Monday 10/12/18

1. In MACRON NEWS, the French president faces serious challenges
2. In UK CONSUMER/HIGH STREET NEWS, footfall is expected to fall sharply, Pizza Express has dough woes but then Hollywood Bowl is looking good
3. In TECH-RELATED NEWS, the Huawei saga intensifies, driverless cars are still a faraway prospect and the electric scooter frenzy eases up
4. In OTHER NEWS, I bring you the fire noodle challenge and a Riverdancing baby. For more details, read on…

So Macron continues to face tough challenges in his bid to reform France…

Protests threaten Macron’s campaign to remake France (Wall Street Journal, Noemie Bisserbe and Stacy Meichtry) shows us just how tricky things have become for the French president as France endured a fourth consecutive weekend of protest from the “Gilets Jaunes” in Paris and other major cities. Macron has been using his powerful majority to work through and implement big changes in the labour market, taxes, public spending and pensions but it was his proposals for a new “green” tax on fuel that proved to be the final straw for many who had

been grumbling about his dictatorial style of leadership. Pressure is increasing for him ease middle-and-working-class household budgets by doing things like cutting taxes that retirees pay on pensions, lifting the minimum wage, increasing social welfare payments and telling banks to stop charging overdraft fees. * SO WHAT? * Macron has blinked for the first time in his eighteen months in office and I think that if he caves to more demands from an “organisation” (the Gilets Jaunes), he is finished and everything he has done will unravel. As far as I can see it, France needed wide-reaching reforms to modernise after years of mismanagement and weak leadership and the French people gave Macron a huge mandate to change things. Now that he is doing that, it seems that a traditionally socialist country is having a serious wobble. Will he cave? We’ll see soon enough…

Footfall for shops is expected to drop, Pizza Express gets a slap in the face from Moody’s but Hollywood Bowl shows punters are still spending…

Christmas gloom settles on high street (The Times, Philip Aldrick) cites the latest figures from Springboard, the retail insights company, which predict that shopper visits to the high street will fall by 4.2% this month versus the same period last year. This follows on from a 3.2% drop in footfall last month, with Black Friday being blamed for shoppers spending online in preference to, you know, going outside. Springboard’s marketing director, Diane Wehrle, observed that “The 3.2 per cent drop in November is indisputable evidence that Black Friday delivers no tangible benefit for bricks-and-mortar stores”. Another rather sobering finding was published by Intrum, a credit management company, which says that British consumers are more overstretched than anywhere else in Europe apart from Greece, with 29% of respondents saying that they “have maxed out their credit card or borrowed money in order to pay a bill or bills, apart from mortgages, during the past six months”. * SO WHAT? * As I keep saying, I think that pretty much everyone is expecting doom and gloom from the high street which means that any retailers who do well will probably see particularly sharp rises in their share price if they even offer a tiny glimmer of hope.

Pizza Express downgraded by Moody’s as woes pile up (Daily Telegraph, Tim Wallace) shows that Pizza Express is creaking under the strain of debt, rising costs and a competitive landscape and credit ratings agency Moody’s has decided to put the boot in by downgrading it as rising leverage ratios “may cause the company difficulties in effecting a timely and cost effective refinancing in due course” and added that “the downgrade to the ratings of Pizza Express reflects declining profitability [and that] fierce competition and sustained cost pressure means a turnaround during 2019 is unlikely”. * SO WHAT? * This is not what the company needs right now as it gets closer to facing the prospect of refinancing debts of £465m falling due in August 2021 and £200m a year later. It faces a tough time ahead if it is to avoid a similar fate to the likes of Jamie’s Italian, Byron Burgers, Carluccio’s, Gourmet Burger Kitchen, Prezzo and Strada.

On a more positive note, Hollywood Bowl lines up another dividend (The Times, Dominic Walsh) shows that people are still willing to spend money on amusing themselves as the tenpin bowling operator is expected to announce a special year-end dividend for the second year in a row along with some strong results. Hollywood Bowl is the UK’s biggest tenpin bowling operator, ahead of Ten Entertainment Group, and is forecast to do well despite a hot summer and World Cup (which usually dent revenues). * SO WHAT? * Once again, here is more evidence that consumers are willing to spend money on “experiences” – something that all retailers really need to embrace, given that they aren’t really going to be able to compete with online specialists on price.

