Friday 28/02/20

  1. In CORONAVIRUS NEWS, markets drop, the coronavirus fallout continues and China gives firms an “easy” way out
  2. In RETAIL NEWS, online retailer Zalando wants more lux, Homebase exits its CVA early and Amazon’s cashierless shop gets fooled
  3. In INDIVIDUAL COMPANY NEWS, DoorDash files for an IPO, BAT is smokin’ and Beyond Meat plans a marketing push
  4. In OTHER NEWS, I bring you some classic car chases…



So markets drop and the fallout continues…

Markets dive as virus spreads (The Times, Callum Jones, Tom Howard and James Dean) highlights more stock market weakness as the S&P500, Nasdaq and Dow Jones have now all fallen by 10% or more from their peak, which takes them into “correction” territory. Not only that, they also had their biggest one-day points fall ever.

The spread of the coronavirus continues to have consequences such as Japan shuts all schools to combat coronavirus (Financial Times, Robin Harding and Kana Inagaki) which says that all schools in Japan will shut from Monday as Japan switches from a policy of trying to keep the virus out to one of containment, Motor show visitors told to keep a distance (Daily Telegraph, Alan Tovey) suggests that next week’s Geneva Motor show is looking a bit iffy although it’s still supposed to be going ahead as things stand, albeit with potentially far fewer than the usual 500,000 visitors and 10,000 journalists. Airlines freeze hiring and investment as virus damps profit hopes (Financial Times, Tanya Powley and David Keohane) highlights Lufthansa’s hiring freeze and KLM’s statement that it will delay investment in IT and real estate among other cuts and Global brands fear economic consequences of coronavirus (Daily Telegraph, Louis Ashworth, Hannah Uttley, Chris Johnston and Alan Tovey) looks at a string of global companies struggling to cope with the ongoing outbreak including Reckitt Benckiser (sales of Dettol and Lysol have shot up, but supply chain disruption means that they may not be able to continue to meet demand), Standard Chartered (potential earnings miss), ABInBev (profits hit as beer sales plummeted over Chinese New Year) and John Menzies (the aviation services business which does things like baggage handling, is suffering from fewer flights).

Coronavirus/tech stocks: issue warning (Financial Times, Lex) looks at the impact of the virus on tech stocks where factory shutdowns have strangled production (HP and Apple are among those to have stated these problems). Microsoft is also suffering from slowing PC demand and supply issues impacting software sales but its growing cloud business should help it through versus others who rely solely on hardware sales. Coronavirus disruption at Samsung could threaten S Korea economy (Financial Times, Song Jung-a and Edward White) highlights just how important Samsung is to Asia’s fourth largest economy as exports account for 45% of South Korea’s GDP, with computer chips (which Samsung makes a lot of) representing about 20% of all outbound shipments. It also makes up about 25% of the value of the country’s entire Kospi index – so coronavirus problems for Samsung could hit the country hard.

China issues record number of force majeure certificates (Financial Times, Sun Yu and Xinning Liu) shows how the China Council for the Promotion of International Trade (CCPIT) has been handing out record numbers of force majeure certificates to steelworks, electronics companies, car makers and parts suppliers (among others) since the beginning of this month that will exempt its exporters from fulfilling contractual agreements with overseas customers. In other words, it’s doling out certificates to stop Chinese companies from getting sued. * SO WHAT? * Yes, this may make overseas companies think twice about doing business with Chinese companies and give them even more reasons to go elsewhere, but TBH, I can’t really see that happening in the short-to-medium term because China is just too important in their supply chains. They will whinge (quite rightly) but ultimately I expect that they’ll just have to chalk it up to experience. Foreign lawyers say that these certificates aren’t decisive (they would say that, wouldn’t they!), but good luck in getting anything.



Zalando wants to go more up-market, Homebase manages to exit its CVA early and Amazon’s new cashierless supermarket gets pranked…

Online fashion retailer Zalando pushes into luxury clothing sector (Financial Times, Tobias Buck) shows that Zalando, Europe’s biggest online fashion retailer, is aiming to push further into the luxury segment with plans to double the product available from makers such as Moschino and Alberta Ferreti by 2023. Co-chief exec David Schneider, said that “Premium has been our fastest-growing category in the past months, and we see a huge potential to build on that”. The company’s full-year revenues shot up by 20% and its active users increased from 26.4m to 31m year-on-year. At the same time as announcing a move into luxury, the company also said that it planned to sell secondhand goods on the platform in order to become a fashion one-stop-shop. * SO WHAT? * This is great, IMO – a retailer doing well and continuing to evolve by broadening its appeal and adding interesting new product. So far there has been no negative impact from the coronavirus but the company is monitoring the situation.

Homebase to exit CVA early after returning to profit (Financial Times, Jonathan Eley) shows encouraging signs for the troubled DIY retailer as it said that it would end its CVA 18 months ahead of schedule as it had managed to renegotiate most of its leases and made progress in terms of profitability. Britain’s #2 DIY retailer used the CVA in 2018 in the immediate aftermath of its disastrous time under the ownership of Australian group Wesfarmers. The number of stores prior to the CVA was 241 – but that has since shrunk to 164. * SO WHAT? * It is very rare to have a company exiting a CVA early as many of them end up refinancing or the companies just collapse anyway. Resructuring specialist Hilco bought Homebase for £1 in 2018 and clearly it has done very well. It bought Bathstore out of administration last year as well as Dwell, the furniture retailer, and plans to rollout these brands in its outlets. Nice one, Homebase/Hilco!

In Shopper fools Amazon store’s cashierless system (Daily Telegraph, Hannah Boland) we see that a reporter managed to fool Amazon’s first cashierless supermarket (which I mentioned the other day) by going into the store’s toilets, changing clothes and then carrying his rucksack in a different way. Customers are normally picked up by cameras and scanners, but this guy managed to get past them. No doubt they will be looking to close this loophole!



DoorDash aims for an IPO, BAT increases cigarette prices and Beyond Meat targets a marketing push…

In a quick scoot around some of the other news today, DoorDash files confidently for an IPO (Wall Street Journal, Corrie Driesbusch and Preetika Rana) shows that US food delivery provider DoorDash has filed for an IPO, which means that the loss-making San Francisco startup could get a listing in late spring. * SO WHAT? * This is pretty

punchy given plunging stock markets at the moment and increasing scepticism among investors about loss-making startups. Still, they are clearly hoping for more stable market conditions in a few months’ time, so we’ll see whether they are right to take the gamble!

Elsewhere, BAT raises prices and lights up revenues (The Times, Alex Ralph) put e-cigarette difficulties aside to report a 5.7% increase in annual revenue despite falling cigarette volumes and Beyond Meat plans to tout heathfulness of its burgers (Wall Street Journal, Jacob Bunge) signals the intention by meatless supremo Beyond Meat to up its efforts on marketing to combat criticism that its products are over-processed. It certainly needs to do this!



And finally, in other news…

As a reader of Watson’s Daily, I suspect that you are probably an adrenaline junky. That being the case, I thought I’d keep the adrenaline party going by bringing you this: The 15 Greatest Movie Car Chases (Mental Floss, Matthew Jackson There are some classics in there!

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Some of today’s market, commodity & currency moves (as at 0719hrs 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 **
6,796 (-3.49%)25,767 (-4.42%)2,979 (-4.42%)8,56612,367 (-3.19%)5,509 (-3.06%)21,143 (-3.67%)2,881 (-3.70%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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