Friday 17/05/19

  1. In RETAIL/HIGH STREET NEWS, Walmart continues its winning streak, Waitrose outlines online ambitions post-Ocado, Pret closes in on Eat and Thomas Cook has a Brexit shocker
  2. In FINANCIALS-RELATED NEWS, Investec shuts its robo-advice business, Metro Bank’s fundraising goes well and remortgaging is all the rage
  3. In INDIVIDUAL COMPANY NEWS, Huawei’s blacklisting has repercussions, Tesla gets nervy on safety and Amazon edges closer to Deliveroo
  4. In OTHER NEWS, I bring you sage observations from a librarian. For more details, read on…



So we see Walmart winning, Waitrose’s online future, Pret coming on to Eat and Thomas Cook’s ongoing headaches …

Walmart extends streak of sales growth (Wall Street Journal, Sarah Nassauer) highlights continued progress for the US retailer as its sales strengthened in the first quarter, extending an upward trend that’s been going for four years straight! Sales were boosted by online purchases and solid trading over the Easter period. The company even managed to raise prices on some products to take into account higher tariffs charged as part of the current US-China trade spat. * SO WHAT? * This is another solid performance and has come about as a result of the company shifting its strategy to reducing spend on new stores, spending more on its online capability, reducing prices and boosting the provision of services in physical stores like click-and-collect. Nice one, Walmart – all it needs to do is offload Asda somehow and it will continue to go from strength to strength!

Talking about online grocery sales, Waitrose to treble online operations when Ocado deal ends (Daily Telegraph, Ashley Armstrong) highlights Waitrose’s plans to significantly increase the size of its digital business in order to hit a £1bn online sales target as the retailer looks beyond the end of its relationship with Ocado. It just signed a deal with Today Development Partners (TDP), which is led by Ocado co-founder Jonathan Faiman and Google X’s former chief business officer, to help it boost its online business. It will develop three all-singing-all-dancing automated distribution centres and has appointed current retail director Ben Stimson into the new role of “digital director” to oversee online growth and customer satisfaction. * SO WHAT? * It sounds like Waitrose is taking this online malarkey thing very seriously and has employed the services of some very big hitters. Let’s hope it works!

In Pret A Manger in advanced talks over deal to swallow up rival Eat (Daily Telegraph, Vinjeru Mkandawire) we see that the two are rumoured to be close to a deal after Eat’s private equity owner, Horizon Capital, indicated it wanted to

sell up back in February. When Horizon Capital, formerly known as Lyceum Capital, bought Eat back in 2011 it planned to treble Eat’s outlets to 300 but then proceeded to struggle with tough trading conditions. It has since tried to emulate some of Pret’s international success by opening sites in Barcelona, Malaga and Alicante airports in addition to an outlet in Paris’ Gare du Nord station. Pret is rumoured to want to convert most of Eat’s 94 stores to its Veggie Pret brand, which sells vegetarian and vegan sandwiches and salads. * SO WHAT? * Huddling together for security might be the right thing given how difficult things are on the high street at the moment. Still, I’d be quite sad about this because I think that Eat is far better! I also have doubts about having a stand-alone veggie/vegan outlet although you could say this would be one way to minimise sales cannibalisation between the two. TBH, though, given how many retail premises are standing empty these days you would have thought that Pret could expand its network quite easily organically, rather than going down what I think could ultimately be a more expensive route. This is a tough and highly competitive market.

Brexit chaos hits Thomas Cook as losses mount to £1.5bn (The Guardian, Julia Kollewe) shows how the company has been suffering from Brexit blues as the travel firm announced a massive loss for the first half of the year in its third profit warning in less than a year. It said that the loss was down to British customers postponing travel plans for the summer due to Brexit uncertainty. The share price took a 15% bath as investors took fright at the fact that it had only sold 57% of its summer 2019 holidays – and it is now having to cut the number of holidays it offers as well as giving UK customers big discounts to drum up interest. Thomas Cook is currently looking for a buyer for its airline, but there are other potential bidders looking to buy other bits of the business like the high street stores and package holiday business. * SO WHAT? * Times are tough for travel operators – and although Tui isn’t having it quite as bad as Thomas Cook at the moment, it’s not exactly shooting the lights out. I expect more uncertainty until a decision is made on Brexit. If something favourable is hammered out, however, I think that this situation could turn around very quickly – but the likelihood of that happening is pretty remote!



