Friday 13/09/19

  1. In MACRO & CRYPTOCURRENCY NEWS, the ECB stimulates, Germany teeters and France says “non” to Libra
  2. In RETAIL NEWS, Topshop suffers, Old Navy outlines expansion plans, Morrisons gets closer to Amazon, supermarkets mull Brexit actions and John Lewis has a shocker
  3. In IPO NEWS, AB InBev reignites plans for an Asian listing, SmileDirect has a bad debut and WeWork ploughs ahead
  4. In INDIVIDUAL COMPANY NEWS, BAT axes 20% of its senior staff and Trainline puts in a solid performance
  5. In OTHER NEWS, I bring you the ring-con and a fire massage…



So “Super” Mario wants to go out with a bang, Germany continues to wobble and Libra gets the French thumbs down…

ECB cuts rates and tells governments to act (Financial Times, Martin Arnold) shows that Mario Draghi, president of the ECB until he hands over the reins to former IMF MD Christine Lagarde, just announced the biggest package of rate cuts and stimulus for three years in order to jolt the eurozone back into growth mode. It cut its deposit rate from -0.4% to a new record low of -0.5% and will restart its quantitative easing programme worth $20bn per month. The ECB expects inflation rates will stay lower for longer and also lowered its inflation projections for this year and next – but this is based on assumptions of a smooth Brexit (!). Trump expressed his displeasure, saying that the moves were designed to weaken the Euro, which would be bad for US exports. Draghi obviously denied that exchange rates were the target here, but yeah right. * SO WHAT? * Europe is in a hole and Draghi has used his silky diplomatic skills to hand Lagarde something she can work with. I think that the success of these latest moves, although widely expected, will largely depend on how much the individual countries toe the line. Given the current sluggishness of the eurozone (and global, for that matter) economy, you would think that it would be in their interests to do so – at least in the short-to-medium term.

Fears of German recession as factory output slumps by 5.3% (Daily Telegraph, Tom Rees) highlights the predictions of the well-respected IFO Institute, which says that Germany is in recession and will have its worst growth

for six years in 2019. Tito Wollmershaeuser, head of forecasts at IFO, warned that “This downturn was triggered by a series of world political events that call into question a global economic order that has grown over decades”. This grim assessment was also borne out by the latest figures for eurozone factory output which fell more than expected in July, with German manufacturers being the worst performer. * SO WHAT? * The Eurozone needs Germany to pick up otherwise a proper recovery just won’t get off the ground.

France plans to block Facebook’s digital currency Libra (Daily Telegraph, Natasha Bernal) just shows the latest blow to Facebook’s Libra cryptocurrency project, with French finance minister Bruno Le Maire being the latest politician to slag it off. He told an event at OECD that “All these concerns about Libra are serious. I therefore want to say with plenty of clarity: in these conditions we cannot authorise the development of Libra on European soil”, explaining that “It would be a global currency, held by a single player, which has more than two billion users around the world. The monetary sovereignty of states is under threat”. He called on the financial sector to respond to Libra and come up with ways to improve and streamline existing international payments systems. * SO WHAT? * Central banks and politicians hate the idea of Libra and continue to accuse it of bypassing the regulation and scrutiny that flat currencies have. It seems to me that if they have their way, Libra will become something akin to the Disney Dollars that you get at an amusement park and nothing more. Banks have already been working on their own cryptocurrencies for internal payments systems, so surely the tech is there or thereabouts. I just wonder whether banks are trying to keep their powder dry and use central banks/politicians’ aversion to all things Libra/Facebook as leverage to buy themselves concessions for a potential launch of a more “legit” cryptocurrency. The drama continues…



Topshop’s woes continue, Old Navy plans more stores, Morrisons cuddles up with Amazon, supermarkets mull Brexit preparations and John Lewis has a shocker…

Philip Green’s TopShop and Topman report £505m loss (The Guardian, Sarah Butler) shows that Arcadia’s fashion brands continue to suffer against stiff competition with the likes of Asos, H&M and Primark. Given that Topshop is Arcadia’s biggest brand, this is particularly worrying. On the plus side, Topshop has plans to expand online, as it already went live on Asos’ website and has plan to go live on Next’s in the coming months. It is already available in the US via Nordstrom the department store and via Zalando online. * SO WHAT? * TBH, this should be no surprise given that it is only just emerging from a CVA that squeeked through in June – so if the group had staged a dramatic turnaround this quickly questions would have been asked. While it’s good to see that the company is trying to optimise its online/offline balance, you do wonder whether this is too little too late. We’ll just have to wait and see – but I’m sure that those who have their pensions tied up in the company will be watching nervously.

Old Navy plans to open 800 more stores (Wall Street Journal, Patrick Thomas) heralds early moves by Old Navy to open a boatload (#dadjokes) of stores in preparation for its split from parent company Gap. Old Navy has outperformed its parent (and sister brands like Banana Republic) for years and plans to split the two with separate public listings were announced earlier this year. The company didn’t reveal a timeline for the openings at an investor event yesterday but news of the openings stands in stark contrast to Gap’s store closures over the last few years. * SO WHAT? * It looks very much like the student has become the master and it’s now time for Old Navy to spread its wings and separate from Gap, which will retain the Gap, Banana Republic, Athleta, Intermix and Hill City brands. Investor reaction was muted, though, given that splitting up will incur pretty big costs. Still, it sounds like

the right thing to do long term.

