Wednesday 08/07/20

1. In MACROECONOMIC & MARKETS NEWS, Brussels cuts EU growth forecasts, Sunak is to unveil a £2bn scheme and the Hong Kong market benefits from home-comings
2. In RETAIL NEWS, Boohoo gets the cold shoulder, JD Sports grumbles and Halfords is a mixed bag
3. In NEWS ON “WINNERS” & LOSERS, Under Armour and Uniqlo vie for face mask supremacy, Travelodge sees bookings recover, Plus500 benefits from lockdown boredom and chain restaurants look vulnerable
4. In INDIVIDUAL COMPANY NEWS, P&O sells Oceana and BG electrifies its fleet
5. AND FINALLY, I bring you LED facemasks and a heart-warming moment…

So Brussels downgrades, Sunak offers up a new plan and America’s loss is Hong Kong’s gain…

Europe faces deep recession and UK will shrink by 10%, says EC (The Guardian, Jennifer Rankin) shows that the European Commission has downgraded its growth forecasts for European GDP versus the forecasts it made in May. This comes ten days before EU leaders meet in Brussels to discuss the €750bn bailout plan for the bloc and bring the “frugal four” (Austria, Denmark, the Netherlands and Sweden) into line. Everyone apart from the EU wants to issue more grants, whereas the “frugal four” want the fund to issue more loans.

In Sunak unveils £2bn scheme to avoid youth jobless disaster (Financial Times, George Parker and Chris Giles) we see that chancellor Rishi Sunak will today announce a

£2bn job creation scheme aimed at helping young people. The Treasury plans to pay the minimum wage for up to 300,000 people aged 16-24 for six months starting from next month. Young people are said to be suffering more than older people because a higher proportion work in sectors most affected by the coronavirus. The chancellor is also expected to announce a temporary VAT cut and a stamp duty “holiday” for house purchases at the lower end of the market.

Hong Kong’s bourse reaps benefits of China homecomings (Financial Times, Primrose Riordan) highlights how the territory’s stock exchange is benefiting from increased tension between the US and China as a number of major Chinese companies, including giants Netease and JD.com, have migrated from Wall Street to Hong Kong for their secondary listings. Many are expecting more Hong Kong listings in the short term but some are saying that there may be longer term concerns for the exchange as a whole regarding China’s increasing legal encroachment.

Boohoo gets the silent treatment, JD Sports could do better and Halfords does well on bikes, not so much on cars…

Next, Asos and Zalando drop Boohoo from websites (Financial Times, Patricia Nelson) shows fallout from the recent discovery of Boohoo’s clothes in a factory in Leicester paying illegally low wages as the fashion retailers have temporarily blocked Boohoo products from their websites. Boohoo faces boycott from social media influencers (Daily Telegraph, Laura Onita) shows that influencers could be sticking the boot in as well. * SO WHAT? * Boohoo needs to come up with something Pretty Darn Quick because this is taking the shine off what has so far been an example of an epic performance by a retailer thriving through lockdown. Big retailer partners are looking for reassurances and Boohoo says it has launched an investigation that will result in unethical suppliers being cut off. If this problem is widespread, it could ultimately prove to be costly if it impacts margins due to having to pay their suppliers more – but it’s too early to tell yet.

Meanwhile, on the high street, Abrupt halt to JD Sports’ run lays bare rocky road ahead (Daily Telegraph, Ben Marlow) takes a closer look at JD Sports and how its strong past performance is not necessarily the indicator of future performance. Turnover and profits had been very solid and there has been strong trading in the US, but current footfall is not great and there are no obvious catalysts for outperformance on the horizon. * SO WHAT? * The company’s previous success is to be applauded, but I guess that putting a brave face on things is all that JD Sports can do at the moment as it prays that more consumers emerge from lockdown and spend.

