Thursday 21/11/19

  1. In MACRO & ENERGY NEWS, Europe warns France and Italy on debt and China continues to finance coal
  2. In RETAIL/HIGH STREET NEWS, Target unveils solid results, B&Q owner’s new chief plays the blame game, Crew Clothing benefits from LTA “love” and All-Bar-One/Harvester’s parent company bucks the gloom
  3. In INDIVIDUAL COMPANY NEWS, PayPal buys Honey Science, Emirates orders $9bn of aircraft from Boeing and Fevertree fizzes despite revenue warning
  4. In OTHER NEWS, I bring you an unfortunate stained glass window…



So Europe warns France, Italy and Spain on debt while China continues to invest in coal…

France and Italy warned by Brussels over high debt levels (Financial Times, Daniel Dombey) cites a report from the European Commission, published yesterday, which outlines its opinions on all the eurozone member states. France, Italy and Spain came under particular criticism for failing to reduce their debt burdens. * SO WHAT? * Valdis Dombrovkis, the EC’s vice-president in charge of the euro said that current apparent inaction “is worrying because very high debt levels limit the capacity to respond to economic shocks and market pressures” and warned that failing to do something about it now could pile the pressure on other highly-indebted states in the future, risking contagion in the bloc. Italy has forecast a 136% debt to GDP ratio, France looks likely to breach the EU’s deficit ceiling of 3% of GDP this year (the only country in the eurozone to do so) while Spain and Belgium have been asked to hand in fresh budgets as soon as their new governments get their feet under the table! Spain could find this particularly tough going as the ruling Socialist Party campaigned in this month’s general election to increase spending and has just formed a coalition government with

radical left party Podemos, who want to spend even more than they do! Good luck with that.

China’s appetite for coal returns despite climate pledge (The Guardian, Jillian Ambrose) shows that the country’s ongoing penchant for building new coal-fired power stations has actually outweighed coal-fired power station closures in the rest of the world since the start of last year, according to the latest data. Although China continues to invest in clean energy sources, Global Energy Monitor said that this trend looks likely to continue with Beijing planning to build more coal-fired plants than the rest of the world put together. The country is behind the financing of 25% of all the new coal projects in the rest of the world, including places like South Africa, Pakistan and Bangladesh – but if you include its domestic projects, China is backing over 50% of all global coal power capacity currently under development! * SO WHAT? * This is quite interesting in that you have China the defender of the planet with a huge lead in things like electric cars (it sold more last year than the rest of the world put together) and solar and wind power on the one hand, and then being the driving force behind “dirty” coal-powered generation on the other. Given China’s ongoing massive thirst for energy, I suspect that this mix of clean and dirty will continue for quite some time to come – and no-one can realistically do anything about it. I don’t see Greta Thunberg getting a warm reception in China any time soon (well not from the authorities anyway)…



US retailer Target hits the spot, B&Q parent company’s new CEO blames his predecessor, Crew Clothing does well from its LTA tie-up and All-Bar-One owner bucks the trend…

Target extends its sales streak (Wall Street Journal, Sarah Naussauer) highlights another good quarter from the US retailer as both its offline and online sales increased, extending its winning sales streak to over two years. American retailers have had mixed fortunes thus far in the earnings season but despite its consistency, Target still managed to outperform market expectations and the company raised its full year forecasts as well – prompting investors to boost the share price by 14% in trading yesterday. Separately, DIY chain Lowe’s reported weaker quarterly sales but raised its profits forecast for the year. * SO WHAT? * Target’s performance has been powered by market share gains in apparel and home and beauty categories, which have in turn been helped by new in-house brands, store refreshes and customer service improvements. This is impressive stuff and goes to show that successful retailing CAN be done in this environment! Retail strugglers should take note…

Boss of B&Q owner hammers predecessor (Daily Telegraph, Laura Onita) shows that Thierry Garnier, the new boss of Screwfix and B&Q parent Kingfisher, has followed the time-honoured tradition of new guy blaming the predecessor for all the problems (this is also known as “kitchen sinking”). Tel “Because I’m Worth It” Garnier got the top job two months ago and, surprise surprise, is now talking about bringing more focus to the company (=”I’m probably going to sack loads of staff and close down/sell-off outlets/brands that don’t work”) as predecessor Veronique Laury’s attempts at bringing together its rag-bag of overseas businesses clearly hasn’t worked. Garnier is expected to unveil a new strategy in March. * SO WHAT? * This is classic new-CEO behaviour. We’ll never know whether Laury was a victim of macroeconomic circumstance (i.e. that Kingfisher’s business fell away because of cooling real estate markets which are a big driver of sales) rather than poor execution of strategy but

Garnier has got a lot to sort out. Like I said before I would be willing to bet my mortgage on him coming out with a plan in March to cut tons of jobs and sell off underperforming businesses. I’m not sure who would buy them though – maybe another one for private equity?

