Thursday 03/09/20

  1. In CONSUMER/RETAIL NEWS, we take a look at what consumers are and aren’t spending their money on as Macy’s in the US has a bumpy recovery
  2. In CAR NEWS, investors scramble to find the next Tesla, electric cars sales stall in the UK and Ford aims to make more cuts
  3. In TECH NEWS, India bans more Chinese apps and Apple joins others in passing digital tax on
  4. In INDIVIDUAL COMPANY NEWS, Lego triumphs, Juul considers its future and the Gym Group goes on the offensive
  5. AND FINALLY, I bring you the hilarious Uncle Roger…



So we see what consumers are and aren’t spending their money on while Macy’s paints a mixed picture…

*** It’s Thursday today, which means that it’s time for the Zoom call! This is where I do a roundup of the week and then give you the chance to ask me anything! Click HERE to do the call at 5pm TODAY! ***

House prices hit record high after easing of lockdown (The Guardian, Jasper Jolly) shows that UK house prices have made up for their lockdown losses with August experiencing the steepest price rise for 16 years, according to the latest Nationwide building society figures. Nationwide’s chief economist says that “behavioural shifts” (e.g. more working from home and an increasing desire to have a garden) may have boosted activity. * SO WHAT? * Whatevs. The MAIN reason for this boost is Rishi Sunak’s freebie 😂! Although I think that there’s a certain amount of pent-up demand that got caught up in the lockdown that I would class as “real” demand, activity has certainly been boosted by the stamp duty holiday and super-low mortgage rates. I would imagine that the next big event is going to be the end of furlough – if it’s “soft” (phased out gradually and/or industry-specific) the resulting drop-off may not be too bad, but if it’s “hard” (a sudden end to government payments) I would expect housing activity to fall off a cliff. In the meantime, if you have a decent steady job and are ABLE to move, there will be a lot of options open to you.

So although UK consumers may be spending on houses, they are not spending money flying away on holidays or business trips – Heathrow to cut workforce by up to 25pc after £1bn loss (Daily Telegraph, Oliver Gill) and United plans to cut more than 16,000 staff (Wall Street Journal, Doug Cameron) will attest to that – or even on travelling to

work, as per Rail passengers down 3m on last year despite return to office plea (The Guardian, Gwyn Topham).

Department for Transport figures published last week showed that train journeys on Monday 24th August were just 38% of 2019 levels. Consumers also appear not to be spending on the high street, which is resulting in Empty shops on UK high streets at highest level in six years (The Guardian, Sarah Butler) although Eat Out to Help Out scheme serves up 30% spending boost (The Times, Philip Aldrick) cites the latest Barclaycard figures which show that spending on dining out jumped by over 30% last month. Interestingly, there are signs that normality is starting to return as dining out from Thursday to Sunday also rose by 33%. Given that Barclaycard processes almost 40% of all UK transactions, this is an indicator to be taken seriously. Still, the spectre of no more furlough in the near future could put the dampeners on too much optimism.

Meanwhile, across the Pond, Macy’s posts $431million loss as stores continue recovery (Wall Street Journal, Charity L.Scott) highlights a gaping first quarter loss for the struggling department store chain despite sales actually turning a corner. The company’s interim CFO said that the results were stronger than forecasted as a result of better digital sales along with a faster-than-expected recovery of stores and luxury goods sales. However, Macy’s: thanks, but no thanks (Financial Times, Lex) strikes a more sceptical tone, pointing to the problems Macy’s was facing before coronavirus hit and to the fact that fellow department stores JC Penney, Neiman Marcus, Stage Stores and Lord & Taylor have all filed for bankruptcy during the pandemic. * SO WHAT? * Cutting jobs, closing stores and raising $1.3bn in a bond offering are all positive moves, but could ultimately prove to be a case of just moving the deck chairs on the Titanic, especially if the upcoming holiday season proves to be a dud. I would suggest that the same is more or less true for many analogue department stores operating in an increasingly digital world.



Investors try to find the next Tesla, UK sales of electric cars weaken and Ford makes more cuts…

Given Tesla’s rip-roaring success, it’s perhaps unsurprising to see Investors pour cash into Chinese start-ups in hunt for next Tesla (Financial Times, Christian Shepherd and Peter Campbell) as they pile into companies like Xpeng Motors (up 40% on its New York trading debut last Friday!) and Li Auto (up almost 70% since July!) are getting the benefit – and even Nio, which had been struggling, is now rising from the ashes. Optimists say that they will benefit from a strengthening Chinese EV market but pessimists say that the boom may be too early as there are still issues with China’s charging infrastructure and an increasingly crowded market comprising of both domestic and international players. When you see stories like Tesla’s biggest independent investor cuts stake in electric carmaker (Financial Times, Chris Flood) talking about Scottish fund manager Baillie Gifford selling off a bit of its stake in the company, generating a $17bn profit from its investment in the process, you can understand why investors are chasing The Next Big Thing!

