWIW, and I’m sure I will be criticised for this, I actually think that, in Primark’s case, staying offline is actually a reasonable policy. Now I like a bit of online retailing as much as the next person, but there are many downsides to providing this convenience. Returns from people ordering online are surprisingly chunky and making your own delivery capability can cost a lot of money. I don’t think that Primark can continue to be offline forever, but for the moment, it can save itself some money and benefit from shoppers being overjoyed at the prospect of browsing around real shops once more.

There’s an interesting trend going on in the US at the moment – Data point to soaring US gun sales in June (Financial Times, Lauren Fedor and Christine Zhang) cites the latest FBI figures which show that a record 3.9m firearm background checks were carried out in June as gun sales have skyrocketed through lockdown and a spike in civil unrest following the George Floyd killing. The number of checks conducted was a whopping 71% higher than the number carried out in the same month last year. * SO WHAT? * This is only a guide because these figures don’t tell you how many guns were sold, not all American gun buyers need to submit to background checks and regulations governing their purchase vary from state to state. I guess that some people were using the $1,200 checks they received from the government to buy their dream gun.



Tesla confounds the sceptics and Facebook remains calm about the ad boycott…

Tesla quarterly deliveries fell less than expected amid Covid shutdown (Wall Street Journal, Tim Higgins) shows that the electric car company’s second quarter deliveries global deliveries fell by only 4.9% versus the previous year – a figure that is way better than the market was expecting. This performance will no doubt fuel investor speculation that 2020 will be the year that Tesla turns a full-year profit. The share price rose again in trading yesterday by 8% after recent strength made the company the biggest car manufacturer in the world in terms of

valuation. There is SO much expectation for Tesla at the moment.

Despite all the recent furore surrounding the movement to encourage an online ad ban Advertisers will be back soon, says Zuckerberg (Daily Telegraph, Laurence Dodds) shows that Mark Zuckerberg remains defiant and says that the company will not be changing its policy in the face of “a threat to a small per cent of our revenue”. * SO WHAT? * FWIW, I think that although the motivations of the movement are admirable, they are likely to come up short because as long as Facebook has a massive user base, companies are going to want to advertise to them. The company has a massive goldmine of user information that is very hard to get and so ultimately, unless you can get rid of Facebook users in vast numbers – and quickly – it will be impossible for advertisers to boycott Facebook for long.



…in other news…

I thought I’d leave you today with a home project idea in ‘Genius’ hack sees family transform trampoline into swimming pool for under £40 (The Mirror, Paige Holland – although I must say it looks potentially problematic to me! Then there are the rather unfortunate consequences of not thinking through a spruce-up properly in Woman’s DIY fail leaves others in stitches after she tried to revamp old wardrobe (The Mirror, Luke Matthews Oh dear.

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Some of today’s market, commodity & currency moves (as at hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!

FTSE 100 *Dow Jones *S&P 500 *Nasdaq*DAX *CAC-40 *Nikkei **Shanghai **
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