Thursday 17/09/20

1. In RETAIL NEWS, Inditex returns to profit and The Hut Group has a smokin’ IPO
2. In FINANCIALS NEWS, the FCA targets Klarna while Handelsbanken shuts a ton of branches
3. In TECH NEWS, Beijing expresses concerns over the Arm deal, Snowflake’s share price goes bananas and Sony unveils two consoles
4. In INDIVIDUAL COMPANY NEWS, Kodak’s share price recovers, Zwift gets new backers and is the 20-second Covid test company real??
5. AND FINALLY, I bring you a high-flying restaurant…

So Inditex gets back on track and The Hut Group has a successful debut…

*** TODAY IS THURSDAY, WHICH MEANS THAT IT’S ZOOM CALL DAY! This is where I talk over Zoom about the week’s main business and financial markets news and open it up to questions from YOU! You are welcome to ask me whatever you want to. For FREE subscribers, the call will start at 5pm and finish at 5.30pm (the link to join this call is HERE). For FULL/PAYING subscribers, the call will start at 5.30pm and finish at 6.30pm and will cover the week’s news – but we will also have discussions as well as Q&A (the link to join this call is HERE) ***

Fashion retailer Inditex returns to profit (Financial Times, Sarah Provan) shows that the world’s biggest clothing retailer, which owns the Zara and Massimo Dutti brands among others, has returned to profit over the summer after the lows it experienced in April. It managed to do so thanks to strong growth in online sales as well as physical stores reopening. Online and retail sales in April were just 28% of what they were in the same month of the previous year, in June they hit 72%, in July it was 83% and in the month to September 6th they hit 89%. * SO WHAT? * This is positive news – and comes only a day after Swedish rival Hennes & Mauritz said that it expected to return to profitability.

Inditex has managed to maintain a tight rein on margins by continuing to improve inventory control (using the stock in its stores to fulfil online orders) and has also benefited from a big surge in online orders during lockdown. The company believes that the third quarter will see even more progress towards normality, adding that it has now reopened 98% of its stores.

Hut Group shares jump in value by quarter on first stock market day (The Guardian, Jasper Jolly and Sarah Butler) highlights a massive 25% jump in value for the Manchester-based e-tailer on its first day of trading on the London Stock Exchange. The Hut Group (also known as “THG”) floated due to pressure from private equity backers wanting to crystallise their investments, but despite the exit of many early investors the flotation was a roaring success. Although the company is now big enough to be in the FTSE100, it does not qualify because of the way it is structured. Founder Matthew Moulding is joint chairman and chief exec and has a controlling “founders share” for at least the next three years. This was the biggest London Stock Market debut since 2013! * SO WHAT? * Clearly this listing was a great success. Although the structure of the company is actually not that unusual in the US, it tends to be frowned upon over here because too much power is concentrated in one person. Let’s hope that Moulding is the right person otherwise the company will be in a whole load of trouble! He’s done a pretty good job up till now, though…

The FCA wants to look at Klarna and Handelsbanken closes loads of sites…

FCA targets Klarna as it launches a crackdown on unsecured credit (The Times, Kenza Bryan) shows that the Financial Conduct Authority (FCA) is about to do a review of “buy now, pay later” companies such as Klarna as part of a broader inquiry into lending practices in the unsecured credit market. Sweden’s Klarna is the dominant player in the UK deferred payments market and its market valuation has doubled in the last year. It has just become the highest value fintech in the European Union. * SO WHAT? * As things currently stand, the FCA does not regulate the products that Klarna and rival Clearpay provide but campaigners have been calling for tighter rules to prevent 

vulnerable customers get in more debt. I think that this is an overdue move by the FCA given the rapidity of the expansion of this sector. Given the user demographic and current unemployment profile, I would have thought that this is highly pertinent to current circumstances. I’ll be talking more about this in the Watson’s Daily podcast later today (you can find it on Spotify, Google Podcasts and Apple Podcasts – as well as a whole load of other sources!).

Handelsbanken to close almost half of Swedish branches (Financial Times, Richard Milne) highlights tough times for the Swedish bank that has been a longtime advocate of physical branches. It announced yesterday that it would close 180 of its 380 branches in Sweden, axe 1,000 jobs and invest $115m in its digital offering to customers. Handelsbanken: the screaming spires (Financial Times, Lex) says that this will save the bank a decent slug of money and, painful though it may be, it will ultimately make the bank stronger. I guess this is just a sign of the times!

Beijing doesn’t like the Arm deal, Snowflake’s share price shoots up and Sony unveils two consoles…

In a quick scoot around some of today’s tech news, Beijing’s concerns loom over Nvidia’s $40bn Arm deal (Financial Times, Ryan McMorrow, Henry Sende and Qianer Liu) shows that China’s chip industry is objecting strongly to Nvidia’s deal to buy Arm as Zhu Jing, vice-chairman of the Beijing Semiconductor Association, said that a US company can’t be trusted with owning Arm – especially considering that Arm’s chip designs are used in 95% of chips designed in China! * SO WHAT? * Although there is likely to be major resistance from the Chinese, Nvidia could threaten to pull out of the Chinese market – although that would be an extreme option as this could preclude it from ever doing business in China again. I expect more objections given the sheer importance of Arm’s products.

Elsewhere, Snowflake’s stock price soars in IPO (Wall Street Journal, Corrie Driesbusch) shows that share of the data-warehousing company almost doubled from its flotation price yesterday of $120 a share in the biggest tech IPO of the year. The closing price of $253.93 implied a valuation of three times what the company had initially estimated a week ago! Snowflake isn’t profitable, but it has grown very quickly.

Then in Sony to launch two PlayStation 5 models this fall (Wall Street Journal, Sarah E.Needleman) we see that the console race is hotting up! Sony announced that it will be releasing a $400 and $500 consoles, slated to go on sale in November. This echoes Microsoft’s tactic of releasing both a “cheaper” and premium model of its own new consoles – also thought to be hitting the shelves in November. I expect them to fly off the shelves as households prepare for more potential lockdowns with Christmas just around the corner!

Kodak recovers, Zwift gets backer and is there really a 20-second covid test??

In other news today, Kodak shares soar as chief cleared of insider trading (Daily Telegraph, Hannah Uttley) highlights Kodak’s massive 80% share price gain yesterday as an independent review cleared its chief exec of insider trading. Chief Jim Continenza and Philippe Katz, a board member, were handed stock option the day before the company was awarded a $765m US government loan to produce pharmaceutical ingredients – so you can see why alarm bells were ringing!!! Hmmm. What an amazing coincidence!

Elsewhere we see Zwift pedals past $1bn value after attracting new backers (Daily Telegraph, Michael Cogley) shows that the company which operates an online platform for cyclists and runners managed to raise a chunky $450m in its latest funding round that gives it an implied value of over $1bn. Given Peloton’s success, you can understand why investors are keen to get a piece of Zwift’s action!

Then in Is the company with a 20-second coronavirus test for real? (Financial Times, Anna Gross and Jemima Kelly) we see that a Toddington-based company with four employees is developing a saliva test for detecting coronavirus that will take 20 seconds to process. British tech company iAbra unveiled its “Virolens” test last week and it involves taking a mouth swab that you then drop into a box. Inside the box is a digital camera and a microscope and the result will be displayed in mere seconds. This is in the early stages, but if it works out it will surely be massively popular!

…in other news…

Today, I thought I’d leave you with an unusual dining experience in Fifty meters up and two apart – Belgium’s dinner-in-the-sky relaunches (Reuters, Bart Biesemans). Wow 😱😱😱!