Thursday 13/12/18

  1. In MACROECONOMIC NEWS, we see what’s next for the PM, Italy sounds like it’s trying to comply on its budget and markets turn up on hopes that US-China negotiations are nearing a happy place
  2. In RETAIL NEWS, Zara owner feels a slowdown, Ikea pops up in town, Carphone Dixons has a shocker and things hot up at Superdry on continued woes
  3. In INDIVIDUAL COMPANY NEWS, Revolut gets a European banking licence
  4. In OTHER NEWS, I bring you a man who invents useless – yet entertaining – things. For more details, read on…



So we look at what’s next for May, Italy makes conciliatory noises and markets rise on US-China trade hopes…

Well after all the drama last night, What next for Brexit after Theresa May’s victory in confidence vote? (Financial Times, Alex Barker and Rochelle Toplensky) takes an interesting look at imminent potential scenarios. As the 27 remaining EU states hold an emergency summit on Brexit today, they may be considering the following: that the PM’s victory could hasten the Brexit process both in Brussels and Westminster because it could encourage both sides to move faster – EU leaders could offer concessions on particularly sticky items such as the Northern Ireland backstop which could help May to schedule a House of Commons vote on Brexit before Christmas (it is currently scheduled to be held before January); that she might have to keep stalling on a Brexit vote, which could make things trickier for the Europeans in terms of the timing of any concessions and there are concerns about whether she will be able to deliver on a Brexit deal anyway even if she does win a “meaningful vote” on the package. * SO WHAT? * At the end of the day, German chancellor Angela Merkel and European Commission President Jean-Claude Juncker have stated very publicly that there is absolutely no wiggle room to amend the treaty, but diplomats handling the process appear to be less categorical although they admit the margin for negotiation is very small and that more fundamental changes are highly unlikely. Although Theresa May has bought herself some time, there seems to me a high likelihood that we could get to January with a very slightly amended deal and she will STILL lose the vote or aggravate everyone by continuing to kick the can down the 

road by moving the vote. Surely this makes a second referendum more likely?

Italy promises budget cuts to avoid EU sanctions (Financial Times, Miles Johnson, David Keohane and Federica Cocco) shows that those rebellious Italians appear to be reluctantly falling back into line as PM Giuseppe Conte promised a significant cut to its budget deficit target for 2019 (from 2.4% to 2.04%) in an effort to avoid EU sanctions for breaching budget rules. Conte seemed to climb down from his previously defiant tone and tarted up his furious back-pedalling thus: “Our proposal allows us to say that we do not betray the trust of Italians and that we will respect the commitments we have made with the measures that have the greatest impact”. * SO WHAT? * Time will tell if these are just empty promises. After all, if Conte could find the wherewithal to comply with the EU down the back of the sofa, why didn’t he do this in the first place??

In Markets rally as investors hope US-China trade battle is easing (The Guardian, Richard Partington) we see that financial markets strengthened on early signs of progress in the US-China trade negotiations. This thawing was inferred by China prepares policy to increase access for foreign companies (Wall Street Journal, Lingling Wei and Bob Davis) which shows that the country’s top planning agency is drafting a replacement for the “Made In China 2025” that will play down China’s efforts to dominate manufacturing and allow more access for foreign companies – as well as Trump offering the tantalising carrot of making the whole Huawei CFO arrest thing go away. Saying that “If I think it’s good for the country, if I think it’s good for what will be certainly the largest trade deal ever made – which is a very important thing – what’s good for national security, I would certainly intervene if I thought it was necessary” would seem to imply willing, if nothing else.



Zara has a slowdown, Ikea goes urban, Carphone Dixon has a profit warning and Superdry intrigue increases…

Zara owner feels the heat after slowdown (The Times, Tabby Kinder) shows that even super-retailer Inditex (the owner of Zara) has off days as it blamed unseasonably warm weather in the autumn for a slowdown in sales that was greater than expected. Euro fluctuation was also a factor as it generates over half of its sales in other currencies with shops in China, Russia and India. It’s also particularly sensitive to currency movements because suppliers worldwide have to get their clothes to shops via distribution centres in Spain which means that a big part of the company’s costs are in Euros. * SO WHAT? * I think it would be fair to say that all apparel retailers are feeling the same pain to a greater or lesser extent. If Inditex is feeling the pinch, I suspect that many others will be getting it far worse.

