Friday 21/08/20

1. In RETAIL/HIGH ST/CONSUMER NEWS, Alibaba sees stellar online sales, House of Fraser hustles, Asda has suitors and car sales rise
2. In LEISURE NEWS, Genting Hong Kong signals more cruise operator woes, nightclubs face ruin and ‘EOTHO’ gives a seaside boost
3. In TECH NEWS, Huawei employees worry and newspapers join in against Apple
4. In INDIVIDUAL COMPANY NEWS, Uber and Lyft get a reprieve and Estée Lauder announces job cuts
5. AND FINALLY, I bring you an amazing traditional craft and a WHF option…

So Alibaba triumphs, House of Fraser warns of closures, Asda attracts suitors and car sales rise…

*** I am going to be OFF between August 24th and 28th 😱. My wife has even banned me from the study so I cannot get to my laptop! Normal service will be resumed on Monday 31st August! See you then! ***

Alibaba’s online orders soar during coronavirus, fueling a sales recovery (Wall Street Journal, Liza Lin and Dave Sebastian) highlights a stellar Q1 profit for the e-commerce giant as its profits more than doubled versus the same period in the previous year. It benefited from more shoppers buying daily necessities and revenues rose by 34%, above market expectations. Revenues were also strong in its cloud-computing segment as businesses increased their efforts to digitise. * SO WHAT? * Chinese consumers are already the worlds biggest online shoppers but the pandemic has accelerated a trend for older consumers and those in smaller cities to buy more online. These results mark a solid rebound from the tricky January-March quarter when Alibaba’s profits were hit by falling valuation of its public investments. It remains to be seen how escalating US-China tensions will impact companies such as Alibaba.

Then in a sign that there is some consumer confidence out there, UK car dealer sales rise as Covid drives people from public transport (The Guardian, Jasper Jolly) cites the latest figures showing that car dealerships are reporting a rise in new and used vehicle sales in July as people continue to avoid public transport. Even the struggling Lookers chain said sales across new and used cars were up by 17% and Vertu, the UK’s #5 car dealership, said new car sales were up by 18% in July versus July 2019 and secondhand sales by 14%. * SO WHAT? * I’ve said before not to get TOO excited by these figures because July and August are typically slower months as new car buyers prefer to wait for the “new” registration plates in September. The whole industry is on tenterhooks regarding sales in that month and thousands of jobs will depend on how sales go.

Mike Ashley warns of store closures at House of Fraser despite expected profit rise (Financial Times, Jonathan Eley) highlights tricky times ahead as Frasers’ CEO Mike Ashley warned of more store closures when the business rates holiday finishes in March 2021. At this point they will be payable once more but based on 2015 rental values until they get reviewed in 2023! The company reported strong full-year results and forecast a rise of up to 30% of underlying profits for the full year. Ashley also announced a £100m investment in improving the company’s digital capability spread over the next three to four years. * SO WHAT? * Ashley has been extremely vocal for quite some time now on the whole business rates thing and it will be interesting to see whether anything actually changes. I guess that the easiest thing for the government to do would be to extend the holiday across the board or target specific categories of store that need more help – but there’s a while yet before the deadline. It’s interesting to see that he has been building stakes in other luxury businesses that will bolster his luxury segment – he’s bought 12.5% of Mulberry so far this year and is working on Hugo Boss.

Veterans go head to head in £6bn battle for Asda (The Times, Ashley Armstrong) shows that two parties are competing to buy Asda from parent company Walmart. Private equity firms Lone Star and Apollo Global Management are being advised by Paul Mason (CEO of Asda 20 years ago) and Rob Templeman (former chief exec of Debenhams) respectively. Asda is the UK’s #3 supermarket chain and has been owned by US retailer Walmart since 1999. Walmart’s overseas strategy has changed in the last year or so and it almost offloaded Asda to Sainsbury’s in what eventually ended up as a failed bid. It still wants to keep a minority stake in Asda as it sees a private equity deal as a stepping stone to a public listing in a few years’ time. It is rumoured that Walmart has given bidders until September 7th to table proper bids. * SO WHAT? * Loads of private equity firms expressed an interest in Asda initially, but it seems that many eventually got cold feet because of Asda’s low margins and the uncertainty of prospects for British retail in general. There are fears out there that further weakness under a coronavirus-induced recession could trigger a price war that could decimate already-thin margins.

