Thursday 14/02/19

1. In MACROECONOMIC NEWS, Xi joins the trade talks, China exports surge and UK inflation falls
2. In DRINKING AND DRIVING NEWS, Heineken profits, driverless players jockey for position and an electric car startup gets an Amazon and GM boost
3. In RETAIL NEWS, Ikea looks at trying a new sales platform, Dunelm defies gloom and New Look turns a corner
4. In OTHER NEWS, I bring you Tinder for cows and some cat foot socks. For more details, read on…

So Xi’s involvement pumps up the optimism, China exports surprise on the upside and UK inflation slows further…

China raises hopes of US deal as Xi joins talks (The Times, James Dean) highlights the unexpected presence of President Xi at the US-China trade talks in Beijing as US Treasury Secretary Steven Mnuchin and US trade representative Robert Lighthizer come to the conclusion of the latest round of trade talks following the impasse that has run since last summer. * SO WHAT? * This sounds like a positive development – and markets were cheered by the news first reported by The South China Morning Post – but it ain’t over till it’s over and the real talking has to be between Xi and Trump. At least it looks more likely that they could ACTUALLY meet.

China’s 9% surge in exports surprises economists (Wall Street Journal, Liyan Qi and Grace Zhu) cites the latest data from the General Administration of Customs which

shows that exports rose by a chunky 9.1% in January versus January 2018. Some say this was due to exporters banging out orders before February’s Lunar New Year holiday and before the March 1st deadline for the US-China trade war ceasefire. This was an unexpected fillip as it followed a 4.4% decline in December. On the other hand, imports fell for the second month in a row – although it wasn’t by as much as consensus expectations.

Fall in energy prices drags UK inflation to two-year low (The Guardian, Phillip Inman and Richard Partington) shows that inflation fell to 1.8% last month after the biggest monthly drop in gas prices since records began in 1988. Between December 2018 and January 2019, consumer gas prices fell by 8.5% – the sharpest fall for thirty years. * SO WHAT? * This latest fall in inflation brings the level below the Bank of England’s 2% target after peaking at a five-year high of 3.1% in November 2017. Stephen Clarke, senior economic analyst at the Resolution Foundation thinktank, said that “This will provide a welcome boost to people’s spending power and means that next month we’re likely to see real wage growth of around 1.5%, the fastest since mid-2016”. Great for the moment, but no-one knows what Brexit is going to bring!

Heineken raises a glass, self-driving car makers continue the race for supremacy and one electric car startup gets a major boost…

Heineken profits refresh the parts other brands just cannot reach (Daily Telegraph, Oliver Gill) highlights the best performance of its flagship beer in over ten years, with volumes increasing by 7.7%, which helped the company to beat expectations. The world’s #2 brewer, which owns brands such as Amstel, Tiger, Sol and Strongbow cider, employs over 80,000 staff globally and owns 165 breweries in 70 countries and is second only to Budweiser owner AB InBev in terms of size. Sales last year were boosted by the hot summer in Europe last year (remember that?!) and the footy world cup. Europe was very strong, but the US and Asia Pacific regions weren’t so good. Non-alcoholic beer: a sober assessment (Financial Times, Lex) looks at the increasing success of non-alcoholic beers as brewing technology over the years has improved to the extent that they are actually palatable – some UBS research found that almost two-fifths of people trying low or no-alcohol beers said that they drank non-alcoholic because they liked the taste. It would seem that there is a decent amount of potential in this market as in Spain they account for 12% of beer sales! * SO WHAT? * It’s great to hear Heineken doing well – but it’s important that it continues to change along with the market. All brewers are looking to broaden their product portfolios and investment in fruit juice, energy drinks and (local laws permitting) cannabis-infused sparkling water is a testament to that. Given that European alcohol consumption has fallen by 20% in the 11 years to 2016, brewers clearly need to adapt their respective offerings.

