Tuesday 13/07/21

1. In RETAIL NEWS, UK sales rise rapidly, Superdrug has a tough time, Topshop reappears in the US and Flipkart raises cash
2. In POST-CORONATRENDS NEWS, Ryanair hires, Center Parcs plans a new village and McDonald’s offers incentives
3. In CAR-RELATED NEWS, Europcar says car rental prices will stay high, the EU moves to make EVs more profitable and the UK aims to bring home supply chains
4. In MISCELLANEOUS NEWS, Brussels hastily abandons digitax plans, Tate & Lyle announces a sweet deal, Admiral benefits from low claims and pubs benefit from England’s progress at the Euros
5. AND FINALLY, I bring you a pizza abomination – or a stroke of genius? You decide…

So UK sales rise, Superdrug has a tricky time, Topshop gets revived and Flipkart raises funds…

UK retails sales jump in June buoyed by sport and good weather (Financial Times, Valentina Romei) cites the latest figures from the BRC and KPMG which show that UK retail sales rose at their fastest rate in Q2 since at least 1995, when records began. This was due to a combination of the lifting of lockdown restrictions, the Euro 2020 football championships and super-keen consumers eager to spend after being cooped-up for so long! In the April to June quarter, retail sales increased by 10.4% versus Q2 in 2019.

It seems, though, that not everyone got a whiff of this as Superdrug profits plunge 80pc as shoppers shun stores (Daily Telegraph) highlights tough times at the health and beauty retailer as it reported a disastrous 2020 despite being classed as an “essential retailer” during lockdown. On the plus side, its online pharmacy grew by 132% and it vaccinated 100,000 in the first half of the year. Although online orders rose by 106%, its beauty business suffered as people stayed at home, but the chief exec said the company will try to win them back by providing more in-store “experiences” and new stores. * SO WHAT? * It’s difficult to say how keeping open under lockdown was a positive or not. Its rival Boots was also kept open but it had its own problems with the sudden closure of its much more profitable railway station and airports business. At the end of the day, I guess they both survived and their online businesses got a serious boost that will no doubt help them in the future (although you do wonder whether this

will cannibalise the business of physical stores). I personally think that the “experience” you get these days when going to either store is pretty bland and many of their products can quite easily be bought online or at the supermarket. I really do think that both of them need to provide more experiences to keep punters coming through the door otherwise I think that they will wander down the path to extinction.

Elsewhere, Topshop returns to bricks-and-mortar shops…in US (Daily Telegraph) shows that Topshop clothes are going to be sold in concessions at some of US retailer Nordstrom’s 350 North American shops. Topshop’s new owner, Asos, has signed a deal with Nordstrom where the latter will buy a minority stake in the Topshop, Topman, Miss Selfridge and HIIT brands. Asos will also offer click-and-collect services in Nordstrom stores. * SO WHAT? * I think that this is notable for two reasons: firstly, because it is the first time that Asos has signed a deal with a retailer that has physical outlets (so will this become a precedent?) and secondly, it sounds like a great idea to get more engagement in the US and Canada. 

Then in India’s Flipkart raises $3.6bn ahead of flotation (Daily Telegraph) we see that the Indian online retailer Flipkart has just raised a ton of cash in its latest funding round with investors. This implies a company valuation of $37.6bn, which means that it has doubled in size in less than three years! * SO WHAT? * This will give the company more extra fire power and the new money will be put into its grocery, fashion and “last-mile” delivery network. The company is expected to list – when it will no doubt raise even more money!

Ryanair hires, Center Parcs plans an expansion and McDonald’s offers incentives to new employees…

Airline to recruit 2,000 pilots over next three years after planes order (The Guardian, Gwyn Topham) highlights Ryanair’s recruitment plans as it tries to rebuild its business. Given that it is starting to take delivery of an order of over 200 Boeing 737 Max aircraft, I guess it needs pilots to fly them! Remember, these planes were the ones that were grounded globally after two fatal crashes killed 346 people in its first months of service, so although CEO Michael O’Leary said that the plane is a “gamechanger” because of its fuel capacity and seat capacity, passengers may be a bit reticent. * SO WHAT? * This sends a very bullish message and I am sure that pilots, both experienced and aspiring, will welcome this move. However, the ongoing success does somewhat depend on how quickly travel will return to pre-Covid levels.

Then in Center Parcs finds room for new village (The Times, Dominic Walsh) we see that there are plans to develop a new sixth site in West Sussex, near Crawley, in an effort to boost its growth prospects. Center Parcs is owned by Canadian firm Brookfield Property Partners who bought it in 2015 for over £2.4bn and this could help its plans to exit the business (it has held on to Center Parcs

for longer than it had originally intended because of Covid). The development is expected to cost £350-400m, create 1,000 jobs during construction and 1,500 permanent jobs when it’s finished. It will also add £40m a year to the local economy. * SO WHAT? * This is a pretty punchy move, but then again this thing won’t see the light of day for quite some time as it will submit a planning application in the middle of next year and, if all goes well, it would take another three years before it opens. Hopefully by then, Covid will be but a distant memory! In the meantime, though, it gives Brookfield Property Partners a dream to sell.

Meanwhile, in the US, McDonald’s owners offer tuition, child care to lure burger flippers (Wall Street Journal, Heather Haddon) shows continued desperation on the part of employers in the US who continue to face employee shortages. US franchisees are now trying to boost hourly pay as well as adding more benefits like emergency childcare, paid time off and tuition costs in order to attract staff. * SO WHAT? * This is just another example of an employer who cut deep in the pandemic struggling to get back to normal as the competition for jobs has intensified greatly. I get the feeling that we are experiencing the same thing over here, but not to quite the same extent. It is amazing to watch, though!

