Friday 11/01/19

  1. In RETAIL/HIGH STREET NEWS, Macy’s cuts its guidance and we see more winners and losers on the UK high street
  2. In CARS NEWS, JLR and Ford announce job losses and Fiat Chrysler pays a chunky fine
  3. In INDIVIDUAL COMPANY NEWS, Tencent gets the cold shoulder, Xiaomi falls again and Ofo abandons London
  4. In OTHER NEWS, I bring you an unusual job. For more details, read on…



So Macy’s suffers in the US and there are retail winners and losers on “Super Thursday”…

Strong economy can’t save Macy’s from retail shifts (Wall Street Journal, Sarah Nassauer) highlights the travails of the US department store as it failed in the ongoing battle with discounters and e-tailers going into the year-end as chief exec Jeff Gennette observed that “The holiday season began strong – particularly during Black Friday and the following Cyber Week, but weakened in the mid-December period”. Previously upbeat expectations were dashed by the news and the company’s shares took an 18% dive, dragging others – like Kohl’s and L Brands – down with it (although they were down by around 4.5% each). Discounters Target and Costco also took a share price ding despite actually doing OK – Target was on track for its biggest annual sales gain for 13 years and Costco’s sales were also up. * SO WHAT? * Macy’s has actually been trying to embrace change by investing in stores that they call “magnets” with a fresher format whilst simultaneously shrinking poorer performing stores, but it seems that it has not been enough to boost sales as the “magnets” actually performed really well. Kohl’s announced that it was closing two stores and introducing a voluntary retirement programme for workers over 55. Target and Costco (as well as Walmart) have been focusing a lot more on their online businesses of late and it would appear that this is starting to bear fruit.

It’s been a big week for retailer results announcements and there continued to be winners and losers in the battle for consumers’ hard-earned cash. Of the winners, Pub group M&B pips its rivals with a double-digit sales boost (Daily Telegraph, Oliver Gill) showed strength in the leisure end of the high street (rivals Green King and Stonegate also had a merry Christmas, but not quite as good as M&B) as the owner of Harvester, All Bar One and Toby Carvery benefited from milder weather and the fact that both Christmas and

New Year fell in the middle of the week. Its shares were up by 7.7%. Tesco leaves rivals trailing with strong Christmas performance (Daily Telegraph, Ashley Armstrong) showed up the likes of competitors Sainsbury’s and Morrisons and Discounter B&M pledges to open more British stores (Daily Telegraph, Charlie Taylor-Kroll) shows that it’s not just the German discounters who enjoyed brisk trading over the festive period, with toy sales being a particular highlight.

Department stores had some negative news. Once they got 20%, now staff at John Lewis may lose bonus (The Times, Alex Ralph) shows that although Christmas trading wasn’t a disaster, the partnership behind John Lewis and Waitrose is getting sufficiently jittery about overall trading that it’s considering axing the staff bonus completely for the first time since 1953 after five consecutive years of cutting it. Mike Ashley ousts CEO and chairman from Debenhams board (Financial Times, Jonathan Eley) highlights some dramatic goings-on at the ailing department store as Sports Direct supremo Mike Ashley used his 29% shareholding in the company to gang up on the chairman and CEO with Landmark, another major shareholder, to vote against their reappointment. Chairman Sir Ian Cheshire resigned, but CEO Terry Duddy opted to stay on to run the company but will no longer be on the board. * SO WHAT? * Ashley is clearly gunning for a takeover here – and who can blame him given that the company’s share price has cratered by 90% since the current top team were in place. Sports Direct was put on the naughty step last year for talking in public about a possible takeover when it shouldn’t have, but that punishment runs out in mid-March – so Ashley could yet bag himself this bag of cr*p for next to nothing. I would imagine that the share price will start to rise in the run-up to this deadline as speculators bet on some kind of bidding war but TBH, you’d have to be one kind of masochist to want to buy it. At least if Ashley buys it he can do some kind of Frankenstein operation on it, keeping the best bits and selling off the rubbish. Surely anyone else buying it would want it for the real estate or at least repurpose it. The current team has presided over an absolute disaster.



There’s bad news for JLR and Ford employees and Fiat Chrysler faces a big fine…

Jaguar Land Rover cuts 4,500 jobs as Ford considers UK future (Daily Telegraph, Alan Tovey) heralds some bad news for JLR employees as chief exec Ralf Speth announced that it would be cutting 10% of the workforce to “protect the future” of the business (and this is in addition to all the contractor roles they cut last year). Ford piled on the misery in the sector as its European boss Steve Armstrong said that there was going to be an overhaul of the loss-making European operations that will likely lead to major job cuts to its 53,000 European staff as the parent group seeks out $14bn of cost savings worldwide. Speth warned that “the industry is facing unprecedented geopolitical, technical and regulatory challenges. They are coming not singly or in pairs but in hordes in a way not

witnessed in the past and the impact…is severe”. * SO WHAT? * Neither of these actions is particularly surprising given the general backdrop of weakening car sales globally, fears of economic slowdown, tighter regulation and chunky tariffs. JLR has just been hit particularly hard because it’s smaller than many others, and was was hugely exposed to China (which is seeing weakening sales) and diesel (which everyone now hates). 

