Tuesday 02/06/20

  1. In RETAIL NEWS, we look at the current challenges facing US retailing while in the UK Primark opens, Ted Baker has a shake-up, Monsoon gives an ultimatum and car dealers face the future
  2. In NEWS ON “WINNERS” AND LOSERS, we take a closer look at six businesses that are thriving and one that isn’t
  3. In INDIVIDUAL COMPANY NEWS, insurers are in the dock, Facebook faces revolt and Huawei might suffer from a UK U-turn
  4. AND FINALLY, I bring you some kitchen hacks…



So US retail faces challenges and UK retail starts to emerge from hibernation…

Protests derail comeback plans for restaurants and retailers (Wall Street Journal, Heather Haddon and Jaewon Kang) follows on from what I was saying yesterday about US retailers suffering fallout from the George Floyd protests as Macy’s delayed store openings, Apple boarded some of its stores back up and outlets of Kroger, Popeyes Louisiana Kitchen and Burger King cut their hours. Starbucks and McDonald’s are having/planning to have discussions with employees about how they feel about George Floyd’s death and how they can be more inclusive. Talk is cheap – action is what is needed here. * SO WHAT? * It’s bad enough for the big chains desperate to ease themselves back into some kind of activity, but you’ve got to feel for those smaller businesses who, through no fault of their own, have suffered firstly with the coronavirus shutdown – and now looting/fire as tensions flare. Bigger issues at are clearly at stake here, but tell that to someone who’s seen their business literally go up in flames (or employees thereof who see the end of their jobs as a result). The public needs to be heard, but is Trump and corporate America actually going to listen? Whatever Trump’s achievements have been seen to be thus far in his presidency, I think that what he does between now and election day will be absolutely crucial to his re-election chances. There will be no hiding.

Putting that aside for a moment, Shoppers can expect big clearance sales this summer (Wall Street Journal, Aisha Al-Muslim) shows that retailers who have piles of product that they have been unable to shift because of lockdown are going to be trying their hardest to sell it to consumers. Surviving retailers and those who have gone bankrupt are going to be competing for consumer spend side-by-side and it is likely that the real bargains to be had will be in-store rather than online as they try to clear inventory ahead of the autumn season. Bigger discounts may be needed to tempt shoppers to part with their cash as many are feeling the pinch and things are likely to get even tighter as business failures and subsequent clearance sales increase. Mind you, US online grocery shopping jumps as chains rush to add capacity (Financial Times, Dave Lee) shows that online grocery sales shot up by more than 25% over the last month with an average of $90 per order, citing a Brick Meets Click/Mercatus survey. Interestingly, customer satisfaction with online groceries has fallen since the crisis began with fewer than half of the respondents saying that they would be “extremely” or “very” likely to use the same service again in the next 30 days. * SO WHAT? * It’s

certainly going to be a buyers’ market as far as apparel is concerned. Those who decide to brave the shops and cope with social distancing – and who have cash to spare – could bag some serious bargains. As far as online grocery shopping is concerned, I’m sure that stores offering this capability will keep some of their online customers but they will have to think hard about whether they want to invest in their own infrastructure or outsource delivery – both of which will put pressure on their margins.

Meanwhile, back in the UK, Primark plans to reopen all 153 stores in England on 15 June (The Guardian, Jasper Jolly and Sarah Butler) shows that the offline-only retailer will be opening its stores imminently – something it badly needs to do considering that it reckons it loses £650m in sales for every month its stores are closed. All the usual distancing protocols will be in place and if its experience in the European stores that it has already reopened is anything to go by Primark will be welcoming back customers in their (socially-distanced) droves.

Elsewhere, Founder’s stake falls as Ted Baker raises emergency £95m (The Times, Simon Duke) highlights Ted Baker’s £95m emergency fundraising to bolster its finances and now Toscafund has replaced controversial founder Ray Kelvin as the biggest shareholder. The former stock market favourite has lost 95% of its value in the last two years as its credibility has been dented by Kelvin’s alleged “forced hugging” of staff and the unveiling of a massive accounting hole at the end of last year by the new CFO (who is now CEO). It’ll be interesting to see if Toscafund can bring anything to the party.

Monsoon gives landlords stark ultimatum over rent (Daily Telegraph, Laura Onita) shows further evidence of a retailer that is looking over the brink as Monsoon Accessorize has just told landlords that they have a week to come up with rent waivers or it will shut down outlets. At the moment, it is trying to decide which shops it could keep open, if any. 3,500 jobs could be in the balance if the business goes belly-up…

Car dealers reopen but many feat it will be a long road back (Daily Telegraph, Alan Tovey) highlights the reopening of car dealerships yesterday – generally by appointment-only – although it is not yet clear whether consumers will be willing to spend money on big ticket items.