Investec ditches robo-advice, Metro Bank gets some relief and remortgaging rises in popularity…

Losses make Investec shut robo-advice arm (Daily Telegraph, Harriet Russell) heralds the rather embarrassing development that the company will sell its Click & Invest unit after racking up almost £13m in losses in the year to March. Investec closed the service to new clients and, in so doing, put around 50 jobs at risk. Existing customers have been advised to move their investments elsewhere. * SO WHAT? * It’s interesting to see how the much-trumpeted advent of robo-advice has come to such an abrupt end after only two years. UBS closed down its robo-advice wealth management platform SmartWealth and losses at digital wealth manager Nutmeg have also been sizeable (over £12m). Human wealth advisers will no doubt be breathing a collective sigh of relief!

Elsewhere, Fundraising call by Metro Bank raises £375m in three hours (The Guardian, Kayleena Makortoff) heralds a rare bit of good news for Metro Bank as its share placing

with existing investors closed early yesterday evening and raised more than the £350m it was seeking originally. * SO WHAT? * This is probably the best news that Metro Bank has had for some time as it has struggled with an embarrassing accounting scandal, false rumours being spread on social media and questions over the competency of its chairman. The fact that it raised more money in less time than it had planned is a positive, but now it has to go off and do something concrete with it. Showing staff how to categorise its loan book properly might be a good start ????

Then Homeowners cash in on cheap loans as remortgaging booms (The Times, Philip Aldrick) cites the latest figures from UK Finance which show that remortgaging levels are on the rise as homeowners benefit from low borrowing costs. * SO WHAT? * In the past, this has caused concern because it has often occurred amid a red-hot property market which then went on to crash spectacularly – but current conditions do not reflect bubble-times as the housing market has continued to slow down in the face of Brexit. Interestingly, while remortgaging has been on the up, lending for home purchases has been on a downer as Brexit has prompted many potential buyers to sit on their hands.



Huawei focus has repercussions, Tesla safety concerns persist and Amazon gets closer to Deliveroo…

In a quick scoot around other interesting stories doing the rounds today, US chipmakers hit after Trump blacklists Huawei (Financial Times, Demetri Sevastopulo, Kiran Stacey, James Politi, Nian Liu and Kathrin Hille) shows that US chipmakers such as Qualcomm, Intel and Microsoft, are now suffering from President Trump’s increased pressure on Huawei as he is looking to cut the Chinese telecoms equipment company out of the US entirely but then China arrests Canadians in escalation of Huawei dispute (Financial Times, Lucy Hornby) shows that China isn’t taking this lying down as it retaliates against Canada’s holding of Huawei’s CFO Meng Wanzhou. She is

currently fighting extradition from Canada to the US on charges that Huawei violated US sanctions on Iran. The tit-for-tat goes on.

Then Tesla races to quell concerns about safety after fires (Financial Times, Richard Waters and Daniel Shane) shows the company’s reaction to recent reports that its cars were catching fire as it said that it would launch new software that would revise the “charge and thermal management settings” on all of its Model S and Model X vehicles globally while Amazon leads $575m investment round in Deliveroo (Financial Times, Siddarth Shrikanth) highlights an exciting development for the UK-based food delivery group that currently operates in 14 countries. The extra cash will help it to build out its engineering team, broaden its reach and develop new products. Interestingly, Amazon operates its own food delivery service called Amazon Restautants offering one-hour restaurant delivery to Prime customers, but it canned the service in the UK. Exciting times for Deliveroo.



And finally, in other news…

I used to use libraries all the time as a kid and then back in my university days – and I’ve only come back to them once more since I’ve had kids (you really don’t need to buy them all their books – especially in the early days). They are brilliant places fighting to stay alive and so I really liked what this librarian had to say in Thousands praise library assistant for epic list of things they learnt from job (The Mirror, Courtney Pochin Some very poignant observations…

Some of today’s market, commodity & currency moves (as at hrs 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 **
7,354 (+0.78%)25,863 (+0.84%)2,876 (+0.89%)7,89712,310 (+1.74%)5,448 (+1.37%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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