Tuesday 17/07/18

  1. In RETAIL NEWS TODAY, US consumers go on a Trump-powered spending spree, French supermarket tie-ups get probed and M&S looks to cull management
  2. In TECH NEWS, ZTE shares jump on getting the green light from Washington, Netflix falls sharply on subscriber growth disappointment and Uber gets investigated for gender discrimination
  3. In OTHER NEWS, I bring you a song to celebrate today, World Emoji Day. For more details, read on…



So US consumers get spending, the French regulator looks at tie-ups and M&S managers are in the firing line…

US shoppers go on spree after Trump tax cuts (The Times, James Dean) shows the effect of Trump’s big income tax cuts – consumers spend more! Retail sales grew by 5.9% in June, according to the latest monthly report released by the Commerce Department, and economic forecasters are upbeat about the prospects for second quarter GDP. This was the fifth consecutive month of increased spending, with spending on motor vehicles, health and personal care and online retail being particular highlights. * SO WHAT? * Consumer spending powers about 2⁄3 of the US economy and Trump’s tax cuts, which came into the effect at the beginning of this year, have given Americans a significant boost. Continued strength is looking likely.

French supermarket tie- ups probed by competition watchdog (Financial Times, Harriet Agnew) highlights a potential spanner in the works for European retailers as France’s antitrust authority, the Autorité de la Concurrence, stated yesterday that it wanted to look at “the competitive impact of…purchasing partnerships on the concerned markets, both upstream for the suppliers, and downstream for the consumers”. There has been a trend of late for large European retailers getting together to cut costs and preserve margins in order to fight back against the likes of Amazon as well as the German discounters Aldi and Lidl. Purchasing partnerships, which help supermarkets boost volumes on commoditised items by getting lower prices from suppliers, have been

particularly popular in France where M&A has not really been an option (mainly because it is already relatively well-consolidated). Tesco and Carrefour’s tie- up, which was announced earlier this month, is just one example of such a purchasing alliance, but others that will also go under the microscope will include alliances between Carrefour and Systeme U and the one comprising of Auchan, Casino, logistics company Schiever and Germany’s Metro in France and International markets. * SO WHAT? * Although this is a bit of a pain for the retailers, it would seem unlikely that the regulator will do anything too drastic given that supermarkets aren’t having a great time of it at the moment – so there’s little to be gained from squeezing them too hard. If you are interested in knowing more details about the alliances, it’s definitely worth looking at this article which has a useful little table which identifies each alliance and exactly what areas are covered.

Managers in line of fire as M&S targets extra 350 jobs (The Guardian, Hilary Osborne) heralds more woes for M&S staff as efforts to affect a turnaround continue at the troubled retailer. It was only last week that it warned that its plans to close 100 stores did not necessarily signal the end of the restructuring. A review of the management structure showed that although sales activity across M&S stores has fallen by 7.5% over the last two years, management costs have actually gone up, which has “contributed to reducing store profitability, impacting on our ability to trade our existing stores and open future stores viably”. * SO WHAT? * Given chairman Archie Norman’s comments last week and the general shifting of management at the moment, M&S is clearly in a transitional phase. Having a management clear-out is an obvious way of cutting costs and will probably buy the company time (plus a bit of goodwill from shareholders) but it will need to come up with a proper plan sooner rather than later that will revamp its offering more dramatically – otherwise investors and customers alike will continue to abandon it.