It is clearly very early days regarding who will win or lose on the high street. However, I think it is going to be a buyers’ market for quite some time as retailers vie for consumer wallet in order to survive. Those fortunate enough to have money to spare will be able to get a LOT of bang for their buck.



We take a quick look at some businesses who are benefiting from the outbreak and one losing out…

Six businesses finding an upside in the coronavirus crisis (Financial Times) is an interesting article which highlights businesses that have thrived during the outbreak. MarketAxess, an electronic bond trading venue, now has more users than ever as traders and investors worked from home (its shares have risen by 60% since March lows and it’s now worth $17.3bn!); Discord, an app which allows text, voice and video, has emerged as a popular home-schooling aid in France, Spain and Germany; Japan’s Nissin Foods benefited from ramping up production of noodles before the panic started and people started hoarding; London-based FRP Advisory, the restructuring specialist, has also seen a big uptick in business from businesses desperate to seek out options to avoid collapse; Berlin-based Delivery Hero has seen its share price shoot up by 60% since the

middle of March as food deliveries have picked up and Italy’s Lavazza saw sales rising as people stocked up. B2B wasn’t great, but increased home consumption has helped to mitigate the effects. * SO WHAT? * It’s good to see that some businesses are thriving through this crisis but the key for them will be how to benefit longer-term.

Following on from what I was saying the other day about static caravan makers, Parkdean ‘may run out of cash within weeks’ (Daily Telegraph, Oliver Gill) shows that the UK’s biggest holiday park operator could run out of cash unless the lockdown is lifted. On the one side, Parkdean Resorts has customers demanding refunds for cancelled holidays but on the other it needs people coming in when they hope to open on July 6th in order to keep going. * SO WHAT? * In theory, places like this could benefit from mass-“staycations”. I would have thought it would be much easier to social distance in these places than at hotels and although activities would be more limited compared to normal, I think that people who have been couped up for months will be desperate to see anything other than their very familiar four walls! The key for Parkdean, though, will be the timing. The sooner they can open their doors, the more likely it will be that they can survive.



Insurance companies face a big test, Facebook faces mutiny and Huawei could suffer from a UK 5G U-turn…

Hiscox, RSA and Zurich involved in coronavirus insurance test case (Financial Times, Matthew Vincent) heralds a potentially key development as the Financial Conduct Authority is going to the High Court in order to find out whether wording in business interruption insurance policies is enough to protect them against having to pay out to disgruntled policy owners. * SO WHAT? * With a momentum of anger and frustration building up among businesses who thought they were covered, the FCA took the unprecedented step of launching a test case itself in order to speed up proceedings. A ruling is expected by July. The ramifications of this could be huge.

Zuckerberg hit by staff revolt over Trump posts (The Times, Tom Knowles) shows that some Facebook staff are criticising their leader for turning a blind eye to inflammatory comments made by President Trump, using free speech and accountability as an excuse for leaving them up. This stands in direct contrast to Twitter which slapped his tweet with a warning label. * SO WHAT? * I don’t think that this in itself is going to have a lasting effect on Facebook. The hissy-fit that ensued after Twitter put

fact-check labels on two of Trump’s tweets last week – which resulted in him signing an executive order to review federal advertising sounds and monitor social media companies for bias – sounds worse than it actually is. In reality, an executive order can’t change federal law so there should be zero impact on revenues for any of the social media platforms. However, if social media platforms ARE put under more scrutiny, Facebook may have to monitor content much more closely than it is doing now. At the moment, Twitter employs about 30 employees per million users whereas Facebook employs about 15. This would mean that Facebook would have to employ more people to review content, which would squeeze its operating margins.

Hanging up on Huawei may return PM to US’s good books (Daily Telegraph, Hannah Boland) heralds a potentially key development for Huawei as it is starting to look like Boris Johnson could do a U-turn on Huawei and push it out of developing its 5G network, getting back into Trump’s “good books” in the process (Trump’s team went on a world tour last year telling everyone what a security risk Huawei was and they they should be completely frozen out of 5G!). Ministers are currently looking at putting taxpayer cash towards an international scheme to standardise 5G network equipment. This could make it easier for rival suppliers to enter the market and compete with Huawei. The drama continues…



…in other news…

Following on from yesterday’s “life hacks”, I thought you might like 12 Smart and Simple Kitchen Hacks (mental_floss, Erin McCarthy https://tinyurl.com/ycuk8r7o). There are a couple of quite surprising ones in there…

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Some of today’s market, commodity & currency moves (as at 0734hrs 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 **
6,166 (+1.48%)9,61711,845 (+2.23%)4,763 (+1.33%)22,326 (+1.19%)2,921 (+0.20%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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