Friday 20/03/20

  1. In MACRO NEWS, banks and central banks implement more measures to combat coronavirus impact
  2. In RETAIL/HIGH STREET NEWS, we look at the shops that would stay open through the crisis and some of the current strugglers and survivors
  3. In INDIVIDUAL COMPANY NEWS, Microsoft and Slack benefit from remote working while Netflix agrees to lower picture quality
  4. In OTHER NEWS, I bring you some toilet roll maths…



So governments and central banks announce more measures…

Sunak to launch massive rescue package for stricken UK companies (Financial Times, Chris Giles) highlights the latest rescue package for British companies and employees in the face of the coronavirus. Rishi Sunak is expected to unveil new measures today that will help companies retain staff and ensure their own survival following yesterday’s moves by the Bank of England to cut the interest rate to 0.1% (the lowest interest rate in its 325 year history) and buy more bonds.

Europe’s central banks pledge €1.7tn to fight virus (The Guardian, Juliette Garside) looks at the massive measures being taken around Europe as a whole so far. However, the

feeling is that these measures are just going to get bigger. Meanwhile, Australia slashes interest rate to record low (Daily Telegraph, Lizzie Burden) highlights another central bank that’s cut its interest rate to a new low as central banks around the world engage in an economic damage limitation exercise. * SO WHAT? * I’m not really giving you loads of detail here on the cuts being made because, TBH, it’s all changing on a daily basis anyway! The important thing is to remember the general direction of things. I think that it won’t be that long before we run out of conventional measures to tackle crises (cut interest rates, increase spending strategically) and some unusual creativity will be called for to raise money out of thin air. We need a country (specifically China), and ideally a region (maybe Asia?) to start to recover in order to see light at the end of the tunnel and then maybe new central bank and government measures can become more effectively targeted. At the moment, pretty much EVERYONE needs help…



We take another look at the winners and losers in retail and on the high street…

The ‘fortress firms’ best place to weather the coronavirus crisis (The Guardian, Julia Kollewe) takes a look at which shops may be given “essential retailer” status if we go down the same road as France where only supermarkets, pharmacies, banks, petrol stations and hairdressers (!) can stay open. Peel Hunt retail analysts say that the UK’s major supermarkets will be OK, as will M&S and convenience store/newsagents McColl’s. B&M, Pets at Home and WHSmith are also likely to be safe as well (I was wondering this myself yesterday when I went to my local one – especially because many of them now have post offices). Interestingly, Jefferies analysts put out a report yesterday highlighting companies that had strong enough balance sheets to weather the outbreak and Primark owner Associated British Foods looked good on the high street whereas Domino’s Pizza and pubs group Marston’s look wobbly. * SO WHAT? * I suspect that these retailers will be glad to stay open during this crisis and it could actually prove a reversal of fortune for some (M&S and WHSmith’s high street stores spring to mind!). Let’s hope they can hang on to enough staff to get them through the next few months.

Carrying on from this, Next boss says it can cope with £1bn hit from virus (The Times, Ashley Armstrong) shows confidence from the fashion retailer that it has the wherewithal to get through the crisis despite being in the midst of an “unprecedented challenge” but Burberry fears that worst has yet to come (The Times, Ashley Armstrong) is less confident and announced a very weak outlook for sales (which they say are set to fall by 70-80%). Over 60% of its 431 shops in Europe, the Middle East and Asia are closed, as are 85% of its shops in the US. On the other hand, most of its shops in China had reopened. * SO WHAT? * Maybe Burberry’s exposure to China will ultimately prove to be its saving grace, but I do wonder whether its recently-announced strategy to go more upmarket will chime well with Chinese who may not have earned much since the coronavirus outbreak started. Also, you do wonder whether people’s priorities will change, in the short-term at least, because of what has been going on.

In food-related retailing, Pret slashes staff pay and hours as customers stay away (The Guardian, Mark Sweney) shows the effect of customers staying away as the coffee shop chain has decided to cut wages by 25% and working hours, with the new measures taking effect from the end of next week for at least three months. Some people are trying to keep their favourite restaurants going in Vouchers keep restaurants on back burner (Daily Telegraph, Rachel Millard) as restaurants sell prepayment vouchers to be used when they reopen. Demand is currently strong as people try to save their restaurants and high streets. Some restaurants are also starting to deliver meals via Deliveroo

(or just delivering them themselves) and others are hosting online cooking courses. * SO WHAT? * I like this idea in theory, but fear that it is just delaying disaster. If the restaurants survive, they will be filled for some time with people that have these vouchers and will have to buy stock and cook it effectively for free (or at a much lower cost). Voucher holders would either have to bring all their non-voucher holding friends and family to make up the difference or just not use the vouchers at all for this to work.

