Monday 27/04/20

1. In CORONAVIRUS & OIL NEWS, Europe eases lockdowns and the US considers it while weak oil price fallout continues
2. In RETAIL NEWS, John Lewis faces tough times and retail faces new rules
3. In NEWS ON “WINNERS”, Qatar scopes for bargains and meat substitutes get a boost
4. AND FINALLY, I bring you some amazing grass graffiti…

So the cautious easing of lockdowns starts and oil weakness continues to hit…

Leaders across Europe prepare to ease lockdown (Financial Times, Daniel Dombey, David Keohane and Miles Johnson) highlights plans from the Spanish, French and Italian governments regarding coronavirus lockdown easing. It’s obviously a delicate balance between getting the respective economies back on track and avoiding a second wave. Spain started with letting children outside for the first time in six weeks this weekend and plans on taking a sector-by-sector phasing out of lockdown measures, France is going to be outlining its exit strategy tomorrow with a focus on “health, school, work, shops, transport and gatherings” and a gradual re-opening from May 11th while Italy said that it would unveil a plan – by the start of next week at the latest – to reopen businesses. Italian schools would, however, remain closed until September.

German shops reopen but celebrations in Berlin muted (Financial Times, Guy Chazan) shows that although Germany made a tentative start on opening shops last week after a five-week shutdown, things are still looking uncertain for retailers as business is proving to be extremely slow. Footfall is very low as shoppers continue to avoid crowded areas and many are also feeling the financial pinch, meaning that they are less inclined to spend on things other than essentials. At least closed shops get government aid – open ones will be left on their own and there will be slim pickings even if they are selling goods at big discounts. Meanwhile, Bosses appeal to the government for a lockdown exit plan (The Guardian, Zoe Wood) highlights increasing calls from UK businesses for more visibility regarding the road to “normality” as the Institute of Directors appealed for more visibility so that companies can do some planning. Across the Pond, US states move to reopen as coronavirus job losses

mount (Financial Times, Katrina Manson) shows US Treasury Secretary Steven Mnuchin talking a good game on the economy saying that “as we begin to reopen the economy in May and June, you’re going to see the economy really bounce back in July, August, September”. Many state governors are pondering a lifting of coronavirus restrictions (some have already done so) – and even New York governor Andrew Cuomo is looking at doing so after May 15th. * SO WHAT? * It’s interesting to see the cautious lifting of restrictions going on now and no doubt everyone will be watching each other and monitoring their successes (or not). It seems to me that although the UK appears to be unmoved in its lockdown plans, I would have thought that we will start to lift restrictions soon because I suspect that UK citizens are already getting antsy and the more they see of other people around the world getting out and about the antsier they will get. I wonder whether there will be public order problems if full lockdown goes on too long – and so the government will have to weigh this up with how many more coronavirus deaths they can cope with.

It may take three years to work off excess stocks and higher prices are far off, experts say (Daily Telegraph, Ed Clowes) highlights ongoing gloom in the oil sector as price weakness continues. Trump’s talk of supporting the industry and oil producer cuts just aren’t doing much to help the cause as current measures aren’t going far enough to make up for the current lack of demand. Shutting down production until better market conditions prevail is not as easy as it sounds – and for some, it actually costs more to do than pumping oil at a loss. * SO WHAT? * For now, the US Department of Energy said last week that producers will be able to store some oil in the Strategic Petroleum Reserve (SPR), a load of salt caverns near the Gulf of Mexico, but this won’t be a permanent solution. When you consider that the US shale industry really needs oil prices to be above $50 a barrel to be be profitable and that current prices are way south of that, you just know that things like Diamond Offshore Drilling files for bankruptcy (Financial Times, Laura Noonan) are going to be increasingly common. 

