Friday 16/10/20

1. In CONSUMER/RETAIL-RELATED NEWS, credit card borrowing costs are expected to rise and we’re spending money on Domino’s and AO World but not at Boots. Marston’s faces reality, the EG Group brothers face scrutiny and LVMH offers hope
2. In FINANCIALS NEWS, Stripe buys into Africa, Morgan Stanley sees profits jump and more fund raising looks likely
3. In TECH NEWS, Google Chrome comes under the spotlight and Twitter goes down
4. In INDIVIDUAL COMPANY NEWS, Ford leans on rivals, Ryanair makes tough choices and Big Hit Entertainment looks vulnerable
5. AND FINALLY I bring you a VERY weird tattoo and some expensive underpants…

So credit card borrowing costs look like rising, Domino’s gets a slice of the action, AO World triumphs, Boots doesn’t, Marston’s makes tough choices, the EG Group brothers face scrutiny and LVMH offers hope…

*** If you got through the FIRST ROUND of the Watson’s Daily x More From Law x LittleLaw competition, please find the questions for Round Two HERE. You should be getting an e-mail on this if you achieved the pass mark, but I thought I’d put it up here as well! ***

Credit card borrowing costs to rise by Christmas (The Guardian, Phillip Inman) cites findings by the Bank of England which show that banks raised the cost of credit cards in Q3 and look to continue to do the same in Q4. The majority of lenders are also likely to restrict loan products during the final quarter. * SO WHAT? * This will increase fears that the UK’s poorest households will have much more restricted access to credit as the furlough scheme ends and unemployment starts to rise. On the other hand, lenders are keen to limit their downside and potential exposure to customers defaulting. Tough times.

Meanwhile, consumers are spending on pizza – as per Domino’s sales figures served cold (The Times, Dominic Walsh), which highlights like-for-like sales growth of 17.5% in Q3 although orders are now falling due to more rivals opening up and some students delaying a return to university – and on electrical goods in Sales boom at AO World puts rivals in shade (The Times, Ashley Armstrong) where the online retailer announced a hike in sales in the six months to September of a whopping 57%. Chief exec John Roberts said that “The last six months of trading have been like no other during my two decades in the business” and the company’s share price shot up by 30.1% following this bullish update, pushing its valuation above that of Dixons Carphone. This is an incredible performance when you consider that AO’s share price has gone from 85p at the beginning of this year to 302.5p!

On the other hand, Boots is problem child for US parent as stores suffer (The Times, Ashley Armstrong) shows that

Boots posted a rather disappointing 29.2% fall in like-for-like sales in the three months to the end of August as footfall continues to drop. This poor performance will prompt action by the company’s American parent Walgreens Boots Alliance to turn things around. On the plus side, Boots’ online sales shot up by 155% over the quarter and it has managed to win back market share in the beauty sector. * SO WHAT? * This doesn’t sound particularly great and usually, when a parent says that it will be focusing on a turnaround, it usually means more closures and more job losses. The other thing I would mention is that Next is busy trying to put together a format that will be a new source of competition as per First look at the new Next Beauty and Home stores (Marie Claire, Fiona Embleton). I bet you never expected me to quote from Marie Claire, now did you!

Meanwhile, Pub and brewer Martson’s to cut 2,150 furloughed jobs (The Guardian, Rob Davies and Kalyeena Makortoff) highlights yet more misery in the hospitality sector as it reacts to the latest government covid restrictions. The company traded strongly over the summer but the 10pm curfew, requirement for full table service and now a three-tier system just all combined to push the company to make tough decisions. The British Beer and Pubs Association has warned that up to 300,000 jobs could disappear in the hospitality sector unless the government steps in. * SO WHAT? * Unfortunately, this was bound to happen given the circumstances. It is likely to continue.

I thought I’d mention Billionaire brothers need to account for themselves (Daily Telegraph, Ben Marlow) because it highlights a potential fly-in-the-ointment for the recently-announced Asda deal. Brothers Mohsin and Zuber Issa built up EG Group, which recently announced it was to buy a majority stake in Asda from current owner Walmart. However, it’s all gone a bit pear-shaped as the company’s auditors, Deloitte, resigned because of disputes on governance – just days after the brothers received their MBE’s from the Queen! * SO WHAT? * The article suggests that this is great publicity for Deloitte in a way, because many of the Big Four accountants have come under a lot of criticism over the last few years for signing off on dodgy accounts. It also suggests that the Competition and Markets Authority are now much more likely to investigate the pending deal much more closely as a result of Deloitte’s actions. Asda really seems to be a problem child!

