Monday 05/08/19

  1. In RETAIL NEWS, US retailers shed jobs and Sports Direct gets closer to Jack Wills
  2. In LEISURE-RELATED NEWS, Disney closes in on channel launch and Netflix is accused of falsifying figures
  3. In INDIVIDUAL COMPANY NEWS, FiatChrysler relies on Jeep, KKR buys German payments group and Just Eat gets a massive tax bill
  4. In OTHER NEWS, I bring you the BODMAS vs PEMDAS debate…



So US retailers are feeling the pinch as well, despite the economy doing well – and Mike Ashley edges closer to buying Jack Wills…

US retailers shed 50,000 jobs as boom bypasses stores (Financial Times, Alistair Gray) shows that it’s not just UK retailers who are suffering at the moment. Although the US economy is currently doing pretty well, retailers are warning that Trump’s trade spat with China will force their collective hand to accelerate employee cuts as higher costs will snuff out already-thin margins – especially for smaller shops – which will hasten cuts or even closures. Data published on Friday showed that there were 49,000 fewer jobs in the retail sector in July this year versus July 2017, with department store, apparel and electronics retailer employees suffering particularly acutely. When you consider the ongoing effect of Amazon on retail, it is also interesting to note that, over the same time period, the number of employees in transport and warehousing has gone up by about 370,000. * SO WHAT? * Things could have been worse in the latest ramp-up of rhetoric between the US and China as Trump “only” imposed a 10% tariff on the additional $300bn-worth of goods rather than the 25% he had previously threatened, but that didn’t stop the share prices of retailers such as Best Buy, Gap and Macy’s tanking last week. For the moment, things in US retail are quite twitchy, but the longer this p!ssing contest goes on,

the more Americans are going to suffer. The fact that this is all happening while consumer behaviour continues to evolve isn’t making things any easier, but at least the American economy is still doing OK. If it wasn’t, the wheels would be falling off much faster…

It’s the sound that many retailers don’t want to hear – the approach of Sports Direct’s Mike Ashley and the opening of his chequebook in Now Ashley eyes up Jack Wills (Daily Telegraph). The preppy fashion retailer has been struggling of late – to the extent that is on the verge of administration – meaning that Sports Direct’s chief exec Mike Ashley senses that there’s a bargain to be had. Apparently, Sports Direct is now looking like the front-runner to buy it, although rival retailer billionaire Philip Day is also in the running. * SO WHAT? * Good Lord, Ashley is a deal machine. He just can’t help himself! Even though Sports Direct is having a rough time at the moment and Ashley himself had a good old rant about buying House of Fraser only very recently, it seems that his thirst for a bargain remains unabated. From Ashley’s point of view, I would have thought that Jack Wills would sit quite well with his stable of apparel retail brands but you just have to wonder how stable Sports Direct really is at the moment. If the core business continues to suffer (and remember, it’s not going brilliantly at the moment with some big names withholding their best product because they don’t like his stores) there is a risk that his whole house of cards falls over and Jack Wills would be caught up in it. I just think that Ashley needs to slow down, do a proper job on what he’s already got and then possibly do more deals – but hey, that’s just an opinion. We’ll just have to see how this turns out…



Disney moves closer to launching its new channel, Netflix is accused of lying about subscriber numbers and Juul launches a new type of e-cigarette…

OK – so Disney’s new streaming channel Disney+ isn’t expected to launch until November 12th in the US, but Disney, king of the box office, now primed to do battle with Netflix (The Guardian, Mark Sweney) highlights a strong performance from the world’s biggest entertainment company as it broke its annual worldwide box office record, taking $7.67bn after only seven months, thanks to the likes of Avengers: Endgame, Captain Marvel, Aladdin and The Lion King with Frozen 2 and Star Wars: The Rise of Skywalker yet to come. The company appears to be in good shape heading into its results announcement tomorrow and now controls a staggering 40% of the US movie market after a number of key acquisitions such as Pixar, Marvel Studios and Lucasfilm between 2012 and 2016. * SO WHAT? * This all sounds great, but the fact is that Disney is going to have to spend big in order to catch up with the likes of Netflix and is aiming to nab subscribers with an offering priced at $6.99 per month (almost half of Netflix’s most popular subscription option). It is going to swallow a big chunk of lost revenues to make a splash and won’t expect to be profitable until 2024. Streaming is about to get tougher as other services from NBC Universal, HBO and Apple are also going to be launching at about the same time. It’ll be interesting to see how successful they are – but I do think Disney is likely to have a compelling offering – and it will also be interesting to see how long it takes for users to reach “subscriber fatigue” and cut back.

