Tuesday 19/05/20

  1. In MARKETS & MACRO NEWS, markets rise on vaccine hopes, Germany and France propose a €500m rescue fund and the Bundesbank sees signs of recovery in Germany
  2. In RETAIL/HIGH STREET NEWS, JC Penney announces store closures, Apple opens some of its US stores, shopping centre owner Intu faces more problems, Café Rouge’s owner talks with creditors and Aldi teams up with Deliveroo
  3. In INDIVIDUAL COMPANY NEWS, the nightmare continues in airlines for Thai Airways and Ryanair while Uber cuts staff and offices and JAB goes for a coffee listing
  4. AND FINALLY, I bring you a coronavirus-friendly door-opener and a brilliant high school graduation ceremony…



So markets rise, Germany/France propose a rescue fund and there are signs of a German recovery…

Vaccine hopes and easing of lockdown fuel mini-revival (The Guardian, Larry Elliott) highlights a boost to markets following rising hopes of a vaccine (Moderna’s vaccine showed positive results in tests), the ongoing easing of lockdown restrictions and the announcement of a European rescue package as per Merkel and Macron propose €500bn EU rescue fund (The Guardian, Daniel Boffey), which states that the two European heavyweights are looking at doling out grants to European economies via a centralised fund. As things stand, the member states receiving the cash would not need to repay it – and it will be added to the EU budget where everyone contributes depending on the size and prosperity of their respective

economies. The proposal still needs to be approved by the other 25 member states, but could signal a significant step forward in addressing recent criticisms that Europe has been paralysed by Covid-19. This is not yet done and dusted, though.

Bundesbank sees early signs of recovery in German economy (Financial Times, Martin Arnold) shows that Germany’s central bank believes that a “recovery is on the way” following a big contraction in April. It says that weakness in manufacturing and services is being offset by the reasonably robust performance of its construction industry. The Bundesbank added that the €1.8tn package of fiscal measures to help individuals and businesses through the pandemic will also start to kick in and sounded positively chipper when it said “There is currently much to suggest that overall economic developments will move up again in the course of the second quarter as a result of the easing measures and a recovery is under way”. Let’s hope it’s right! If it talks things up enough, maybe the optimism will be self-perpetuating.



JC Penney announces cuts, Apple opens some US stores, Intu is up against it while Café Rouge’s owner considers its future and Aldi teams up with Deliveroo…

JC Penney to close nearly 30% of its stores (Wall Street Journal, Suzanne Kapner) heralds the ongoing nightmare for troubled US department store JC Penney that announced the closure of over 240 stores. The 118-year old company filed for chapter 11 bankruptcy last Friday and follows Neiman Marcus, J.Crew and Sage Stores, who have all gone down the same road this month. It also announced that it would close two distribution centres, cut corporate overheads by 25% and $1bn in expenses. * SO WHAT? * The company has been in trouble for quite some time, so it wasn’t really a surprise that it had to file for chapter 11. It suffered from confusing pricing, sub-par marketing and poor online shopping capability. Apparently it has learned from this and will make changes accordingly. Exact job loss numbers and locations of stores affected have not yet been disclosed. There will no doubt be more to come…

On a more positive note, America’s Apple stores open again (The Times, James Dean) highlights a reopening of an additional 25 shops as the country starts cranking up activity. It had already reopened five US stores after closing all of its 510 stores worldwide after the coronavirus hit. Everyone has to wear face coverings and temperatures will be taken at the door, with shopper numbers restricted at any one time and loads of cleaning. This brings its total number of opened stores worldwide to about 100 and it expects to open 12 sites in Canada and 10 in Italy this week. It has 271 stores in the US.

Back in the UK, Shopping centre firm seeks debt standstill as lockdown takes toll (The Guardian, Julia Kollewe and Joanna Partridge) shows that the nightmare being experienced by Britain’s retailers is continuing to have a knock-on effect as Intu, one of the country’s biggest shopping centre operators, is appealing for “standstill

agreements” from its lenders to help it survive a sharp drop in rent payments from its retailer tenants. Under a standstill agreement, the company would not have to pay back what it had borrowed until the end of 2021. Intu said it was likely to breach debt commitments at the end of June and is unlikely to be able to raise money via other means given the current economic backdrop. Most of its shopping centres will be closed until at least 1st June and the company has furloughed 60% of its mall staff and 20% at its head office. * SO WHAT? * Intu is not the only landlord that is suffering because its tenants aren’t paying rent at the moment – but there is limited recourse at the moment for them to pursue some of the better-capitalised ones in the courts as such actions have been temporarily banned by the government. This just gives us more evidence, as if any was needed, that pretty much anything to do with retail is having major problems at the moment.

