Friday 20/11/20

1. In CONSUMER/GOODS/RETAIL NEWS, UK consumer confidence weakens, the PS5 launch crashes sites, Frasers increases its stake in Mulberry, Peacocks and Jaeger go under and Naked Wines toasts more subscriptions
2. In CORONAVIRUS DRUG NEWS, the WHO dismisses Remdesivir but an arthritis drug looks promising
3. In CORONATRENDS NEWS, Royal Mail delivers more parcels and Cineworld seeks out a CVA
4. In INDIVIDUAL COMPANY NEWS, GM pledges more money for EVs and Roblox heads for an IPO
5. AND FINALLY, I bring you a very clever dog…

So UK consumer confidence wanes, the PS5 launch causes chaos, Frasers takes a bite of Mulberry, Peacocks and Jaeger fail and Naked Wines racks up the subscribers…

UK consumer confidence at six-month low as restrictions tighten (Financial Times, Valentina Romei) cites the GfK consumer index which shows that coronavirus restrictions have taken their toll on consumer psyche as concerns increase about jobs and business survival. Consumer spending powered the rebound in Q3 but cracks are showing at a time when shops are bustling. The results were based on interviews carried out between November 2nd and 13th which encompasses lockdown but, crucially, does not include the recent good news on the vaccines. Separately, Fable Data (a company that monitors credit card transactions) reported that UK consumer spending contracted by 8.8% in the week ending November 15th versus the same period last year. Although spending was weak across the board, the main drag was from spending in bars and restaurants. * SO WHAT? * This is not great – but it will be interesting to follow the same data points in the coming weeks as vaccine news filters through and shops open up once more in the run-up to Christmas.

Playstation 5 launch overwhelms retailers (The Times, Ashley Armstrong) shows that Tesco, John Lewis, Currys and Game websites all crashed yesterday as they were unable to cope with the deluge of interest for Sony’s latest console. Some eBay users were selling their consoles for £800 versus the actual price of £449! * SO WHAT? * This always happens with a console launch – but the difference this time is that high street retailers aren’t able to get involved, putting even more strain on online retailers. This is going to be a massive hit under lockdown!

Elsewhere, Frasers Group increases stake in Mulberry (The Guardian, Zoe Wood) shows that the-company-formerly-known-as-Sports-Direct is pondering a potential takeover of Mulberry after it increased its stake in the brand to 37%. Interestingly, companies normally have to make a bid for the whole company (“put up or shut up”) when they own 29.9% of the shares, but the Takeover Panel made an exception this time because Mulberry’s biggest shareholder owns a 56% stake. Under the current rules, Frasers has

until 17th December to make a full offer. * SO WHAT? * Mulberry has really been through the wars due to Covid. It has not only been hit by the closure of its own stores – the closure of department stores has also been devastating. You do wonder whether any of the brand’s cachet will be tainted by being associated with Mike Ashley, but then again he is good at sniffing out a bargain and he does seem to be carving a path towards taking his retail empire upmarket – he is also building up his stake in Hugo Boss, for instance. One thing you can count on – if Ashley buys it, it will be for a very reasonable price!

Peacocks and Jaeger businesses collapse into administration (The Guardian, Sarah Butler) shows that Peacocks, Jaeger, Austin Reed and Jacques Vert have all fallen into administration as they come under the umbrella of entrepreneur Philip Day’s Edinburgh Woollen Mill, which had recently warned of imminent collapse. Administrators said that the businesses would continue to trade whilst considering options for the future. Day is thought to want to rescue Peacocks and Jaeger, but has been looking for a buyer for Austin Reed and Jacques Vert. Funnily enough, Mike Ashley’s Frasers Group is among those in the mix for buying them. * SO WHAT? * Although it looks like there are brands here that will be available for fire-sale prices I would have thought that buyers will need to be very wary because there are reasons why those brands are not firing on all cylinders and the retail landscape looks unlikely to recover any time soon. Whoever ends up owning them will at least have to sort out their poor online presence to at least get that base covered.

Talking of online, Naked Wines toasts surging mail-order subscriptions (Daily Telegraph, Hannah Uttley) shows that the company unveiled 80% growth in half-year sales which prompted it to lift its full year sales growth forecasts to between 55% and 65%. Naked Wines parted company with Majestic Wines last year to concentrate on growing its US business. It seems that it has been pretty successful in this endeavour as the US now accounts for about 50% of sales with the UK coming in at 35% and Australia 5%. The share price has almost doubled since the start of the year. * SO WHAT? * It’ll be interesting to see how the company fares going forward, but if the trend for home drinking continues after lockdown is lifted, I don’t see there being any reason why the party can’t continue. They are arguably in a better position than Majestic because they don’t have a massive tail of stores to worry about.