The cruise industry gets another blow, nightclubs face ruin and Eat Out To Help Out gives some cause for hope…

As if things weren’t bad enough already for the industry, Cruise ship operator Genting Hong Kong halts payments on debts (Financial Times, Thomas Hale) shows that Genting Hong Kong, one of the territory’s biggest cruise ship operators, is now suspending payments on debts of nigh on $3.4bn as it seeks to restructure its debt. Genting was previously known as Star Cruises and is listed on the Hong Kong Stock Exchange – and its share price cratered by 38.5% on this news. * SO  WHAT? * The company previously issued a profit warning for the first half but I have to say that things aren’t looking good for the future. The whole industry has been absolutely decimated by the pandemic and I don’t even think there’s that much scope for consolidation with rivals because they are all “in the same boat”. The only thing I can think of that could save them is if a business came along that wanted to start afresh with cruises. If that happened, it would probably have its pick of boats/ships/vessels (or whatever they call them!) given that other operators will be wanting to offload. I would have thought this is an industry that even private equity firms would deem to be a step too far…

Back in the UK, UK industry facing ‘financial armageddon’ (The Guardian, Rob Davies) highlights the plight of nightclub owners who feel left out from government incentives such as “eat out to help out” among other measures. Over 50% of the members of the Night Time Industries Association (NTIA) say they think their businesses will fail within the next two months unless they get more government support. * SO WHAT? * The NTIA warned that this could put over 754,000 jobs in jeopardy and operators in smaller towns are likely to be particularly hard hit. Clubs are expected to be the last entertainment venues to be able to reopen as part of ongoing government efforts to contain the crisis. The tough times continue.

On a brighter note, Bournemouth among beneficiaries of ‘eat out to help out’ scheme (The Guardian, Richard Partington) shows that seaside towns are among the biggest beneficiaries of the “eat out to help out” initiative, according to the research conducted by the Centre for Cities thinktank, as people were encouraged to return to town centres. Larger cities did not do so well but Franco Manca chief hails Government’s ‘eat out’ deal (Daily Telegraph, Hannah Uttley) highlights the success of Franco Manca and The Real Greek owner Fulham Shore thanks to the scheme. Chief exec David Page said that the initiative has not so far had much of a detrimental effect on weekend trade – something he had been worried about when the scheme first started. He added that the scheme had encouraged diners to order more and tips for waiters and kitchen staff had increased.

Huawei employees face uncertainty and newspapers join in the Apple debate…

Huawei employees worry about lay-offs after tougher US sanctions (Financial Times, Ryan McMorrow) shows that employees of the embattled tech giant are getting more worried by the day about job losses following Trump’s tightening of loopholes this week. Both employees and analysts are concluding that the ban on using US tech in its products could effectively close down the smartphone and 5G equipment businesses and also impact cloud computing, gaming and virtual reality units. * SO WHAT? * Huawei earned 65% of its revenues overseas in 2013 versus 41% last year and the current US tensions could make matters much worse. Having said that, some in the company say that they have been getting used to Trump’s

shenanigans over the last two years and that this will force the company to be more self-sufficient in the future. There will be pain in the meantime, though…

In News publishers join fight against Apple over app store terms (Wall Street Journal, Benjamin Mullin) we see that major news organisations are joining in the growing number of companies pressing for better terms on Apple’s App Store. All app developers have to pay Apple 30% of first-time subscriptions made via iOS apps which then goes down to 15% after the subscriber’s first year. Apple argues that this is the same on other platforms and helps to cover Apple’s operating expenses. * SO WHAT? * It seems that momentum is building here as Spotify initiated resistance last year, Epic Games are currently suing over the same thing and even Facebook gently stuck the boot in recently. I have said this before but I think that none of these companies have a chance against Apple on their own – if they want to get any kind of success they will ALL need to act together IMO.

Uber/Lyft get a stay of execution and Estée Lauder announces job cuts…

Lyft, Uber get more time as they fight California order (Wall Street Journal, Preetika Rana) shows that both companies got a last minute reprieve from the state appeals court. It will allow them to continue to operate during the appeals process of the ongoing case of whether they should be reclassifying their drivers as employees.

They were both very close to shutting down operations at midnight prior to the decision. The case continues…

Then in Esteé Lauder plans to cut up to 2,000 jobs globally after profits dive (The Guardian, Sarah Butler) we see that the make-up, skincare and fragrance company is looking at shutting stores and department store concessions. The company, which also owns brands including Jo Malone, Clinique, La Mer and MAC, said it was aiming to cut 10-15% of its standalone stores as part of a bid to cut $400m in costs after sluggish sales during the coronavirus pandemic. Although online sales were strong, they were not enough to mitigate the closure of its physical retail outlets.

…in other news…

I thought I’d leave you today with an amazing Japanese craft that really is quite special in The ancient Japanese textile craft made with jagged fingernails (SoraNews24, Oona McGee). How amazing is this?? Also, for those of you working from home and yearning for different surroundings, how about this for inspiration: Barbados Offers One Year Visa for Remote Workers (Trendhunter.com, Grace Mahas)…