Bicycle boom predicted to continue for 2020 (The Guardian, Sarah Butler) shows that Halfords reported a 57% rise in cycling-related sales during the pandemic as people wanted to do a bit more exercise and avoid public transport but Bike sales boom fails to offset car business slide at Halfords (Financial Times, Antonia Cundy) points out that this has not been enough to make up for the poor performance in its more profitable car business. Having said that, the company believes that motoring revenues will rise as more people venture out onto the roads and get back in their cars to avoid public transport. * SO WHAT? * It’s only a personal opinion, but I think that the cycling boom really kicked into gear around the time of the London Olympics in 2012 with the popularity of Bradley Wiggins & co and the Brownlee brothers in triathlon. Expensive bikes for these sports flew off the shelves for types who bought more than one bike – perhaps a “winter bike” for doing the bad weather rides, a lighter racing bike and maybe even a time-trial specific bike for shaving off a few more seconds in races (not to mention all the carbon fibre disk wheels etc.etc). However, it seems that the popularity of this has calmed down in the last few years but new demand has suddenly come from nowhere in the form of coronavirus as people have wanted to ride their bikes for their “daily hour” under lockdown and use them/dust off old ones to commute to work in order to avoid crowded trains and buses. IMO, the current demand is not really sustainable in the longer term because I think that people who buy bikes for “leisure” as opposed to sporting purposes will tend to buy one bike and that’s it! Those who buy for sporting purposes are probably more likely to buy more expensive bikes, more accessories and more bikes more frequently. HOWEVER, I would expect demand to continue to be strong for now – which could tide things over nicely for Halfords until the more profitable car business kicks in once more.

Facemasks get competitive, Travelodge sees more bookings, Plus500 profits from boredom and chain restaurants face an uncertain future…

Under Armour faces off with Uniqlo in activewear masks (Financial Times, Rurika Imahashi) highlights the current trend for reusable face masks as Uniqlo’s offering (pack of three AIRism masks for about $9) just completely sold out! Under Armour launched its reusable UA Sportsmasks on the same day and its stock of 30,000 retailing for $28 each ran out within one hour! Demand is likely to increase further as some countries are making the wearing of masks mandatory in public spaces. * SO WHAT? * Although masks for many aren’t all that profitable (although maybe the UA ones are at that price!), they are very good for brand visibility AND they will attract more people to the shops that sell them. I suspect that they will continue to sell well for the foreseeable future as people seek out reusable options!

UK hotel bookings returning after slump, says Premier Inn owner (The Guardian, Joanna Partridge) shows that hotel

bookings for UK destinations are rising as more people are booking summer trips to the beach and other traditional tourist spots, which is welcome news for Premier Inn owner Whitbread – and Plus500 wins big as bored gamblers lose on the markets (The Times, Ben Martin) shows that the amateur trading website is benefiting from punters trying to make money on volatile stock markets.

On the other hand, Covid threatens to break the chain restaurant (Daily Telegraph, Hannah Uttley) provides an interesting discussion on the survival prospects of chain restaurants following the difficulties that have faced owners such as the Casual Dining Group and The Restaurant Group etc. * SO WHAT? * FWIW, I think that many chains will fail and that the previous wisdom of private equity companies getting involved and rolling out huge numbers of outlets at a rapid pace will have to change. Some chains will no doubt survive – and perhaps strengthen as more locations become available due to the demise of rivals – but I really think that the make-up of our high streets could change with more independents taking their place because I would expect the government to give loans to people starting businesses. Who knows – perhaps landlords will be more reasonable to their new tenants?! Or maybe this is just a pipe dream! If things continue as they are, though, the hollowing out of our town centres is likely to continue…

P&O sells a boat  and BG tries to go electric…

Given the nightmare that the cruise ship industry has had to endure this year, Oceana makes way for much bigger sister at P&O Cruises (The Times, Dominic Walsh) shows that the cruise ship, Oceana, owned by P&O Cruises (owned by Carnival Corporation) has been sold for an undisclosed sum after 18 years of service as the company decides to concentrate on larger more efficient ships. Carnival’s chief exec has said that the company plans

to retire six ships within the next three months and that some of them would be scrapped rather than sold. Ouch 😱! Unsurprising, though, given the horrendous PR they had at the beginning of the coronavirus. It’s going to take some time and a LOT of discounting to recover from that IMO.

Then in Electric vans lined up by British Gas (The Times, Emily Gosden) we see what may be a vision of the future as the energy supplier has just ordered a thousand electric vans from Vauxhall as it moves forward on its plans to electrify its entire fleet by 2030! This sounds like good news and I would imagine that other companies (and public bodies like councils!) will do the same thing.

…in other news…

I’ve referred to face masks already in today’s Watson’s Daily, but maybe this could be a glimpse of the Next Big Thing: White is so 2019, LED light-up face masks a hit on Japanese crowdfunding site (SoraNews24, Master Blaster https://tinyurl.com/ybt3qn9r). This could be the hot new trend for Christmas 2020, no?!? But I really wanted to finish on this rather heart-warming story that will start your day on a positive  note: Three-year-old besties reunite after months apart in lockdown and it’s adorable (The Mirror, Paige Holland https://tinyurl.com/y6vv55hy). Ahhhh! This is sooo cute!