Mind you, Appetite for electric cars in UK wanes as pandemic squeezes finances (Financial Times, Peter Campbell) cites a survey by Auto Trader which shows that the number of respondents expressing an interest in buying an EV has dropped sharply since the beginning of the year. In January, 16% said that they were planning on buying a battery-only car but in August only 4% said they were thinking of doing so. * SO WHAT? * Although buying electric is generally expensive up front, this is normally mitigated by savings in fuel and running costs during the course of ownership. In this case, though, respondents cited changing personal finances as the main factor behind this change of heart and an increasing unwillingness to splash out a large lump sum in uncertain economic circumstances. It seems that we are not going electric just yet…

Then in Ford looks to trim 1,400 salaried employees in US through buyouts (Wall Street Journal, Micah Maidenberg) we see that Ford is planning on cutting more employees by offering buyouts to employees who are eligible to retire as of December 31st. This comes in addition to the 7,000 already axed last year globally. The tough times for carmakers continue…



India takes another swipe at Chinese apps and Apple joins Google in passing on digital taxes…

Following on from recent moves to ban Chinese apps in India following skirmishes between Indian and Chinese troops on the Himalayan border, it seems that things are getting increasingly feisty in India bans 118 Chinese apps as Himalayan border tensions surge (Financial Times, Amy Kazmin and Christian Shepherd) as the country goes even further, banning Tencent’s massively popular PUBG Mobile game. Apps owned by the likes of Tencent, Alibaba and Baidu were accused of “stealing and surreptitiously transmitting” Indian user data to China. * SO WHAT? * Tensions continue to rise between the two nuclear-armed

countries and India has imposed other anti-Chinese measures such as placing new restrictions on Chinese investment and ordering telecoms operators to phased out Chinese telecoms equipment from their networks. Although these things can potentially be reversed, ultimately it may make growth harder for Chinese companies in India. Given the market potential there, this really could prove to be a spanner in the works for overseas growth for Chinese companies – but this could, in turn open the door for other overseas operators – such as Google and Facebook – to make decent inroads.

Following on from Google’s announcement that it would pass on any new digital taxes to advertisers, Apple joins other tech titans in passing digital levy buck (Daily Telegraph, James Titcomb) shows that Apple will pass any increased costs onto app developers. Because they just can…



Lego triumphs, Juul considers and the Gym Group gets active…

In other news doing the rounds today, Lego builds up online sales as profits increase by 11pc (Daily Telegraph, Simon Foy) highlights a bumper first half from the toy manufacturer. Sales increased by over 10% in the major markets of Europe, Asia Pacific, the Americas and China. They did particularly well from digital sales under lockdown.

Elsewhere, Juul to cut more jobs, explore exiting Europe and Asia (Wall Street Journal, Jennifer Maloney) shows that things continue to change drastically for the e-cigarette supremo Juul as it plans another big round of layoffs and market retreats (it already cut about a third of its workers at the start of this year). It is considering pulling out of up to 11 countries and sticking with the US, Canada and UK. The carnage continues!

On a healthier note, Gym Group targets empty retail sites (Financial Times, Alice Hancock) shows that the budget gym operator is looking to buy up sites abandoned by distressed retailers as the number of new members increases and its finance re-jigging starts to kick in.



…in other news…

You may be aware that I took last week off 😱😱😱, but during that time, you will be glad to know that I spent the odd minute here and there on YouTube. Now I’m probably a bit late to this party, but I thought I would introduce you to a hilarious character called “Uncle Roger” who clearly likes egg fried rice 👍. Although he is a comedy character, I wholeheartedly agree with his assessment of Jamie Oliver’s recipe HERE. This guy (played by comedian Nigel Ng) is a genius 😂!

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Some of today’s market, commodity & currency moves (as at hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!

FTSE 100 *Dow Jones *S&P 500 *Nasdaq*DAX *CAC-40 *Nikkei **Shanghai **
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

(markets with an * are at yesterday’s close, ** are at today’s close)