Stripe buys into Africa, Morgan Stanley announces strong profits and more fund raising looks likely going into the end of the year…

Stripe moves into Africa with Paystack deal (Financial Times, Tim Bradshaw, Miles Kruppa and Neil Munshi) heralds an interesting move into Africa with its acquisition of Lagos-based payments company Paystack for an undisclosed amount. Paystack is among a group of companies that has made Lagos a hotbed of fintech on the continent. It now processes about half of all online payments in Nigeria. * SO WHAT? * It’s fascinating to see this move given that Jack Dorsey, founder of Twitter and Square, had planned to spend a number of months in Africa this year before coronavirus scuppered his plans. There is clearly massive potential upside in this market given that about 95% of transactions are still carried out in cash. On the other hand, there are big risks as the region has a long history of money laundering. Things could certainly get interesting!

Then in Morgan Stanley profits jump 25% on Wall Street trading bonanza (Financial Times, Laura Noonan) we see that Morgan Stanley has reflected the success of its peers JP Morgan and Goldman Sachs, who also benefited from higher trading volumes during lockdown. Its investment and loans portfolio also performed well as a result of strong market conditions. It’ll be interesting to see whether Morgan Stanley is able to keep the party going.

Winter nerves in boardrooms could trigger second round of fundraising (The Times, Tom Howard) shows that there is an expectation in the City that companies will try to tap markets for more money via equity placements (where the companies create new shares and sell them) going into the end of the year and many big institutions are ready to invest. * SO WHAT? * Companies who wanted quick money during lockdown turned to the markets. It seems that the underlying demand to raise money to shore up their balance sheets continues to bubble away and many would deem it prudent to raise money ahead of another lockdown “just in case”. Investment banking fees are likely to rise as a result, I would have thought…

Google warrants a closer look and Twitter has a hiccup…

Google’s Chrome now looks a little tarnished (Daily Telegraph, Margi Murphy) shows that members of the US Department of Justice who are investigating Google for alleged antitrust violations are considering whether Google should be forced to sell Chrome, the world’s most popular browser. * SO WHAT? * Given that this is the engine that drives its massive $162bn digital advertising revenues, such a separation could potentially be quite painful, depending on how it was structured. Pressure to force Chrome out of Google continues to build but DoJ bods are

considering other options such as separating it from Android, advertising tech or YouTube. This sort of talk is fine – but if they ACTUALLY decided to do something like this I think the execution would be a nightmare. Have a read of this article if you can, though – it is fascinating.

Then in Twitter suffered widespread service disruption, says there is no evidence of security breach or hack (Wall Street Journal, Sarah E. Needleman) we see that Twitter suffered a two-hour disruption of its services yesterday as some users were unable to send or receive tweets. * SO WHAT? * Twitter dismissed it as problems with internal systems. Mind you, given that earlier on this year it suffered its worst ever hack that allowed access to thousands of accounts to hackers this will be raising eyebrows, especially in the run-up to the presidential election where the spread of false information is a key area of concern.

Ford looks to rivals, Ryanair makes tough choices and Big Hit Entertainment looks vulnerable…

In a quick look at some of the other news stories doing the rounds today, Ford to pair with rivals to avoid EU fines over emissions (Financial Times, Peter Campbell and Joe Miller) signals a massive cop-out for the American car manufacturer as it has had to team up with rivals to meet its European emissions goals as a recall of its hybrid cars meant that it would fall foul of the new tighter restrictions (see what this is about HERE). It said that it had to buy carbon credits from rivals who have sold more electric or hybrid vehicles. * SO WHAT? * This is a short term fix to a longer term problem. Ford needs to pull its finger out on the EV front otherwise it will risk massive fines from Brussels.

Elsewhere, Ryanair cuts one in three winter flights and warns of more job losses (The Guardian, Kalyeena Makortoff and Gwyn Topham) highlights yet more misery for the airline industry as Ryanair makes even more cuts to flights, increasing the likelihood of yet more job losses.

Then in Big Hit/BTS: liable to pop (Financial Times, Lex) we see that although BTS’ management company Big Hit Entertainment is surfing a massive wave at the moment, there is a danger that its investors will be tempted to sell quickly in order to crystallise the massive gains since its flotation this week. I would say that this is a tricky company given its massive reliance on BTS and the fact that investors may be attracted to cheaper rival companies.

…in other news…

OMG. Just get a load of this: Man’s ‘insane optical illusion’ tattoo looks like giant hole in his head (The Mirror, Paige Holland). Incredible 😱! If you find that discombobulating (and it is!), why not check out the politician who thought he could stuff money down his pants in Politician stuffed £4,500 in the underpants he was wearing during raid by anti-corruption police (SkyNews). What??? Quick thinking or just plain stupid?!?