Watson’s Weekly 28-11-2020

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.

• Catering giant Compass said that it is changing its business model to take into account more people working from home (Wednesday) and so it will be shifting its focus to schools, hospitals and care homes (basically, anywhere that stays open during lockdown) and away from office canteens. I think that many businesses will have to take into account changing working patterns, incorporate that into their own business models and adapt accordingly
• So if we’re not going to the office, it follows that we are staying at home more. We are apparently buying more pets (Wednesday) and Pets at Home said that strong demand for pet supplies will mean that they should be able to meet their full year targets
• We’re also exercising at home – so much so that waiting lists for Peloton equipment are getting so bad that customers are cancelling orders (Wednesday) and buying equipment from competitors like Nordic Track, Nautilus and Echelon
• Not going out means that we initially bought fewer lottery tickets, but then Camelot saw a massive upswing in online uptake (Wednesday)
• …and not going out means that we are not commuting, which is why we are approaching the nationalisation of our railways (Monday) as the government has asked Network Rail to put together a 30-year strategy plan – and there’s not much the likes of Arriva, FirstGroup and Go-Ahead can do about it because lockdown has crippled them financially, so they are going to have to do what they are told
• …and no commuting means that we are seeing fewer car accidents (Monday) which is great for car insurers such as Aviva, Direct Line and Churchill etc.
• IN OTHER CORONAVIRUS TRENDS, companies are (or at least thinking about) reshoring production (Monday) as the Coronavirus and Brexit have exposed risks to current supply chains. Meanwhile, in the US, propane demand has shot up (Monday) as people and businesses have been buying patio heaters!

• Global retailers like Abercrombie & Fitch are having problems because of the lack of tourist traffic (Wednesday). In fact, A&F are going to close a number of overseas outlets including London and Paris, but then again they’ve not been doing well for quite some time now. Tiffany is also having difficulties for the same reasons but China sales have shot up by about 70% over the quarter (Wednesday), which is a big help – and will no doubt be music to the ears of its new owner, LVMH!
• Electric goods retailers are doing pretty well. Best Buy has seen strong sales but sounds somewhat cautious over the outlook (Wednesday), saying that current growth rates may be unsustainable. In the UK, AO World had a stellar performance (Wednesday) and is experimenting with a join venture with Tesco via small in-store concessions
• Sainsbury’s announced that it was exiting the financial services business (Monday), closing a chapter that started with some fanfare in the wake of the financial crisis

• The week started off quite positively for AstraZeneca and news about its vaccine candidate (Tuesday) but as the week wore on, there was increasing scepticism surrounding the data demonstrating its efficacy (Thursday)
• Russia, in the meantime, boasted about the superior efficacy of its coronavirus vaccine candidate, Sputnik V (Wednesday)

• India banned 43 more Chinese apps, including AliExpress (Wednesday). This is in addition to the 200-odd it banned in June after India-China relations soured due to Chinese soldiers killing 20 Indian soldiers on the Himalayan border
• France announced it would be introducing a new digital tax on Big Tech (Thursday), which will probably result in retaliatory 25% taxes on £1.3bn worth of French handbags and make-up. FWIW, I think this is a shot over the bows to get Biden to the negotiation tables quicker
• Facebook miscalculated the effectiveness of their ads (Thursday), which will be very annoying for their customers but will also fuel critics who will argue that Facebook is too powerful and has access to too much data. Talking of which, calls are increasing for an overhaul of section 230 of the Communications Decency Act (Friday) – the law that has governed social media and other internet businesses for the last 24 years and gives them broad immunity for user-generated content. Critics say that this has resulted, over the years, in companies being allowed to ignore the spread of false and dangerous information. In another interesting and related development, the UK has announced that there will be a new tech regulator sitting within the CMA whose sole focus will be tech (Friday)
• It sounds like Salesforce might buy Slack (Thursday). I think that this could be a great combination of companies that have great and intuitive software. If this went ahead, Salesforce would get to broaden its product range and Slack would get really useful access to Salesforce’s customer base

• This week was also notable for the big moves in Bitcoin, as it fell sharply going into the end of the week (Friday). All eyes will be on the cryptocurrency to see whether we are going to see a replay of the same time period three years ago! It does, however, appear to be on the way to the mainstream at the moment…
• News came out at the end of the week that retail group Arcadia – whose brands include Topshop, Burton and Wallis – is close to entering into administration. This will put over 13,000 jobs at risk in the group owned by Sir Philip Green. What a fall from grace from the man who bought BHS and tried to take over M&S on two occasions! Arcadia was the UK’s fourth biggest clothing retailer only five years ago – but now look at it!

• Watson’s Yearly updates: watch this space!

My favourite “alternative” story of the week was Dad hilariously dances in daughter’s video – unaware it’s being sent to teacher (The Mirror, Luke Matthews). Nice moves, dad!