Leading self-driving car start-ups accelerate away from the pack (Financial Times, Tim Bradshaw) gives us a

snapshot of where we are in the driverless car stakes after a period of frenzied investment. In terms of start-ups, Nuro, which is developing autonomous delivery vehicles, raised $940m this week from SoftBank’s Vision Fund (one of the biggest “Series B” funding rounds ever) only one week after rival Aurora raised $530m from investors including Amazon and Sequoia Capital and Zoox (which is designing sensors, autonomous systems and a new type of vehicle) raised $500m in funding last year. So far, so impressive. However, they are dwarfed by the likes of Alphabet’s Waymo (which is generally seen to be the most advanced in this space and valued at an enormous $175bn by analysts at Morgan Stanley) and General Motor’s Cruise. * SO WHAT? * You should definitely read the whole of this article if you are at all interested in driverless cars, but I guess that the key message here is that the world of autonomous driving has some noticable behemoths at the forefront with a pack of well-financed start-ups behind them followed by a huge number of smaller companies. All of them are trying to iron out existing problems with technology and execution, but I think the reality is that this area is going to continue to be a massive money pit that many smaller companies won’t be able to survive. The possibilities for M&A activity are almost endless if investors can avoid the landmines…

Talking of investment, Electric car maker plans to power up (The Times, James Dean) heralds some good news for Rivian, a ten-year-old company based near Detroit that is developing a platform for pick-up trucks and SUVs that could be used by other carmakers, as Amazon and General Motors are talking about taking minority stakes in the company that would value it at the equivalent of $2bn. * SO WHAT? * Interestingly, none of the big carmakers are in advanced stages of developing an electric pick-up or SUV! Given the continued popularity of SUVs, it would make sense to make electrified ones available – and if you could buy a platform off the shelf from Rivian, it would save a massive amount of development costs and mean that you could bring an SUV to market much more quickly than if you develop it on your own.

Ikea looks at trying yet another new thing, Denelm banishes gloom and New Look turns a corner…

Ikea looks to launch sales platform that would include rival products (Financial Times, Richard Milne) shows that Ikea is still at it – innovating like crazy – and is currently looking into launching an online sales platform offering not just its own furniture – but also product from rivals such as Alibaba or Amazon. Inter Ikea’s Torbjorn Loof highlighted the example of the success of Zalando, which has become Europe’s biggest online fashion retailer by selling multiple brands, none of whom own the German website. He said that “We are always exploring. You could say within the digital arena we’re exploring the third-party platform, Ikea engaging on other platforms, the platform business in the industry as a whole, how can we make our own ikea.com much stronger and better”. * SO WHAT? * Yes, he’s talking a load of management gobbledygook but at the end of it all, it’s really good to see a big retailer taking the bull by the horns and show a willingness to embrace real change and search all potential avenues for growth. Loof has got time to experiment while the traditional business trundles on – but he’ll have to come up with some proper plans and

concepts in the not-too-distant future otherwise everyone will think he’s just full of it. I do think, however, that some of the company’s innovations could work really well – city centre stores and furniture rental being particular favourites of mine – but the magic will all be in the execution. I think once the company puts together a proper concept, it has the financial firepower to make it happen.

Meanwhile, Dunelm defies gloom on the high street as sales rise 6.9% (Daily Telegraph, Charlie Taylor-Kroll) highlights the success of online sales for Dunelm which helped to drive pre-tax profits up by 17% at the soft furnishings retailer. The company had a decent enough winter but remains cautious over Brexit and said that it was worried about port disruption and that it was stockpiling goods in the run-up to our European departure.

New Look back in shape as its shift from millennials pays off (Daily Telegraph, Ashley Armstrong) heralds some good news for the troubled fashion chain as it returned to profit and staged a recovery in sales following a difficult period where it was forced to make a lot of store closures and refinance. * SO WHAT? * It seems that the company’s shift in customer focus away from the millennial and towards 30-year-old female shoppers is working for now as it had lost its way somewhat in the last few years. This is a highly competitive area, but hopefully it will continue this positive momentum.

And finally, in other news…

Given that it’s Valentine’s Day today, I thought I’d leave you with ‘Tinder for cows’ matches livestock in the mood for love (Reuters, Matthew Stock https://tinyurl.com/yxgaetdf). I hear that it is a bit of a meat market, though – BOOM! Sorry – I couldn’t help it ????.

AND FINALLY, how about this as a gift idea for the cat-lover in your life: These “cat foot” socks from Japan are so realistic they look terrifying on human feet (SoraNews24, Dale Roll https://tinyurl.com/y2oeza3q). Weird…