Thursday 01/11/18

1. In UK RETAIL NEWS, Next delivers but Mothercare eyes job cuts
2. In CAR-RELATED NEWS, JLR considers drastic action and Panasonic gets hit by increased battery demand from Tesla
3. In INDIVIDUAL COMPANY NEWS, Samsung unveils record profits, GSK raises profit guidance and Coca-Cola holds back on marijuana beverages
4. In OTHER NEWS, I bring you two optical illusions – one of which you just can’t unsee. For more details, read on…

So Next sees a contrast between online and offline and Mothercare’s troubles continue…

Wolfson ponders next step as high street fails (The Times, Deirdre Hipwell) illustrates just how important online shopping is to Next as it unveiled quarterly results yesterday that showed a stark contrast between online and offline channels. Sales at its physical shops continued to fall by 8% in the quarter and 6.3% over the year whereas its online directory business showed sales up by 12.7% in the quarter and 14.8% on the year. Chief exec Lord Wolfson observed that “what’s changing is the way people are ordering, are buying clothes, and we’ve just got to be adaptive enough to make sure that we continue to be front of mind when people are buying clothes”. * SO WHAT? * Next is seen to be a bellwether of the UK high street, so its fortunes are closely watched. The contrast in fortunes between online and offline just provides further evidence of the continued shift in customer behaviour. I really think that it’s important for the company not to neglect its stores, though, as decent formats and an exciting offering should help to keep Next uppermost in customers’ minds when clothes shopping on either channel. This is also something that Next has that online retailers, such as Amazon and Asos for instance, don’t have and it can serve to be their distinctive feature.

Mothercare cuts jobs in head office overhaul (The Times, Deirdre Hipwell) heralds bad news for Mothercare

employees as 200 jobs are due to be cut at head office as the troubled retailer continues to cut costs only months after being rescued by creditors. There are currently 500 staff employed at Mothercare HQ. Mothercare is one of Britain’s biggest maternity and children’s retailers – it still has a 40% market share in pushchairs – but it has been suffering in recent years with expensive store leases, rising costs, weaker footfall, an unpredictable overseas business and a sub-par online business. * SO WHAT? * Maybe I’m wrong in thinking this but I tend to believe that cutting jobs at head office is often symbolic more than anything. In taking such action, the company is trying to convey the message that it is serious about shaking things up – so much so that it is willing to cut from the heart of the business. In Mothercare’s case, I think that this is the equivalent of rearranging the deck chairs on the Titanic and that they need to do much more to avoid that iceberg. It has a great name that people know and if it can rejig its offering to take advantage of that I am sure that it can do well because, to my mind, the main shoppers are parents who are generally knackered and looking for an easy life. If they know that they can go to Mothercare for all their needs and have a positive experience, then I think they will continue to come back for more – and for many years. I mean, there aren’t exactly loads of other direct competitors are there? Jojo Maman Bebe and perhaps kids’ sections of other brands (e.g. GapKids) are around for clothing, but I can’t think of anyone else that has the range that Mothercare has. Yes, you can get bottles and bibs etc. online, but if you can tempt the punters in when they are wandering around the high street in a state of exhaustion they will buy IMHO!

In car-related news, JLR takes further action and increased demand for Tesla’s Model 3 dents Panasonic…

In More Jaguar jobs at risk in £2.5bn cost-cutting drive (The Guardian, Jasper Jolly) we see that the 40,000 employees at Jaguar Land Rover face further threats of job losses as part of a £2.5bn plan to cut costs and free up cash that was announced yesterday. The company has also imposed a freeze on all recruitment and non-essential travel as it continues to face up to falling demand for its cars. This comes after it announced 1,000 job losses at its Solihull plant in April and only shortly after the Castle Bromwich plant in the West Midlands went to a three-day week as the company continues to struggle with Brexit uncertainty, the anti-diesel backlash and a weaker Chinese market. * SO WHAT? * It never rains but it pours for poor old JLR as it seems to be a victim of forces beyond its control. In the meantime, it’s time to hunker down and 

weather the storm – which isn’t going to be of much comfort to JLR’s employees. For things to turn around at JLR, the needs to be more clarity on Brexit and the government’s stance on diesel (I can’t see that happening any time soon) and/or the whole US/China/world trade tariff thing being ironed out (which I think is more likely to happen in a reasonable timeframe). Until then, JLR will continue to get a hiding IMHO.