Fiat Chrysler pays $800m to settle claim (The Times, James Dean) heralds the latest aftershock of the diesel emissions scandal sparked by VW back in September 2015 as the $25bn Italian-American carmaker has agreed to pay up to $800m to settle charges that it cheated on diesel emissions tests by installing defeat devices to beat emissions tests. Fiat did not admit any wrongdoing as part of the settlement and states that it “did not engage in any deliberate scheme to install defeat devices”. The shares ticked up by 1.5% as I guess this draws a line under the issue (although it is still under criminal investigation by the Department of Justice and the Securities and Exchange Commission).



Tencent gets frozen out, Xiaomi’s suffering continues and Ofo flees London…

In China’s Tencent again left off list of approved video games titles (Financial Times, Louise Lucas) we see that the tech giant has yet again failed to win approval for new video games as China’s media regulator snubbed their offerings for the second time in a fortnight. There has been a nine-month freeze on the issuance of commercial licences for games as the Chinese government tries to crack down on gaming addiction and fears that it is affecting childrens’ eyesight. Tencent’s stock suffered a major kicking for this last year as it is a major player in gaming – but it started to perk up on news that the regulator resumed issuing commercial licencing on December 29th. * SO WHAT? * Tencent isn’t the only one suffering from this licence issue at the moment. China’s second-biggest video games maker NetEase also didn’t get any of its games approved either – but some are saying that the games being approved at the moment are very low-tech and easy to review whereas the offerings from Tencent and NetEase are more complex and will require more time. Some analysts reckon it’ll take six months to clear the backlog of applications, but no-one really knows as it will also depend on how many new games are developed in the meantime.

Shares in China smartphone maker Xiaomi fall for third day in row (Financial Times, Yuan Yang) signals some tricky news for the cheap-and-cheerful handset maker after the lock-up period following its recent IPO (which valued it

at $54bn) came to an end. Some employees and early investors sold out after the restriction ended but chief exec Lei Jun and other major shareholders committed to not selling their shares for at least a year. Xiaomi’s shares have fallen by 58% since it listed in July last year, but it remains the world’s fourth biggest smartphone maker. * SO WHAT? * Xiaomi is clearly having a tricky time at the moment and it is in a very competitive market. However, IMHO there are still many markets that it doesn’t yet have a presence in, so there is definitely some growth potential.

Bike-share company Ofo withdraws from London (The Guardian, Julia Kollewe and Niamh McIntyre) shows that not all start-ups are successful – whoever their backers are (in this case, it’s the Chinese e-tailing giant Alibaba). There are rumours that Ofo is on the verge of bancruptcy – and you can see why after they already withdrew from Norwich, Sheffield and Oxford to focus on London due to poor take-up and vandalism. According to China Entrepreneur Magazine, Ofo has shut its international operations (which includes the UK) and offered its 50 remaining employees a choice between leaving before Thursday or take a 50% pay cut and join the Chinese business. Ofo originally had 6,000 bikes across London, Norwich, Sheffield, Oxford and Cambridge in 14 local authorities – and it has now withdrawn completely from seven of them. Critics of Ofo have said that the bikes were of poor quality and hard to find. * SO WHAT? * The UK had a massive influx of Chinese bike hire startups with big ambitions, but Bluegogo went bust in September 2017, GoBee pulled out of Europe after 60% of its bikes were damaged or destroyed only four months after launch and Mobike has also changed its tune recently after it withdrew from Manchester last September due to “unsustainable losses” from vandalism and theft. Clearly, the China model cannot be applied elsewhere without a considerable amount of adjustment.



And finally, in other news…

Looking for an alternative career? Step forward Meet the professional cuddler who makes $80 an hour snuggling clients (Inside Edition, This is strictly platonic and above board, but it has be said that it is a rather unconventional way of earning a crust. Not for everyone…

Some of today’s market, commodity & currency moves (as at 0827hrs 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 **
6,943 (+0.52%)24,002 (+0.51%)2,597 (+0.45%)6,98610,922 (+0.26%)4,806 (-0.16%)20,360 (+0.97%)2,554 (+0.74%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

(markets with an * are at yesterday’s close, ** are at today’s close)