Following on from Ikea’s recent declaration of a major change in its business model, Ikea takes next step into town (The Times, Emma Yeomans) talks about another “planning studio” format in Bromley to follow the October opening of its Tottenham Court Road outlet. The idea is to increase face-to-face contact with customers and provide better and more personalised service than is possible in its out-of-town outlets. * SO WHAT? * This is just Ikea showing that it is following through on its business overhaul and is a great example of how retailers can help themselves by improving the customer experience.

Dixons Carphone posts massive losses and hits all-time low (Daily Telegraph, Ashley Armstrong) shows the damage being caused to the group by its struggling mobile phone business as customers hold on to their phones for longer and opt for SIM-only contracts. The shares fell by 6% on the profit warning, taking the price down to its worst level since Carphone Warehouse and Dixons merged over four years ago. * SO WHAT? * I must say that I am myself guilty of going to an electrical retailer to do a physical

inspection of gadgetry before inevitably buying it cheaper online – and I suspect that I’m not the only one. I don’t think that the retailer helps itself either by staffing its stores with largely uninspirational sales people and so its announcement yesterday that it would give its 30,000 staff at least £1,000 in shares each to motivate them and give them the feeling of being part of the business is at least a move in the right direction. At the end of the day, we as consumers will spend more when we get paid more AND, crucially, when we are feeling a bit more confident of our jobs and economic outlook. Yes, the job market is tight at the moment – but that could all change if things fall apart due to Brexit.

Superdry co-founder: I’m the only one who can rescue the brand (The Guardian, Zoe Wood and Jasper Jolly) highlights some fighting talk from co-founder Julian Dunkerton who is obviously itching to get back in the driver seat of Superdry. He clearly smells blood after the company had its second profit warning in two months and called on shareholders to support his comeback when he said “This has to be the moment where we say enough is enough and it’s time for a change. We are now at the position where we have to act. The numbers are there and everyone can see I was right”. * SO WHAT? * The share price has fallen by over 80% this year (they fell by 38% yesterday alone!) and current CEO Euan Sutherland’s protestations of poor weather and heavy discounting by rivals is likely to fall on deaf ears. Things are getting so bad that James Holder – the guy who came up with the brand’s Japanese-style logos and still owns a 10% stake in the company – also said he was willing to get involved again. So far, Dunkerton’s efforts have been batted away as the chairman Peter Bamford bluntly pointed out that “Julian signed off on most of the products that are available today in his role as product and brand director. It was his departure in March of this year that has allowed the current innovation programme” (which includes slimming down its product range and moving into children’s wear). It seems to me that momentum is gaining and the current management team will have to do something monumental in order to stop Dunkerton from steamrollering them. Given what’s happening to the share price I don’t think current management has a leg to stand on.



Banking upstart Revolut gets a European licence…

Revolut granted licence to operate in Europe next year (Daily Telegraph, Natasha Bernal) heralds an important development for the free-to-use digital payment company as it has just been given a licence to operate in Europe from 2019. The challenger bank also unveiled plans to

offer a range of current accounts, consumer lending and commission-free share trading in Continental Europe. Although founder and chief exec Nik Storonsky sought an additional full banking licence in Lithuania earlier this year, he maintains that there are no plans for Revolut to quit London, saying that these additional applications were “just to be on the safe side”. The company has plans to expand into the US, Canada, Singapore, Hong Kong and Australia – and this is likely to happen in early 2019. This is one VERY exciting bank IMHO.



And finally, in other news…

I like innovation. Don’t you? Well how about this: How a welder with a useless invention – a meat cleaver cellphone cover – became an accidental viral video star (Los Angeles Times, Robyn Dixon Nice.