Speaking of problems, Cafe Rouge owner stokes job fears with creditor talks (Daily Telegraph, Oliver Gill) shows that Casual Dining Group (aka CDG), which owns brands including Bella Italia, Café Rouge and Las Iguanas, has filed a notice of intention to appoint administrators. Various options, including a CVA, are being considered with restructuring specialists Alix Partners. On a separate, and altogether more positive note, rival restaurant chain owner Boparan Restaurants is on the verge of buying Carluccio’s which could save about 900 jobs. * SO WHAT? * It’s a shame that things have come to this for CDG  given that Café Rouge in particular seemed to be on the path to recovery after a rough patch, but given likely ongoing difficulties in the casual dining sector even if it does open up (social distancing is going to make profits VERY difficult to come by) it seems only prudent to at least consider the options. Sadly, about 6,000 jobs hang in the balance.

Then in Aldi trials online market with Deliveroo tie-up amid battle with rivals (Daily Telegraph) we see that Aldi has started to offer its customers rapid delivery of bread, milk and fresh products (among 150 items) via Deliveroo from its store in Nottingham. It could look to roll this service out to other stores later in the year. Given it’s lagged the UK’s “Big Four” in delivery capability, this sounds like a step forward.



Airlines nightmares continue, Uber makes cuts and there’s a coffee IPO in the offing…

Another day, another load of depressing stories about airlines. Thai Airways headed for bankruptcy protection (Financial Times, John Reed) highlights what is likely to be the world’s first failure of a national flag carrier as the Thai government is to consider a restructuring plan after a bankruptcy filing in court. The airline has been lossmaking for years as it failed to keep up with rivals’ service offerings, continued to fly unprofitable routes and suffered from a strong baht. Elsewhere in the industry, Ryanair warns coronavirus will push it to €200m quarterly loss (Financial Times, Arthur Beesley) shows that the short-haul specialist is expecting tough financials although investors were heartened by it saying that it planned to resume 40% of flights by July.

Uber cuts 3,000 more jobs, shuts 45 offices in coronavirus crunch (Wall Street Journal, Preetika Rana) heralds more drastic action by the ride-hailer two weeks after it announced 3,700 job losses and targeted $1bn in cost savings. The additional cuts mean that, in total, the company will be cutting about a quarter of its workforce within the next month. Job losses exclude drivers, as they are not classed as employees (which is whole other problem!). * SO WHAT? * It sounds like Uber will be continuing to reverse out of non-core and cash-burning businesses but ultimately, the key will be whether or not customers return to its ride-hailing business as the economy starts to open up once more.

Then in JAB seeks €2bn shot for coffee business with listing (Financial Times, Arash Massoudi and Judith Evans) we see that JAB Holdings is looking to raise up to €2bn from listing its JDE Peet’s coffee business in Amsterdam in what will be Europe’s biggest IPO so far this year. JDE Peet is the world’s largest pure coffee company (it merged Jacobs Douwe Egberts Group with US retail coffee brand Peet’s in preparation for the IPO) and is Nestlé’s biggest rival. JAB Holdings, which manages the wealth of Germany’s Reimann Family, hopes to raise €1.5-2bn from the IPO which will be used to pay down debt. * SO WHAT? * IPOs are rather thin on the ground at the moment given market volatility and the opacity of corporate earnings, but it seems that this will be going ahead due to the belief that the coffee market will continue to be robust (or should I say, “robusta” – sorry, I couldn’t help myself).



…in other news…

I thought I’d leave you today with an interesting coronavirus gadget in Japan has a Reassuring Door Opener to soothe coronavirus fears, so let’s try it out (SoraNews24, Casey Baseel https://tinyurl.com/y93aet7o) and the brilliant idea in High school to hold graduation ceremony on a ski lift (CBS News, Caitlin O’Kane https://tinyurl.com/y7cu7rev). Whoever came out with that idea was a genius!

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Some of today’s market, commodity & currency moves (as at 0739hrs 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 **
6,049 (+4.29%)9,23511,059 (+5.67%)4,498 (+5.16%)20,433 (+1.49%)2,899 )+0.81%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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