Friday 10/05/19

  1. In RETAIL NEWS, Superdry starts with a warning, Morrisons tries to get closer to Amazon, Debenhams goes ahead with the CVA and Hamleys gets a new owner
  2. In FINANCIALS NEWS, HSBC and Standard Chartered get tech competition and Metro Bank seeks more money
  3. In INDIVIDUAL COMPANY NEWS, Uber values itself at the low end, Tata denies trying to sell JLR to PSA and Edgewell buys Harry’s
  4. In OTHER NEWS, I bring you a dream job. For more details, read on…

1

RETAIL NEWS

So Dunkerton gets to work on Superdry, Morrisons wants more Amazon, Debenhams’ CVA gets approved and Hamleys has a new owner…

Superdry issues profit warning as overhaul of fashion chain begins (The Guardian, Julia Kollewe) highlights the company’s third profit warning in eight months, with this latest one coming only six weeks after co-founder Julian Dunkerton muscled his way back into the company (by the slimmest of margins). He plans on making more items available online (currently only 4,000 out of 20,000 items are available), putting more stock on the shop floor and cutting back on promotions as well as introducing 500 new products within the next six months. Full-year results are due on 4th July. * SO WHAT? * Sounds interesting, but Dunkerton’s got his work cut out and the company won’t turn around overnight. The online thing sounds like a no-brainer and you do wonder what the previous CEO Euan Sutherland was thinking – was he just trying to direct people to the shop, perhaps? Dunkerton has also abandoned his predecessor’s plans to start doing childrenswear.

Morrisons looks at closer Amazon link after loosening Ocado ties (Daily Telegraph, Ashley Armstrong) shows that Morrisons is looking at bolstering its relationship with Amazon as well as companies like Deliveroo and Uber Eats whilst simultaneously edging back from its current agreement with Ocado as an exclusive digital partner. Morrisons already supplies groceries for Amazon’s Fresh, Pantry and Prime Now services and could provide food for Amazon’s moves into physical stores in the UK. * SO WHAT? * I think that this makes sense from Morrisons’ point of view as it gives the supermarket more freedom to pursue other ways of getting product to customers. 

Ocado’s new venture with Marks & Spencer, replacing Waitrose as a food partner, starts in September next year so I think this all dovetails quite nicely.

Debenhams lives to struggle on after CVA is backed by creditors (Daily Telegraph, Ashley Armstrong) follows on from what I was saying yesterday as the ailing department store got overwhelming approval from its creditors to go ahead with its CVA despite strenuous objections from Sports Direct, which held a 29% stake that was wiped out. * SO WHAT? * I am not a fan of Mike Ashley particularly (although clearly, he is a canny operator) but I just think that Debenhams is a complete nightmare and that this vote is just precipitating the death of a thousand cuts. It needs a LOT of money, huge vision and a management that is prepared to do something drastic to even have half a chance of resurrecting this retail dinosaur – and I don’t see that happening. It’ll be interesting to see whether Debenhams will be stung into action when Ashley announces his plans for House of Fraser. We’ll need to wait and see whether the management has got anything up its sleeve…

Reliance stars in its own toy story (The Times, Robert Miller) heralds a new owner for the famous British toy retailer as India’s Reliance Industries is said to have bought it for £68m in cash from Hong Kong-listed C Banner International Holdings. Reliance Industries is in the midst of transforming itself from an energy conglomerate to a consumer group via expansion of its retail and telecoms businesses. * SO WHAT? * Hamleys has had tons of owners over the years. Toys are a tough gig given relentless online competition and the constant battle between traditional toys and digitally-based amusements – just ask Toys R Us and pretty much any toy manufacturer. This sounds like a nice strategic fit and maybe it’s a bit of a trophy asset for Reliance, but if it really wants Hamleys to thrive I think that there needs to be an overhaul and proper plan to take it forward otherwise I think it will slide into irrelevance.