The WHO sticks the boot into remdesivir and an arthritis drug offer hope…

WHO advises against prescribing remdesivir to Covid patients (Financial Times, Donato Paolo Mancini and Hannah Kuchler) deals a blow to Gilead, who produces the treatment that is currently the only antiviral approved to treat Covid – and was one of the treatments given to Trump when he recently fell ill with the virus. This recommendation is based on four randomised trials comprising over 7,000 patients. The WHO said “Remdesivir has no meaningful effect on mortality or on other important outcomes for patients” but in WHO recommends

against use of Gilead Covid-19 drug remdesivir (Wall Street Journal, Joseph Walker) we see Gilead hitting back by saying that the WHO’s study was not as good as the others which showed that there was a benefit. * SO WHAT? * This is clearly a blow for Gilead and I expect that it will increase efforts to show its efficacy. In the meantime, this is bound to hit sales.

Conversely, Arthritis drug offers hope for severely ill Covid patients (Financial Times, Anna Gross) shows that the administering of a drug used to fight rheumatoid arthritis, Tocilizumab, results in much-improved outcomes for severely ill Covid-19 patients. It is the first immunosuppressant drug to have an effect on hospitalised Covid patients. Many will hope that this could add to the growing array of coronavirus treatments that are becoming available.

Royal Mail benefits from more parcels and Cineworld seeks a CVA…

As the prevalence of online shopping continues to grow thanks to the coronavirus outbreak, Big losses show Royal Mail’s delivery duty ‘must change’ (The Times, Robert Lea) highlights the importance of increased parcel traffic as the Royal Mail announced losses of £180m over the spring and summer due to having to meet its obligation to deliver nationwide six days a week for one price. The company said that the “universal service obligation” it made as part of its privatisation seven years ago now has to change. It reported a 33% drop in letter volumes but a 31% rise in parcel volumes. * SO WHAT? * Overall, parcels helped Royal Mail to post a 5% increase in revenues, but it is clear

that it is operating with one hand tied behind its back compared to the likes of Amazon, DPD, UPS and DHL. It now deals with more parcels than letters for the first time ever! I would have thought it will be tricky to back out of this universal agreement though because who else is going to offer to do it?

Cineworld eyes CVA amid shortage of blockbusters (Daily Telegraph, Hannah Uttley) shows that Cineworld, the world’s second biggest cinema chain, is thinking about pursuing a CVA in order to stop the continued outflow of money. It hired AlixPartners last month to negotiate with lenders about its $8.1bn debt, much of which was due to the company’s reverse takeover of Regal in 2017. Cineworld is also in negotiations with individual landlords about rent cuts. * SO WHAT? * This is a tricky turn of events for a major operator, but maybe it should think about signing deals with movie studios to at least get some money coming in. Surely some money is better than none, no?

GM pledges more for EVs and Roblox gets closer to an IPO…

GM ups bet on EVs as investors swoon for electric cars (Wall Street Journal, Mike Colias) shows that GM announced plans to increase its spend on developing electric and driverless vehicles by $27bn up to 2025 ($7bn more than it pledge back in March). * SO WHAT? * Electric vehicles still only make up 2% of global car sales but pressure continues to increase on car makers to make their fleets more environmentally friendly. This sounds like a big spend on stuff that may or not pay off in the end. I have to say that surely driverless is an even bigger money pit than EVs because the regulatory/insurance/moral hurdles involved will continue for years IMO whereas at least EVs are on most people’s radars currently.

Then in Roblox files to go public amid surge in videogaming spending (Wall Street Journal, Sarah E. Needleman) we see that videogame company Roblox has filed to go public in documents submitted yesterday. * SO WHAT? * Sales and revenues have been stellar under lockdown, so I think it is highly understandable that the company would want to take advantage of its currently strong position and float with a nice fat valuation. Although it is still loss-making, it’s not like other game developers or publishers because Roblox is more of a platform which players use to develop their own games and the company makes its money by getting users to make in-game purchases with virtual currency called Robux. It has been incredibly popular under lockdown as a way to connect with friends and have a bit of fun at the same time. I would have thought its IPO would be very well received under current circumstances!

…in other news…

I thought I’d leave you today with a video clip that I think I could watch all day in ‘Genius’ dog figures out how to steal treats without its owner ever knowing (The Mirror, Luke Matthews). Superb!