Back in the UK, Morrisons puts faith in partnership with Amazon (The Times, Elizabeth Burden) shows that Britain’s fourth biggest supermarket chain is deepening its online partnership with Amazon by signing a multi-year contract (rather than its existing rolling contract) to expand its same-day delivery service to Glasgow, Newcastle, Liverpool, Sheffield and Portsmouth in addition to its existing presence in Leeds, Manchester, Birmingham and parts of London and the home counties. * SO WHAT? * Given the supermarket’s otherwise disappointing performance in the second quarter it’s probably just as well that it is able to cement what has been a successful venture thus far. Morrisons’ current partnership with Ocado will remain unchanged.

Staying on the subject of grocers, Supermarkets make contingencies for a Brexit airlift of fruit and veg (Daily Telegraph) takes a look at what supermarkets are doing to prepare for a disorderly Brexit – including plans to import fruit and veg by plane if our ports and roads get gridlocked. Senior execs from Co-op and Waitrose are weighing up the options, although this particular one will involve higher costs and environmental impact. Morrisons has said that it has already started stockpiling as it intends to take advantage of its supply chain being almost two-thirds based in the UK. All three supermarkets said that they would try not to put up prices. * SO WHAT? * God knows. I would have thought that frozen food will also get more popular as well – and if that’s the case, maybe freezer sales will rise? Waitrose is stockpiling wine (well but of course), olive oil and canned food while the Co-op is keeping it real with stockpiling water and toilet roll…

Meanwhile, John Lewis issues stark no-deal Brexit warning (Financial Times, Jonathan Eley) cites outgoing (as in, leaving – not “really friendly bloke”) chairman Charlie Mayfield who said that “should the UK leave the EU without a deal, we expect the effect to be significant and it will not be possible to mitigate the impact”. The retailer suffered its first ever half year loss, blaming big investment costs and increasingly sluggish sales of big ticket items. * SO WHAT? * This is hardly surprising given the current economic backdrop, but it is significant as John Lewis is often seen to be the barometer of the higher-spending middle classes.



AB InBev reignites its Asia plans, SmileDirect loses its sparkle and WeWork ploughs ahead with its IPO…

In Brewing giant brings back plan to float Asian division (The Times, Dominic Walsh) we see that the world’s #1 brewer has resuscitated plans to float its Asia Pacific business on the Hong Kong Stock Exchange shortly after selling its mature Australian beer business to Asahi for $11bn. It had to abandon plans to list two months ago as investors were frightened off by the price the company was asking. * SO WHAT? * You would have thought that hiving off its Australian business will make it a more attractive investment proposition, but the downside at the moment is Hong Kong’s current instability, which might put investors off. Still, if it manages a successful sale, it would aim to raise about $5bn that would go some way to reducing its massive debt mountain.

Elsewhere, SmileDirectClub shares tumble 28% in public debut (Financial Times, Miles Kruppa) heralds a disappointing stock market debut for the American company that sells clear teeth aligners directly to consumers as its share price fell by a whopping 28% from its flotation price of $28. * SO WHAT? * Given that this was the latest flotation of a company that is deeply in debt and makes b*gger all money, you would think that this may serve as a warning for other considering the same thing although…

WeWork to list shares on Nasdaq, make governance changes (Wall Street Journal, Maureen Farrell and Corrie Driesbusch) shows that WeWork is going to plough ahead with plans to list despite investor concerns and its biggest shareholder, SoftBank, expressing reservations. We Co, the parent company, will be embarking on an investor roadshow next week. * SO WHAT? * I think this sounds like a nightmare, although I’m sure there will be investor frenzy. As I keep saying, there are more profitable operators out there in this space with a better and longer track record. I worry that this company is all mouth and no trousers.



BAT decides to cut senior staff and Trainline remains on track…

British American Tobacco cuts 2,300 jobs in shift towards vaping (The Guardian, Rob Davies) shows plans by the tobacco giant to cut down staff numbers by 2020 as the company tries to move towards a non-tobacco future. * SO WHAT? * Interesting timing for such an announcement given that vaping is coming under massive regulatory pressure at the moment from regulators and politicians – with Trump most recently jumping on the anti-vaping bandwagon. Still, whatever happens with vaping, tobacco 

companies will have to cut their employee numbers as cigarette sales continue to fall worldwide. Moving towards non-tobacco is just a convenient and PR-friendly excuse IMHO.

Trainline chairman pulls into siding with growth on fast track (The Times, Simon Duke) shows solid performance and raising of full year forecasts by the company on the one hand and the announcement of the resignation of its chairman, Douglas McCallum, on the other. Mind you, given that he make £6.5m in the June flotation and still has £12.3m worth of shares as well, you can understand that he might want to spend more time on the golf course 😜. He was always going to leave the company within 12 months of the flotation anyway, so I guess he is just leaving on a high!



And finally, in other news…

I thought I’d leave you with two things today – Nintendo’s crazy new Ring-con and RingFit Adventure are its new exercise/gaming hybrid (SoraNews24, Casey Baseel, which looks rather less alarming than it sounds 😂 – and Egyptian masseur plays with fire to ease muscle pain (Reuters, which is also supposedly the case! Out of the two, I’d go for the Nintendo option every time!

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Some of today’s market, commodity & currency moves (as at 0904hrs 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 **
7,345 (+0.09%)27,182 (+0.17%)3,010 (+0.29%)8,19412,410 (+0.41%)5,643 (+0.44%)21,988 (+1.05%)3,031 (+0.75%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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