Crew Clothing discovers its perfect match with LTA (The Times, Ashley Armstrong) shows that the chain which sells clothes you can go to meet your in-laws in has benefited from a collaboration with the Lawn Tennis Association (LTA) as it announced an increase in both sales and profits. The company now has 81 shops in the UK and about 740 staff and attributes its success to doubling its range to appeal to more customers and redesigning its website to increase online sales. The company said that a decision to sponsor the LTA will enhance its appeal to its core customer base of “people in their forties, in commuter belts”. * SO WHAT? * Although their clothes aren’t exactly cutting edge, I think that Crew Clothing’s success is down to successfully identifying their customer avatar and making stuff that appeals to them. I know that this sounds so basic, but companies like Crew Clothing and Joules have seen continued success by using this strategy whereas companies like M&S suffer from seemingly adopting a rather scattergun approach. I really believe that for retailers to survive for the long term they need to get a decent balance of online versus offline and identify exactly who they are selling to (easy to say, hard to do!). I’m personally not that convinced by Superdry as it stands because it just sells the same old stuff and surely there are only so many hoodies and polo shirts you can sell to people before they get bored.

Pub chain Mitchells & Butlers defies casual dining downturn (Financial Times, Alice Hancock) is another example of a high street operator bucking the general trend of gloom as the parent of All Bar One and Harvester continues to grow its estate and revenues while others in the casual dining market continue to suffer. * SO WHAT? * I think that M&B has been quite canny as it has paid particular attention to the trend for customers eating out less but spending more when they do. It has responded by transferring some of its “cheap-and-cheerful” Harvester sites to higher-end steakhouse brand Miller & Carter. Food sales have edged up and net debt and food waste have gone down. The outlook is still for a tricky market, but M&B is doing all the right things at the moment.



PayPal buys Honey Science, Emirates puts in a Boeing order and Fever Tree maintains its fizz…

PayPal to buy Honey Science for $4bn (Wall Street Journal, Maria Armental) heralds the online payment company’s chunkiest acquisition yet of the shopping and rewards platform Honey Science. Honey helps to find discount codes and personalised online offers and is profitable. It works with the likes of AliExpress (retail arm of Alibaba), Walmart, Adidas and Sephora and PayPal execs believe it will help promote deeper engagement with its 300m customers and access to new markets. The deal is expected to close in the first quarter. * SO WHAT? * Not sure about the price, but this sounds like a good deal on a strategic basis and gives PayPal something new and relevant. I wonder whether this will prompt a flurry of such tie-ups as other payments companies try to provide more services.

Elsewhere, Emirates orders $9bn aircraft from Boeing in wake of Airbus deal (Financial Times, Simeon Kerr) shows that the Middle East’s largest airline just ordered 30 Boeing 787-9 aircraft while cutting its purchases for the delayed B777x from 150 down to 126 following the Dubai air show. This is some rare good news for Boeing since the whole 737Max debacle.

Then in Fevertree fizzes despite alert on profit (The Times, Dominic Walsh) we see that, after five consecutive years of knocking it out of the park, the purveyor of high-end tonic water announced a profit downgrade yesterday – but its shares still went up! The City has become accustomed to nothing but success from this company but there was probably an element of relief here as a profit warning had been rumoured for some time. It seems to me that the UK is maturing and that future growth will come from overseas.



And finally, in other news…

I thought I’d leave you today with Woman spots very x-rated detail in church’s window featuring Jesus and Mary (The Mirror, Courtney Pochin I don’t know what the fuss is all about. She’s clearly holding some kind of ancient baguette 😇…

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Some of today’s market, commodity & currency moves (as at 0912hrs 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 **
7,267 (-0.70%)27,808 (-0.40%)3,107 (-0.44%)8,52713,176 (-0.31%)5,902 (-0.11%)23,039 (-0.48%)2,904 (-0.25%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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