Talking of streaming, Investors sue Netflix over ‘false’ subscriber figures (Daily Telegraph, Margi Murphy) heralds a fly in the ointment for Netflix that could yet make them choke as Deepak Venkatachalapathy, an IT analyst for the

Royal Bank of Canada, is aiming to launch a class action lawsuit against the company on behalf of shareholders. He is alleging that Netflix “artificially inflated” its subscriber numbers despite raising its prices. He’s arguing that Neflix bosses knew that user growth was losing momentum but still made “materially false and misleading” statements to public investors which led them to buying the stock under false pretences. Vankatachalapathy’s lawyers implied that “hundreds of thousands” may be able to claim damages if the action is successful. * SO WHAT? * This comes at a tricky time for Netflix as it is about to face a sudden increase in competition (as per the previous paragraph) and if it was proved to be true, could be very damaging to its reputation and its share price as investors would start to question the veracity of its statements. That would no doubt lead to the company leaders being ousted, leaving the company potentially rudderless just when things are starting to properly kick off in streaming.

Then in Juul launches ecigarettes that monitor users’ vaping (Financial Times, Alice Hancock) we see that the US vaping supremo Juul has just launched its first in a series of bluetooth-connected e-cigarettes – called the Juul C1 – that can track vaping habits of its users, amid fears of an increase in take-up by youngsters. It will go on sale in the UK this week after it tested successfully in Canada. The device links to a smartphone app which has very strict age verification checks and users will be able to see how many puffs they take per day, find their vape if they misplace it and lock other users out if their phone is out of range. British American Tobacco launched a similar connected product called the Vype iSwitch in December and has sold over 2,000 units. It is still assessing its viability (but 2,000 units sounds pretty cr*p, no?). * SO WHAT? * This all sounds quite nice from a user point of view, but privacy experts have rightly raised concerns about how all this data is going to be collected, stored and used. If anyone can make a success of this, Juul probably can, but with issues surrounding “data privacy” being ultra-sensitive at the moment the launch may be more problematic than it was expecting.



FiatChrysler relies on Jeep, KKR lands a payments purchasing group and Just Eat gets a massive tax bill…

Fiat Chrysler’s growth hinges on Jeep expansion (Wall Street Journal, Nora Naughton) shows that the company is trying to offset industry-wide weakness by expanding it popular Jeep brand over the next three years. This will include adding bigger SUVs to its showrooms, boosting growth in China and launching plug-in hybrid versions of its models in the US and Europe. The Jeep brand already accounts for a third of sales. * SO WHAT? * Sounds like a plan as SUVs are obviously popular and the company has a well-known brand that specialises in this segment (I think that the only other brand that truly evokes “SUV” more is Land Rover!). Still, whether or not it succeeds – as everyone else and their dog is launching their own lineup of SUVs – is another question.

Deal activity in the “boring” world of payments processing continues apace in KKR wins race to buy German payments group for €600m (Financial Times, Javier Espinoza) as the private equity group managed to buy Heidelpay in a hotly contested bid. Bidders who lost out included Sweden’s Nordic Capital and EQT as well as payments specialists Worldline and Nets. Heidelpay

enables its clients to accept online and mobile payments and is already used by over 30,000 merchants globally, including L’Oreal. * SO WHAT? * Payments is a HOT area at the moment as players try to lock in scale in order to grow. KKR was involved in the $39bn sale of First Data to Fiserv – one of this year’s biggest payment deals – as the former’s biggest shareholder. It’s all part of KKR’s bid to build up its presence in Germany and also heralds the latest acquisition in the payments space. Given the interest this attracted I suspect that consolidation in payments won’t stop here…

Following on from all the excitement of the Just Eat/ merger that hit the headlines last week, Taxman delivers £126m demand to Just Eat (The Times, Simon Duke) highlights a rather unwelcome tax bill from Denmark of £126m for failing to pay sufficient tax when the company moved its HQ from Copenhagen to London in 2012. Just Eat says the claim is “without merit” but has made a £21m provision to cover potential related payments, although it does admit that having to pay the whole thing is not impossible. A decision on this is expected next year. * SO WHAT? * Interesting timing for a massive tax bill, eh?? I’m not sure whether this will scupper the proposed merger (surely this would have been taken into account in the due diligence) but I wonder whether it will scare off any rival bids. Just look at what happened when Bayer bought Monsanto – disaster! This is obviously not on the same scale, but it is a recent example of how legacy issues have blown up in the face of an acquiror.



And finally, in other news…

I thought I’d leave you with one of those maths problems that often crop up on your Facebook feeds from time to time in Mathematician gives answer to simple sum that has been dividing the internet (The Mirror, Tiffany Lo It’s BODMAS vs PEMDAS. Fiiiiiiiiiight!

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Some of today’s market, commodity & currency moves (as at 0853hrs 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 **
7,407 (-2.34%)26,485 (-0.37%)2,932 (-0.73%)8,00411,872 (-3.11%)5,359 (-3.57%)20,720 (-1.74%)2,821 (-1.62%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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