In tech news, ZTE jumps, Netflix wobbles and Uber gets more grief…

In ZTE shares jump after Washington lifts ban on US purchases (Financial Times, Edward White) we see that shares in the Chinese telecoms equipment maker shot up by 16% in trading yesterday as the Trump administration gave the go ahead for it to resume operations. Wilbur Ross, US commerce secretary, lifted a ban on ZTE purchasing vital parts from the US following the company’s payment of a $1.4bn fine over breaches of US sanctions on North Korea and Iran. * SO WHAT? * The seven-year ban that was put in place in April and lifted on Friday by Ross, had brought the giant to its knees and almost killed it off completely until president Xi Jinping intervened personally to get Trump involved. In return for granting ZTE a stay of execution, the company had to pay a massive fine and has done a major overhaul of its top management. Still, emotion runs high amongst some about this volte-face – Florida senator Marco Rubio says that “ZTE should be put out of business. There is no ‘deal’ with a state- directed company that the Chinese government and Communist party uses to spy and steal from us where Americans come out winning”. Despite yesterday’s gains, ZTE’s Hong Kong share price is still 37% below the level it was at before the ban was announced. FWIW, I think this whole thing stinks! ZTE were just arrogant and they got their fingers caught fair and square in the cookie jar. Trump knows this and is clearly using it as a bargaining chip with the Chinese – after all, he can bring the ban back at any time. In the meantime, however, I think that ZTE needs to get busy on sorting out its supply chain to try and wean itself off using US parts for if Trump changes his mind again, but I get the feeling that this is not going to be easy for them. For now, they just need to play nice and not do too much spying 😜

Netflix reports weaker- than-expected number of new subscribers (Wall Street Journal, Shalini Ramachandran) shows how even the mighty can fall as the company fell short of its own forecasts in terms of subscriber numbers in the second quarter, which resulted in a 14% fall in its

share price in after-hours trading yesterday. The company blamed this on “faulty internal forecasting” and continues to believe in the potential of the business. * SO WHAT? * Let’s get some perspective here. The company has been a serial over-achiever, its share price has more than doubled so far this year and its success is scaring the bejeezus out of its industry to the extent that competitors are either trying to replicate its model in some way or consolidating as a way of protecting themselves (the current Fox/Disney/Comcast drama as well as the recently approved AT&T acquisition of Time Warner are very much examples of this). It is continuing to invest heavily in proprietary content and expansion in growth markets such as India. IMHO, although the “faulty internal forecasting” excuse is somewhat weak, the party ain’t over for Netflix – I believe that this is just a blip.

Uber facing enquiry in US over gender discrimination (Daily Telegraph, Natasha Bernal) highlights the fact that the US Equal Employment Opportunity Commission has been investigating Uber for alleged gender discrimination for almost a year. An Uber spokesman remarked that “We are continually improving as a company and have proactively made a lot of changes in the last 18 months, including implementing a new salary and equity structure based on the market, overhauling our performance review process, publishing diversity and inclusion reports, and rolling out diversity and leadership training to thousands of employees”. * SO WHAT? * Uber continues to garner negative headlines – and this is just another one in a long line. Given the problems the company has had with humans, it’s no wonder that it is looking to driverless cars for its future! No driver = far fewer personnel problems, but in order to get to that stage, the company needs to rely on them. All of this is bound to cost Uber loads in terms of admin (not to mention all the layers of procedures and other processes they have to implement to keep critics – and lawyers – at bay) and fines as disgruntled employees kick the company while it is down. Having said all that, the continuous stream of bad news cannot continue forever and I suspect that things will turn around in the approach to its Initial Public Offering (IPO), due next year. Obviously, if they don’t, the IPO could be postponed but I am sure that the company will do its level best to do what is necessary to keep it on track as it could no doubt do with the large lump of cash an IPO can bring.



… And finally, in other news… 

Well we’ve had some reasonably major sporting days recently, what with the World Cup and Wimbledon being prime examples, but surely nothing can compare to today, World Emoji Day.

Not heard of it? Learn more about this momentous occasion in https://worldemojiday.com/ and perhaps you could put the official song https://youtu.be/svBQjzLyMJ s on repeat to get people around you to join in! Yes, the song’s two years old now but it is a modern classic…actually, talking of modern day classics, I still love this: https://www.youtube.com/w atch?v=IfeyUGZt8nk Apologies to regular WIFI readers, but I love that last song and just thought I’d wheel it out today for no apparent reason!

As always, thank you for reading the WIFI!