Tesla’s Model 3 rush costs battery maker Panasonic (Wall Street Journal, Sean McLain) highlights losses for Panasonic, the company that makes the batteries for Tesla’s Model 3, because of the sudden increase in demand for the electric sedan. Panasonic said that it had to up production more quickly than anticipated, necessitating the hiring of more workers at the Nevada “Gigafactory” that it jointly runs with Tesla. This pushed up fixed costs and edged the business into the red. * SO WHAT? * This sounds like a short term problem to me – and the company itself believes that it will benefit from increased Tesla sales in the second half of the financial year. Tesla is Panasonic’s main battery customer, but obviously it plans to sell more to other manufacturers to ensure it doesn’t put all its eggs in one basket.

Samsung announces record profits, GSK ups its profit guidance and Coca-Cola mellows on its marijuana beverages…

Samsung warns on outlook as profit hits another record (Financial Times, Bryan Harris) shows a stellar performance on the one hand as the company benefitted from strong global demand and high prices for semiconductors which boosted its operating profits by 20% on the year for Q3, but then on the other hand warned of an upcoming slowdown. The downbeat outlook is due to an expected decline in memory chip prices, China’s ramping up of capacity and lower seasonal demand – and given that 80% of the company’s profits come from its memory chips, you can see why the company is painting a pessimistic picture. * SO WHAT? * Prices for memory chips have boomed over the last two years, powered by burgeoning demand for high-powered computer servers as well as gaming and cryptocurrency mining devices but state-supported Chinese competitors want a piece of the action, meaning that supply is now increasing. The company is also facing potential fallout from the US-China trade war and Shinhan Investment analyst So Hyun-chul observed that “China’s economy is faring worse than expected now and Korean companies are largely dependent on the Chinese market. The issue is now whether Samsung is likely to have a hard or a soft landing”.

GSK raises profit guidance as its shingles vaccine outperforms (Daily Telegraph, Julia Bradshaw) highlights the good news for Britain’s biggest

drug maker as it raised its full-year profit guidance by 8-10% on the back of strong sales of its Shingrix shingles vaccine in the US which proved to be more popular than expected with the over-55s. CEO Emma Walmsley continues her efforts to streamline the company but reiterated the company’s commitment to the UK market, which is responsible for 25% of its R&D and manufacturing. GSK’s HIV business also put in a good performance and there is further potential for upside as it submitted a new HIV drug that combines two treatments to US and UK regulators.

Coca-Cola to take it slow on Marijuana (Wall Street Journal, Jennifer Maloney) announced that it won’t use cannabis-derivatives in the US or elsewhere until they are legal and generally accepted as being safe for daily consumption. * SO WHAT? * There’s been a lot of excitement about Coca-Cola getting involved in this area as it’s a blimmin big beverages company looking to broaden its drinks portfolio into “wellness drinks”. Given that companies like Constellation Brands and Molson Coors have announced development plans for cannabis-infused beverages in Canada and Heineken’s Lagunitas brand launched a pot-infused hop-flavoured sparkling water in California (where else?!?) you can see why everyone was getting hot and bothered. Chief exec James Quincey poured cold water on the notion that Coke is on the verge of something by saying “There’s no way we’re going to put something in unless there’s a high degree of consumer acceptance. We like a broad swath of consensus science and public opinion behind things before we’re going to put them in our drinks”.

And finally, in other news…

I thought I’d bring you the latest is-it-or-isn’t-it-optical illusion in People are baffled over latest optical illusion – but is it a cat or a crow? (The Mirror, Robyn Darbyshire https://tinyurl.com/y9n2q9vn). However, once you see the next thing, you won’t be able to unsee it: Woman’s flesh-coloured leggings cause embarrassing optical illusion – and it looks indecent (The Mirror, Nicola Oakley https://tinyurl.com/ydbhq7c5). I’ll warn you now – make sure you’re not drinking something whilst reading this as you might end up spitting it out. Just sayin’.