In groceries, Shutting up shop may cost Ocado more than 4 days of orders (Financial Times, Kate Burgess) shows how Ocado has been deluged with orders to the extent that it is shutting down access for a few days to give it time to catch up. The company’s finance chief said that it had more orders on one day this week than it normally has in seven and basket sizes have ratcheted up. Sales have doubled in the quarter to March, the company is running at full capacity and its share price has shot up by 25% over the last month! Funnily enough, orders have increased so sharply that the company initially thought it was being hacked! Meanwhile, Co-op to create 5,000 jobs (Daily Telegraph, LaToya Harding) heralds a potential lifeline for those losing their jobs in the hospitality industry as the company has made a ton of temporary and permanent jobs available. It wants more people to keep the shelves stacked and fulfil online orders and joins the likes of Waitrose and Amazon who also announced hiring plans this week. Over in America, Walmart to pay $550million in staff bonuses, hire 150,000 temporary workers (Wall Street Journal, Sarah Nassauer) highlights moves to pay special cash bonuses to workers and hire extra staff to cope. The massive upswing in demand from concerned shoppers has resulted in reduced store hours and purchase limits on some items and it has struggled to keep its stores stocked and fulfil online orders. * SO WHAT? * It is incredible to see what’s going on with supermarkets at the moment. Never has stacking shelves looked so enticing – I remember doing it myself for many years when I was doing my A-levels and getting through university! Still, demand is set to continue as more people stay at home and make their own meals. I would have thought that the customer data that supermarkets will collect now will be incredibly useful as time goes on and will help to make their offering that much stronger in the future. It may also result in a serious boost in the number of online delivery customers not just now, but in the future as well. Many people who haven’t bothered to do online grocery shopping thus far will be setting themselves up – and once that faff has been sorted I would suggest that many of them will get used to it and carry on even after the coronavirus runs its course. Aldi and Lidl will be cursing this missed opportunity.

Elsewhere on the high street, Cineworld staff laid off after cinemas are closed (Daily Telegraph, Oliver Gill) heralds bad news for the company’s staff following the closure of all its cinemas. The future looks bleak for the world’s second biggest cinema chain and the proposed £1.6bn takeover of cineplex looks decidedly dodgy now.



Remote working boosts some and Netflix agrees to downgrade its picture quality…

Slack and Microsoft fight for millions of remote workers (Financial Times, Richard Waters and Tim Bradshaw) is a really good article that highlights increased interest in workforce collaboration platforms being experienced at the incumbent Microsoft and new-ish-kid-on-the-block Slack. The latter has seen an uptick in the number of paying customers since the start of last month that is 40% higher than is usual for the entire quarter – but then this is put somewhat into the shade by the number of Microsoft Teams users rocketing up from 20m only four months ago to 44m earlier this week. * SO WHAT? * Ultimately, I think that Microsoft will be the big winner from all this – although Slack and Zoom will certainly get some kind of

boost. The problem is that the coronavirus escalated so quickly that there probably wasn’t time for IT departments to consider “new” software and so the natural thing was to use something that was already part of their systems anyway as part of the Office 365 package. Unless people find Teams to be a complete disaster, I don’t see many companies swapping over – especially if their employees get used to Microsoft’s offering. Still, a potential expansion in remote working should be a boost to all in this area.

Following on from yesterday’s story, Netflix lowers picture quality to avoid broadband overload (The Guardian, Mark Sweney) shows that the streaming supremo has agree to slow download speeds across Europe by 25% to help broadband networks following talks with Thierry Breton, the European Commission’s industry chief. A spokesman said that it would “begin reducing bit rates across all our streams in Europe for 30 days” – so some of you will be seeing a reduction in picture quality. * SO WHAT? * This just goes to show how big streaming is becoming right now.



And finally, in other news…

In these unsettling times, it is worth taking a step back to take a long hard look at our behaviour as per the guy in Dad takes matters into own hands with quarantine maths lesson – and it’s epic (The Mirror, Courtney Pochin Interesting analysis 😂

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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 **
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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