Car rental prices are likely to stay high, the EU moves to make EVs more profitable and the UK tries to keep supply chains close…

Chip shortage will keep car rental prices high, warns Europcar chief (Financial Times, Peter Campbell) shows that rental costs are likely to stay high for as long as chip shortages limit car production, according to the CEO of Europcar, Caroline Parot. Europcar, the largest listed car hire company in Europe, is among those hiking prices because they were not able to get enough vehicles to satisfy demand from holiday makers. This means that charges are now double or triple previous levels – and car hire rental costs have been a contributor to US inflation, which reached record levels last month. * SO WHAT? * This just goes to show the ongoing knock-on effects of the chip shortage – but it also shows just how quickly travel demand is recovering in the US!

EU rules to make electric cars more profitable than petrol, says VW executive (Financial Times, Peter Campbell and Joe Miller) shows that EU emissions rules that will come into force in 2025 could make petrol cars less profitable to make than electric ones, according to VW senior executives. * SO WHAT? * This is an interesting conclusion, but you do think that they are talking their own book given

that they’ve just committed to invest €35bn in EVs. New engine standards, called Euro 7, will make things even harder than they are already for car manufacturers who make petrol-based vehicles because they will need to use more expensive tech in order to meet the standards. 2025 is not very far away and so I think governments will really need to boost efforts to improve charging networks otherwise things could get very nasty IMO.

UK electric carmakers rush to bring supply chains home (Daily Telegraph, Alan Tovey) cites an interesting survey of execs from the European battery industry which shows that a whopping 84% of UK firms are seeking to bring their supply chains closer over the coming year. Bjoern Klaas, director of Protolabs Europe (which did the survey), pointed out that only 6% of battery manufacturing happens in Europe, which means that the UK and Europe as a whole are hugely reliant on imports from mainly the Far East and China. * SO WHAT? * I guess this is OK for now, but when you factor in the complications of Brexit and rising demand for EVs, it is clear that we are fighting against a ticking clock. Still, I think that deals for battery gigafactories are in process and so I think that this balance is likely to be redressed in the coming years. I think it is particularly important for the UK to keep its suppliers as close as possible (ideally domestic!) given the spanner in the works that is Brexit red tape!

Brussels abandons digital tax plans, Tate & Lyle announces a sweet deal, Admiral benefits from lower claims and pubs benefit from Euros drinkers…

Brussels backs off tech giants tax as Apple moves £720m (Daily Telegraph, Russell Lynch and Matthew Field) shows that Brussels has postponed plans to introduce a broad-based new digital tax just hours after Apple said that it had shifted a massive £720m of profits to Ireland from its British operations last year. * SO WHAT? * This just goes to show the EU’s lack of cojones as it blinked in the face of increased pressure from the Americans who warned that introducing the tax could scupper the wider global minimum corporate tax deal. Still, the fact that Big Tech has, once again, managed to significantly reduce its tax bill by shuffling its profits around should focus minds on getting a global deal done.

Tate & Lyle to be broken up in £940m deal (Daily Telegraph, Hannah Boland) is an interesting story which shows the 162-year old business is about to be broken up as it sells a controlling stake in its sweetener division to US private equity firm KPS Capital Partners. This sale is of the North and Latin America divisions and won’t affect the company’s European primary products business. * SO WHAT? * This is all part of T&L’s efforts to focus on products that feed into the booming demand for healthy eating. It’s interesting to see that it is the latest company to

try to diversify from its “unhealthy” roots (Coca-Cola bought Costa Coffee not so long ago in order to broaden its beverages offering – although it’s debatable as to how healthy coffee is!). Fun fact: It sold off its sugar business, including its Golden Syrup brand, to American Sugar Refining, for £211m in 2010.

Admiral gears up for surge in profits as drivers stay at home (The Times, Ben Martin) reflects an interesting aspect of pandemic behaviour as one of Britain’s biggest motor insurers said it was likely to enjoy an uptick in profits because less driving under lockdown meant lower payout claims. The company said to shareholders yesterday that it would beat current expectations for the first half of the year.

Then in England’s run in Euros draws football fans back into pubs (Daily Telegraph, Tim Wallace) cites the latest figures from Barclaycard which show that pubs and bars saw takings jump by 38% versus June 2019 while offies and specialist food stores’ sales shot up by an even-better 75%! Better weather also contributed to improved takings. * SO WHAT? * It is expected that the party started by the Euros will continue over the summer with the upcoming Olympics AND the lifting of most restrictions. Home improvements and DIY continue to be popular as spending increased by 20% last month due to punters preparing for more permanent working-from-home as well as decorating their newly-bought houses in the property-buying frenzy! Clothing sales have slowed right down, but anything involving “experiences” has generally seen a big rise (e.g. cinemas, bowling alleys, golf courses etc.). 

…in other news…

I always wince when I hear the phrase “fusion cuisine”. I’m all for innovation and it is sometimes opens up pathways to new taste sensations. However, what do you make of Domino’s apologises after creating a pizza that ‘insults both Italy and England’ (The Mirror, Rosaleen Fenton)? Although I thought it was an abomination initially, I did think that I would potentially try it – you know, for research purposes obviously 😁. What do you think??