The Huawei saga hots up and we see why driverless cars are still a way off and that the e-scooter frenzy is pausing for breath…

In China warns US of action if Huawei executive is not released (The Guardian, Simon Goodley) we see that diplomatic pressure is intensifying over the recent arrest of Huawei’s CFO, with the Chinese demanding that she be released on the one side and the US alleging that she misled banks about Huawei’s business with Iran in order to avoid international sanctions on the other. Two British banks ensnared in Huawei dispute (Wall Street Journal, Margot Patrick and Eva Dou) identifies HSBC and Standard Chartered as being among the institutions told by Huawei that it wasn’t conducting business in Iran via a Hong Kong company called Skycom Tech. The banks relied on this assurance and proceeded to clear hundreds of millions of dollars worth of transactions which authorities said “exposed the banks to the risk of fines and forfeiture [and] serious harm”. * SO WHAT? * This really is a massive mess. For the moment, at least, it seems that the Huawei situation is running separate to the trade talks between China and the US as both sides appear to be treating it as a stand-alone issue but I would be willing to bet my mortgage on it coming up in negotiations as things progress. It could be a very useful bargaining chip for either side.

Following on from last week’s development with Waymo announcing its “driverless” taxi service for paying passengers, The driverless car is still a long way from passing a test (Daily Telegraph, James Titcomb) does a really good job of summing up the history thus far of driverless car capabilities but also identifies the many issues facing a successful universal roll-out. * SO WHAT? * Basically, the tech has come a long way but we are still a way away from “level 5 automation”, where a car is fully automated (i.e. no safety driver). Although the promise of lower congestion, more free time and fewer deaths are all admirable goals to pursue, all the big players in this area 

have pulled back on their bold predictions. Waymo is seen to be the most advanced in driverless, but is restricted to a small group of users in very defined locations, Uber is going to restart testing in the coming weeks following the well-publicised fatality in March (but even then, this is only going to be in a mile-long loop between two of its offices in Pittsburgh) and Tesla has recently stopped offering buyers the option of having their car “fully self-driving” via a future software update as its capabilities are not as advanced as they might have hoped. The time when we can order a robot taxi to wherever we want to go is still some way off.

Investor frenzy for scooter start-ups cools (Wall Street Journal, Eliot Brown, Greg Bensinger and Katie Roof) highlights a recent cooling in investor excitement about e-scooters as both Bird Rides and rival Lime have scaled back their valuation assumptions due to a lack of interest. Valuations are still high and there is still activity going on (Uber said it is talking to both companies about an acquisition, but Bird said it isn’t in talks and Lime hasn’t commented) but as the frenzy wears off, investors are facing the reality of scooters breaking down more quickly than originally thought (two months, on average) and vandalism. An illustration of this came when Scoot Networks, a small San Francisco operator of electric Vespa-style scooters, launched a fleet of 600 scooters in October, in an attempt to jump on the Bird/Lime bandwagon. Within two weeks, over 200 of its scooters had been stolen or damaged beyond repair. * SO WHAT? * I’ll stick my neck out here and say that this is a fad that will fail sooner rather than later. Yes, there are some big names throwing their weight around in this area (Ford, Uber and Lyft all have fingers in the e-scooter pie to varying degrees), but in the scheme of things their investment is small relative to their existing core businesses and they can afford for it all to fall flat. Unfortunately, there are always more idiots around than you expect and the scooters are far easier to chuck in the river than a shopping trolley, for instance. What starts as a well-intentioned way to get people around will, I think, result in a big blot on the environment as initial excitement will fade to operations involving fishing these things out of canals etc. Which is a pity, because they look like fun and I like the idea.

And finally, in other news…

I thought I’d leave you today with What is the Fire Noodle challenge? Why this Korean food craze has YouTubers in tears (Inside Edition, Johanna Li https://tinyurl.com/ybcyjzff) and the very cute Irish dancing baby could give Michael Flatley a run for his money (The Mirror, Lisa Trainer https://tinyurl.com/y7fds5nx). Ahhh!