2

FINANCIALS NEWS

HSBC and Standard Chartered face digital competition while Metro Bank asks for more…

HSBC and StanChart under attack from China tech (Financial Times, Mercedes Ruehl and Stephen Morris) highlights some big potential threats for banks in Hong Kong as Tencent (the world’s biggest gaming company and digital giant), Alibaba (e-tailing behemoth), Xiaomi (the world’s #4 smartphone maker) and Ping An (the world’s largest insurer) have just won approval from the Hong Kong Monetary Authority to launch digital banks. Customer satisfaction for incumbent banks is among the lowest for a developed economy and slightly less than 25% of Hong Kong consumers think their banks do a good job in digital banking, according to research by Accenture. * SO WHAT? * This is going to be a nightmare for the incumbent traditional banks who will not only get a kick in the pants from these new entrants, but also a punch in the face. HSBC earns over half of its profits and a third of its revenues in Hong Kong, so it will be particularly vulnerable

to attack from the incredibly deep-pocketed newcomers. This is going to be a bun fight of epic proportions IMHO as the new entrants compete with each other and the established players with tempting offers and better functionality. The incumbents need to get their act together pronto! If things work out for the new entrants, Hong Kong could be the springboard for potential global domination!

Meanwhile, Metro Bank seeks cash as it hits a new low (The Times, Katherine Griffiths) shows how desperate things are getting for the UK challenger bank as it tries to get through a difficult time following the unveiling of an accounting fiasco on January 23rd where it miscategorised loans. The shares fell by 8% in trading yesterday on concerns that the bank might ask investors for even more than the £350m they said they’d ask for back in February. * SO WHAT? * All this asking for money malarkey is likely to come at a cost. Its colourful American billionaire founder, Vernon Hill, is facing down all sorts of controversies at the moment and is up for re-election at the bank’s AGM on May 21st – and the price for asking for more money from investors could well be that it gets new senior management. The drama continues…

3

INDIVIDUAL COMPANY NEWS

Uber goes conservative on its IPO, Tata denies it’s selling JLR to PSA and Edgewell buys Harry’s…

Uber prices IPO at $45 a share (Wall Street Journal, Corrie Driesbusch) has been well-flagged, but Uber decided to go conservative on its valuation which is around $82bn versus the $90-100bn that had been previously touted as appropriate. It’s still the biggest US-listed IPO since Alibaba went public in 2014, but this “modesty” has probably been prompted by Lyft’s disastrous performance since its recent flotation. Other stock market wannabes, including the likes of WeWork and Slack, will be watching Uber’s performance closely as this listing will be seen to be a bellwether for others. * SO WHAT? * It’s rare to see this sort of behaviour from a unicorn bad-boy in the run-up to a listing, but although it talks about a future where fewer people own cars and instead hire self-driving vehicles, electric bikes or scooters, investors are more concerned with slowing growth rates and ongoing massive losses. I personally think that there is better value to be had elsewhere but maybe a more conservative flotation price could bring the IPO feelgood factor back to the market.

Tata denies it is trying to sell Jaguar Land Rover to France’s PSA (The Guardian, Jasper Jolly) highlights ongoing drama among car manufacturers as JLR owner Tata Motors has been forced to officially deny that it’s about to sell to the French owner of Peugeot. Rumours about this have been going on for months amid Tata’s growing frustration with JLR’s problems. * SO WHAT? * Tata’s frustration is understandable, but surely it needs to take some of the responsibility as well. Anyway, for now the rumour is quashed and JLR can get back to trying to dig itself out of the hole it’s in at the moment.

Edgewell to buy shaving start-up Harry’s in $1.4bn deal (Financial Times, Philip Georgiadis and Myles McCormick) heralds a big (and rather expensive) move by Edgewell Personal Care, which owns razor blade brands Wilkinson Sword and Schick, to buy shaving start-up Harry’s for a whopping $1.37bn. Harry’s sells direct to consumers online via a subscription service but also has conventional store presence and has been an incredible success story since it started only six years ago. Edgewell’s share price fell by 13% on the news as investors probably thought the price was excessive. * SO WHAT? * This follows a similar deal where Unilever bought Dollar Shave Club back in 2016 for $1bn. Maybe Harry’s can help freshen up the brand – but this is a very full price to pay! We’re talking about razors here – and Edgewell already make them!!!

4

OTHER NEWS

And finally, in other news…

I thought I’d leave you today with a potential dream job to consider: A company is recruiting people to travel the world reviewing yachts for $1,300 a week (Insider, Alison Millington https://tinyurl.com/y5tnmkvf). Nice!