Friday 04/12/20

1. In MACROECONOMIC & OIL NEWS, economists fiddle with their forecasts, sterling strengthens, Opec & friends boost production but Chevron cuts capex
2. In VACCINE NEWS, business confidence rises on hopes but Wall Street cools on Pfizer’s latest and the UK defends against US criticism
3. In RETAIL NEWS, we take a look at the world’s department stores, the Arcadia fire sale, supermarkets returning money and Facebook’s latest setback
4. In INDIVIDUAL COMPANY NEWS, Warner Bros goes for simultaneous release, Flutter puts more into FanDuel and Deliveroo delivers
5. AND FINALLY, I bring you a new KitKat

So economists fiddle and Opec opens the taps but Chevron cuts capex plans…

Economists eye growth of 10pc on vaccine hopes (Daily Telegraph, Tim Wallace) shows that economists are now scrambling to upgrade their forecasts due to rising hopes that vaccines will get economies back on track. Some are predicting a growth boom the likes of which has not been seen since WWII (a GDP rise of about 10%) and Economy’s resilience gives pound a lift (The Times, Gurpreet Narwan) highlights the fact that the pound rose to its highest level since December last year as the latest figures from IHS Markit show that the economy didn’t do as badly under the second lockdown as had been previously feared. There was also some hope that a Brexit deal is imminent. * SO WHAT? * TBH, this kind of stuff is generally hot air (economists fiddle around with their figures constantly and traders are notoriously flaky – so any talk of an imminent Brexit deal is in my opinion because we’ve still got a while yet before the deadline), but it is important to understand what the current feeling is. Forecasts from economists are all over the place, so I wouldn’t get too excited! Still, if the optimistic ones are right wouldn’t that be great.

Meanwhile, OPEC, Allies agree to increase output by 500,000 barrels a day in January (Wall Street Journal, Benoit Faucon and Summer Said) shows that OPEC (13 member countries led by Saudi Arabia) and non-OPEC countries (comprising of 10 countries led by Russia) have, finally, agreed on something – that they will increase output by 500,000 barrels a day next month. This is being interpreted as being a sign that they believe economies will recover and that demand will return – but if they don’t the oil price will just plummet because of extra supply. Agreement was a long time in coming and it is going to be quite twitchy as the increase will be reviewed on a monthly basis. Also, 500,000 barrels is only a very small increase. Despite this apparent optimism, Chevron slashes spending plans as coronavirus hammers oil demand (Wall Street Journal, Christopher M. Matthews) shows that the oil major announced plans to cut capex by 26% next year and beyond and follows on from rival Exxon’s announcement last week. * SO WHAT? * While there are definite reasons for optimism, you can understand why everyone is cautious. Still, a strongly recovering China and potential boost for rich countries who have pre-ordered the various vaccines knocking around could mean that 2021 may be a bumper year for growth. It won’t just be the oil companies who will be praying for this!

Confidence is boosted on vaccine hopes but the UK faces criticism from the US…

Vaccines boost business confidence (The Times, Gurpreet Narwan) cites the results of a Bank of England survey of almost 3,000 business leaders that shows that they are increasingly optimistic on prospects for sales, hiring and Brexit due to advances in vaccine developments. However, Wall Street runs out of steam on Pfizer vaccine supply issues (Financial Times, Colby Smith and Naomi Rovnick) shows that the S&P weakened late on yesterday following a report that Pfizer had to halve the number of vaccines it had hoped to ship out due to supply chain problems. Markets had been buoyed by vaccine news and potential progress made in putting together a fiscal stimulus package, but this report put a bit of a spanner in the works.

Meanwhile, UK regulator defends rapid approval of vaccine after Fauci criticism (Financial Times, Sarah Neville, Anna Gross and Hannah Kutchler) shows that America’s top infectious disease expert, Anthony Fauci, criticised the UK for approving Pfizer/BioNTech too quickly and said that its rapidity would damage the credibility of the approvals process. He subsequently backpedalled on this, saying that he had “great faith” in the UK’s scientific and regulatory community. * SO WHAT? * This was bound to happen. I would like to believe that our scientists are not cutting corners and that European and American criticism of our process is a function of them being under pressure from their own governments for not approving sooner. The vaccine data is going to keep on coming and, hopefully, there will be more of them making it through the approvals process.

Department stores face an uphill battle, most supermarkets return cash and Facebook gets a slap…

World’s department stores hoping for a Christmas miracle (Daily Telegraph, Chris Johnston) is an excellent article that takes you on a whizz around the world’s department stores and where they’re at right now. Galeries Lafayette estimates that its sales will have halved this year – its worst drop for 25 years – and the much-anticipated opening of La Samaritaine, owned by LVMH, on Paris’s Right Bank has been kicked into next year as wealthy tourists stay away. Le Printemps is also having a tough time and recently announced the closure of seven stores while Le Bon Marché said it was expecting to lose 25-35% of sales. Galeria Karstadt Kaufhof, Germany’s biggest department store chain, continues to suffer after filing for creditor protection in April and agreeing a rescue plan in September. In America, Macy’s is closing several stores so that staff can switch to servicing online orders and returns and Nordstrom is offering $15 vouchers and free coffee to customers who pick up their purchases in-store. Meanwhile, in Australia, Myer and David Jones are also suffering. * SO WHAT? * I have been saying for quite some time that department stores are an anachronism and their demise has just been put into overdrive in the pandemic. In short, I think that they will have to concentrate on providing a brilliant customer experience or just go into extinction – and that’s if they can survive until things really start to calm down coronavirus-wise.

