Thursday 11/04/19

  1. In MACRO NEWS, Brexit gets a Halloween extension and the UK economy grows due to stockpiling
  2. In UK RETAILER NEWS, Tesco and Dunelm shine, Asos profits fall off a cliff, Arcadia gets a lump of Topshop returned and Ted Baker forms a JV in the Far East
  3. In INDIVIDUAL COMPANY NEWS, Indivior causes a Reckitt Benckiser headache, Uber goes for a lower valuation and Canada’s GardaWorld eyes a bid for G4S
  4. In OTHER NEWS, I bring you bad news for hipsters. For more details, read on…



So Brexit gets delayed until Halloween and the UK economy grows on the back of Brexit stockpiling…

In the latest round of the ongoing Brexit saga, EU leaders give UK six months until Brexit (The Times, Oliver Wright, Bruno Waterfield and Francis Elliott) shows that, after over six hours of talks in Brussels, the European Council agreed to an extension to October 31st, subject to a review in June. Germany and over a dozen others were willing to give the UK an extension until the end of the year but France’s Macron argued for a much shorter extension in order to keep the pressure on MPs to ratify the current agreement. * SO WHAT? * This is likely to put pressure on Theresa May to step down before the Conservative Party conference, which is scheduled to take place less than a month away from the new deadline. There are still all sorts of other possibilities and permutations as to what could happen

next (e.g. under the terms of the EU’s current offer, it may still be possible for yet another extension that could take us to March 31st 2020) so we’ll just have to see what unfolds.

In the midst of all this, UK economy grows as manufacturer stockpile before Brexit (The Guardian, Richard Partington) cites the latest figures from the Office for National Statistics which show that the British economy continued to grow in February (by 0.2% versus market consensus estimates of zero) as manufacturers got in a frenzy to stockpile goods before Brexit to make sure supply chains suffered minimal disruption. * SO WHAT? * You can’t stockpile forever as there is finite capacity. Mind you, given what happened last night re Brexit, you would have thought that warehouse operators will be loving all this as they will be able to squeeze even more revenues out of ongoing Brexit fears given how long this is being stretched out. Professional service firms providing advice – such as accountants and lawyers – will also be rubbing their hands with glee at the prospect of prolonged uncertainty and the consultancy fees that this generates.



Tesco and Dunelm show how it’s done, Asos has a ‘mare, Arcadia gets a store return and Ted Baker forms a Far East JV…

Drastic Dave’s Tesco turnaround pays off (The Times, Deirdre Hipwell) shows that Britain’s biggest supermarket said yesterday that every part of its business – even its embattled international division – played a part in boosting the company’s pre-tax profits by a chunky 28.8%, which was way above market expectations. Revenues were up by 11.2% in the third year in a row of growth. * SO WHAT? * It seems like only yesterday (actually it was almost five years ago) that “Drastic” Dave Lewis (known as such because of his drastic actions to turn around company performance) left Unilever to take on the role of chief exec at a dark time for the supermarket. He gushed that “after four years we have met or are about to meet the vast majority of our turnaround goals. I’m very confident we will complete the journey in 2019-20. I’m delighted with the broad-based improvement across the business”. In his time at the helm, he’s pulled out of a number of international markets, sold non-core businesses, cut staff numbers, overhauled the way stores are run and took over Booker, a cash-and-carry group. Sainsbury’s and others need to take note of Tesco’s success, especially given the dire state it was in only a few years ago.

Dunelm beats forecasts as it puts high street rivals in shade (Daily Telegraph, LaToya Harding) also showed that there’s still life in furniture retailing as it announced better-than-expected Q3 results and even raised its profit guidance for the year. The 32% rise in online sales more than compensated for the loss in revenues from Worldstores, Kiddicare and Achica that were all closed

down earlier in the financial year. * SO WHAT? * Great performance in a tricky area of retail that will further highlight the difficulties that department store rivals are facing.