John Lewis faces some tough decisions and retail faces new shopping etiquette…

John Lewis seeks outside backer for services move (The Times, Ashley Armstrong) shows just how bad things have got for the venerable retailer as it is now looking at bringing in an outside investor to fund and launch a joint venture to increase services and reduce retail operations in a potentially new business mix. Other measures currently under consideration include not reopening some of its less profitable outlets once the lockdown ends, giving a floor back to landlords in some of its larger stores, relocating some shops to places where rivals have vacated and putting Waitrose food halls in the middle of John Lewis stores to help footfall. * SO WHAT? * John Lewis clearly needs a right old spring clean in order to position itself favourably for the future. In choosing Dame Sharon White – someone who had NEVER worked in retail before (although she has had a VERY impressive career generally) – as chairman very recently, I do wonder whether the company is hoping that she will do a hatchet job on the company, get rid of all the troubled bits of it (because she has no baggage) and then get someone else in with the requisite

retail background to do a proper job. Previous top management John Lewis “lifers” like Paula Nickolds have been booted out so everyone is bound to be feeling on edge. Dame Sharon has got a real job on her hands. Making more of a push into services sounds like a nice idea, but is not something that can be done easily overnight – what she really needs to do is to sort out the old-fashioned retail business!

For everyone else on the high street, however, New rules proposed to limit customers in shops and keep staff safe on return (Daily Telegraph, Laura Onita) cites guidelines from the British Retail Consortium (BRC) designed to keep both staff and consumers safe. Measures include having extra barriers, getting customers to shop alone, keeping changing rooms closed and screens to protect cashiers. DIY stores, garden centres, toy shops and electrical goods retailers are expected to be among the first to open when restrictions are lifted (and some have already started a limited reopening). * SO WHAT? * This all sounds good in theory – and although I suspect that there may be a boom initially as everyone rushes out to buy paint, pot plants and gadgets, footfall will go back to being pretty low if what retailers in other countries are saying proves to be true here as well. For those lucky enough to be relatively unscathed financially by the outbreak, I expect there to be huge amounts of bargains to be had.

Qatar itches for bargains and meat substitutes are making inroads…

Qatar sovereign wealth fund seeks health and tech deals (Financial Times, Andrew England) highlights intentions of the country’s sovereign wealth fund as it is among fellow cash-rich Gulf investors sniffing around for bargains. The country’s finance minister said that the $320bn Qatar Investment Authority’s “main focus” would be on building up international investments and buy up targeted assets that have recently become very cheap due to the coronavirus outbreak. The fund has in the past bought trophy assets like Harrods and The Shard in London and it invested heavily in the wake of the financial crisis of 2008-9. * SO WHAT? * If you are a cash-rich investor at the moment – whether you are a hedge fund, a private equity fund or a sovereign wealth fund – you will have the pick of the best businesses. Clearly, the most obviously attractive ones will get the most bids, but there will be a lot of due diligence going on in the background to make sure they won’t be backing duds. Mind you, I think some businesses

have become SO cheap currently that investors almost can’t fail if they have a long enough investment horizon.

Pandemic accelerates shift to meat substitutes (Financial Times, Emiko Terazono and Gregory Meyer) highlights an interesting phenomenon at the moment – sales of plant-based meat substitutes are rising as the closure of meat processing plants and slaughterhouses continues. Interestingly, sales of meat substitutes shot up by 200% in the week ending April 18th versus the same period last year and by 265% over an eight-week period, according to consumer data group Nielsen. This compares rather favourably versus meat sales rising by 30% and 39% over the same time period. * SO WHAT? * OK, so this is from a low base as meat-substitute sales are still a fraction of “real” meat sales, but the momentum from last year appears to be continuing. The industry is benefiting not only from production problems with meat, but also from the fact that plant-based substitutes required less labour, meaning that there are less staff shortages to contend with. Beyond Meat’s share price shot up by over 40% last week on news of meat factory closures and Starbucks deciding to use its products in its Chinese stores! The plant-based revolution continues!

And finally, in other news…

I thought I’d leave you today with the incredibly impressive Massive coronavirus-themed grass graffiti is unveiled in Swiss Alps (Reuters https://tinyurl.com/y9vvkt23). This really is quite something 👍