In the UK, Arcadia brands may sell for less than half £800m value (Daily Telegraph, Julia Bradshaw and Laura Onita) shows that the brands under Arcadia’s banner are likely to be sold off cheaply given the carnage on the high street and that everyone knows Arcadia is a forced seller. Topshop and Topman are likely to be particularly attractive to potential bidders and some are saying that Boohoo is the leading candidate to buy Topshop. * SO WHAT? * This is all speculation at the moment, but it seems likely that buyers will mainly be interested in the brands and not the shops themselves, so it is likely that gaps will persist in our high streets and malls.

Meanwhile, guilt seems to have got the better of more supermarkets as others followed the lead of Tesco and Morrisons yesterday in Sainsbury’s, Aldi and Asda follow Tesco in repaying business rates relief (Financial Times, Patricia Nelson and Harriet Clarfelt), which now means that a total of over £1.7bn has been returned to the government. Mind you, The ‘laggards’ holding out on repaying relief cash (The Times, Tom Ball) shows that Lidl, Co-op, Waitrose and Marks & Spencer will not be returning the money. M&S says it won’t because it had to close down some of its operations under lockdown, Waitrose said that it’s not going to because of losses incurred due to the closure of its John Lewis shops – which I guess are kind of far enough – but then Lidl was a bit random in that it said that it had to close some of its shops. The Co-op said it would review at the end of the year. * SO WHAT? * Although this is lovely and the supermarkets will be keen to portray themselves in a caring light in the run-up to Christmas, I am sceptical as to any real effect it will have on which consumers shop where. TBH, I think it is right for these firms to see how things go first before they decide to make such grand gestures.

Elsewhere, Privacy blow dealt upon Facebook’s retail ambitions (Daily Telegraph, James Titcomb and Margi Murphy) shows that Facebook’s attempts to get involved in online shopping has been stymied by European privacy laws that will block key features of its Messenger service due to privacy concerns. They mean that businesses will only be able to communicate with the customers via text, pictures and hyperlinks rather than by Messenger. * SO WHAT? * This is a major problem for Facebook which has been trying to increase its efforts to diversify its revenue streams by going deeper into e-commerce and it’s not obvious as to how it will get around the latest hurdle. I guess it will just continue to try to grind resistance down by relentless lobbying for the moment.

Warner Bros makes a huge decision, Flutter ploughs more in and Deliveroo delivers…

Warner Bros to stream films on day of cinema releases (Daily Telegraph, Ben Woods) highlights a massive development in film as one of Hollywood’s biggest studios has announced that all of its 17 films next year will go to cinemas and streaming (on its own subscription service HBO Max) simultaneously. This follows on from Universal’s recent agreements with AMC Entertainment and Cinemark to shorten the time between cinematic release and streaming. * SO WHAT? * This could be disastrous for cinemas but the content makers will be keen to make money somehow on their films. Whether or not this will become a permanent thing is moot, but cinemas are just getting a massive kicking at the moment.

Flutter raises stakes in share of fantasy sport site FanDuel (Daily Telegraph, Oliver Gill) shows that gambling company Flutter Entertainment has decided to increase its stake in FanDuel – an American bookie, fantasy sports and online

betting company – by 37% to take its stake to 95%. * SO WHAT? * This is the latest move in British bookies’ rush to get a piece of the growth market that is America as it continues to lift restrictions on sports betting. Given the pasting that British bookies have taken in their domestic market you can understand the rush to get established state-side.

Then in Deliveroo boss hails profitable six months as flotation looms (Daily Telegraph, Matthew Field) we see that the food delivery company is doing well not only from delivering takeaways – delivering groceries for the likes of Sainsbury’s, Waitrose, M&S, Aldi and Co-op now accounts for 10% of its UK revenues! * SO WHAT? * Founder Will Shu will see this as vindication as the company turned a profit for the first time in its short history during the first lockdown. The company aims to grow its dark kitchens business, Deliveroo Editions, aiming to more than double the existing number of sites. These kitchens are specialist kitchens that offer menus in areas where the food outlet(s) have no existing physical presence. This is all good news for Deliveroo’s plans for an IPO, which some say could value it at up to £3bn.

…in other news…

Just when I thought that there wasn’t much going on in the “alternative” news today, Japan stepped up and delivered in New Japanese KitKat has been aged in whisky barrels from Islay, Scotland (SoraNews24, Oona McGee). What is it about Japan and KitKats?? If you are fascinated by this obsession, maybe have a look HERE. Unfortunately, the site is mostly in Japanese, but you will get the idea! Incredible!