Meanwhile, in the world of fashion retailing, Asos profits dive nearly 90pc as it fails to click with young buyers (Daily Telegraph, Ashley Armstrong) highlights the 87% drop in pre-tax profits due to disruption caused by overhauling some of its warehouses, logistics and tech, acknowledging that it “can do better”. This resulted in fewer items being available, and not as many styling tips and videos to make punters want to buy into the latest trends. On the plus side, the company said that it was confident of a recovery in the second half and left its full year profit guidance unchanged. * SO WHAT? * It sounds like the company is correcting its mistakes and is also addressing its returns policy in order to target “serial returners” who do things like order clothes for social media and then return them. Chief exec Nick Beighton observed that there was a “small minority who treat Asos like a rental service, and it’s certainly not a rental service”.

Philip Green’s Arcadia empire buys back 25% stake in Topshop chain (The Guardian, Sarah Butler) highlights Green’s Arcadia buying back a major slice of its Topshop chain from a US private equity firm that bought it for £350m in 2012. This will probably now prompt a slew of store closures via a company volunatary arrangement (CVA) as well as a host of other measures designed to save the business from collapse.

On a lighter note, Ted Baker forms new joint venture in Far East (Daily Telegraph) highlights plans for the company to form a joint venture with Shanghai LongShang Trading Company to operated its stores in China, Macau and Hong Kong. This will no doubt bolster its efforts in the region. Ted Baker is taking a 50% stake.



Indivior has a ‘mare, Uber gets conservative on valuation and Canada’s GardaWorld eyes G4S…

Indivior indictment casts cloud over Reckitt Benckiser (Financial Times, Sarah Neville, Leila Abboud and Hannah Kuchler) highlights a complete nightmare for London-listed Indivior, which has been accused by the US Department of Justice of illegally elevating prescription sales of its opioid addiction treatment between 2006 and 2015 when it was part of consumer goods company Reckitt Benckiser and called Reckitt Benckiser Pharmaceuticals. This business was spun out of Reckitt Benckiser in 2014 and renamed Indivior. Reckitt Benckiser shares fell by 7% on the news while Indivior’s share price fell by over 70%. * SO WHAT? * A MASSIVE fine could be in the offing and Indivior will obviously try to defend itself. It looks like Indivior would not be able to pay such a huge fine on its own and the fact that it insisted that the actions occurred when it was part of the rather larger Reckitt Benckiser has got investors in the latter panicking. Even if Reckitt manages to avoid being directly implicated, it is possible that it could suffer if its baby formula products were blacklisted from US government food aid programmes due to its involvement in the legal case. I get the feeling that this is going to be a very big deal and drag on for some time.

Elsewhere, in Uber aims for public valuation of as much as $100 billion, below expectations (Wall Street Journal, Maureen Farrell) we see that the ride-hailing company is reining in the toppy valuation ambitions for its forthcoming IPO given the performance of rival Lyft’s share price since it floated. * SO WHAT? * I think this sounds sensible for a company that has more fingers in more pies, both in business terms and geographically, than Lyft. Still, I am surprised that they don’t just plough on regardless and take the investors for all they’re worth – it hasn’t stopped tech companies in the past!

Canadian security firm mulls bid for G4S (The Times, Ben Martin) is a common story doing the rounds this morning as Montreal-based GardaWorld Security confirmed that it was considering a cash bid for all or part of the under-pressure British contractor G4S that would value the latter at over £3bn. The Canadian company has until May 8th to make a firm offer or abandon the whole thing. * SO WHAT? * G4S is way bigger than GardaWorld, but this offer comes at a time when G4S has been considering a break-up following years of controversies. A purchase of the whole business looks like a stretch for the Canadian company, but we’ll hear soon enough what it will do.



And finally, in other news…

This could signal the end of the man-bun-and-beard trend that hipsters have become known for: Men with beards more likely to ‘have smaller testicles than those without’ (The Mirror, Courtney Pochin Presumably this was written by a team of clean-shaven researchers ????