Watson’s Weekly 25-01-2020

This is an amalgamation of the “best bits” of the daily weekday newsletter/blog woven together to form a concise and coherent view on the things that matter in the commercial and economic news of the week. 

THE DAY IN BRACKETS REFERS TO THE EDITION WHERE THE STORY APPEARED IN WATSON’S DAILY. Clicking on the day will take you to the appropriate edition of Watson’s Daily.

• Sainsbury’s announced big management job cuts (Wednesday), which included that of chief exec Mike Coupe (Thursday) who was clearly the fall guy for the failed merger with Asda last year. Morrisons followed suit with more job cuts (Friday) while Aldi became the best payer of all the supermarkets (Wednesday)
• In fashion retailing, it turns out that Ted Baker’s accounting error is much bigger than initially thought (Thursday) but, on a brighter note, Asos had a decent Christmas (Friday), putting a tricky year that included two profit warnings behind it
• Elsewhere on the UK high street, Hotel Chocolat had a good Christmas (Friday), but warned that overseas expansion would cost more than expected

• On the commercial real estate front, and particularly in retail property, it turns out that US retail landlords are suffering like their UK counterparts (Tuesday) because high profile retailer failures are forcing them to make a difficult choice between rent reductions (which force down property values) and leaving spaces vacant (to preserve property values, at least for the short term). Sound familiar?? British retail property landlord Intu announced it was in talks to raise money from investors (Tuesday) but the £1bn figure being bandied around sounds rather low when you consider that it has £5bn in debt
• On the residential property side of things, Rightmove says that house prices have been going up since the UK general election (Monday), something that seems to be confirmed by the latest figures from estate agent Knight Frank (Tuesday) which show that the number of new buyers registered with it hit its highest level for mid-January for over 15 years!

• Daimler announced its announced its third profit warning in only nine months (Thursday), with profits almost 50% down on last year. Although Daimler, BMW and VW are still seeing rising sales, they are making less in terms of profit and losing market share following a string of legal scandals, weaker global sales generally and the increased costs involved in developing EVs – plus, of course, increased competition in the “luxury” segment of EVs from the likes of Tesla etc.
• Tesla’s valuation breached the $100bn mark (Thursday) making it the world’s second most valuable carmaker (Toyota is #1). Breaching this barrier also triggers a potential $346m bonus for the founder if the company’s valuation can stay above $100bn on average for the next six months!

• The Marston’s pub and restaurant chain became the first in its industry to install electric car chargers across its entire estate (Monday). Although I like the idea in the short term because of the lack of infrastructure, I think that there will be limited benefit longer term as EV batteries become more efficient in terms of faster charging times and charge retention
• BAE Systems bought the Military Global Positioning Systems business from United Technologies for $1.93bn (Tuesday) in its biggest acquisition for over ten years. It added that it was also going to buy Raytheon’s Airborne Tactical Radios business for $275m. It looks like United and Raytheon made these disposals in anticipation of their own merger that they announced last year
• Fevertree shocked everyone with a profit warning (Tuesday) after a poor Christmas. I wonder whether we have reached “peak gin”. If so, the company will have to rely even more on overseas expansion for future growth
• Just Eat and Takeaway.com got a nasty surprise (Friday) as the UK’s Competition and Markets Authority decided right at the last minute to investigate their proposed £10bn merger
• The coronavirus outbreak spooked markets (Friday) but things are getting worse as time goes on with more deaths being reported as it continues to spread around the US, Europe and Asia. China has now shut down 10 cities around Wuhan and put major restrictions on transportation. Researchers at the University of Queensland in Australia think they can have a vaccine in six months. It is one of three teams being funded by the Coalition for Epidemic Preparedness Innovations, which is a global non-profit that develops vaccines against new infectious diseases. The two other teams are Inovio Pharmaceuticals (which is listed on NASDAQ) and Moderna

• In the “Cars” section of “Themes for 2020”: Subaru whinged about poor EV sales in America, with the company’s chief exec complaining that “the only EVs that are selling well are from Tesla”. It seems that early adopters are also very patriotic! The US accounts for 2/3 of its global sales, so it’s obviously a pain for the company.
• In the “Country-by-country” section, Russian president Putin approved a cabinet reshuffle by his new PM Mikhail Mishustin who is basically bringing his mates in as deputies. A slew of “national projects” is expected to be announced to spark life back into the economy. Italy is facing more potential turmoil as the anti-immigration Matteo Salvini (leader of the right-wing League party) continues to try to destabilise the current coalition government going into the regional elections. It looks like he’s trying to turn this vote into a referendum on the coalition. This is his latest attempt at rocking the boat as Salvini tried to call national elections in summer 2019 only to be thwarted by the unlikely alliance between his “ex” coaltion partner Five Star and the Democratic Party (PD). Luigi Di Maio, leader of Five Star stepped down following in-fighting within his party who don’t like being in a coalition with the PD. Vietnam‘s #1 telecoms company, Viettel, announced 5G rollout from June this year. Meanwhile, state-owned South African Airways has started to suspend flights as there was a delay in a vital government bailout

This week’s “banter” section is very animal-focused! My favourite stories this week were Bunny in a bow tie is living her best life as she flies first class with owner (The Mirror, Courtney Pochin https://tinyurl.com/rkkcgsj) and Adorable ‘Disney’ dog has people questioning if she’s real – because of her eyes (The Mirror, Courtney Pochin, https://tinyurl.com/qu9pg22). Ahhhhhhh!