Wednesday 10/06/20

1. In RETAIL & CONSUMER NEWS, Sharma outlines plans for UK retail openings and although shoppers are anxious, property sales shoot up and employers try to ease fears
2. In INDUSTRY-BY-INDUSTRY NEWS, we see that US airlines face record losses, Cathay Pacific’s boost calms investors and France pours a ton of money into aviation to save it while warehousing is all good for Big Yellow and Segro
3. In INDIVIDUAL COMPANY NEWS, Nikola overtakes Ford, Vroom has a great market debut and AMC aims to reopen cinemas
4. AND FINALLY, I bring you a tea abomination and a rap on how to fix it…

So retail moves to reopen with anxious shoppers while property sales shoot up and employers try to calm nerves…

Sharma confirms plan to reopen England’s retailers (Financial Times, Jim Pickard, Laura Hughes and Sebastian Payne) highlights what the business secretary Alok Sharma said yesterday about the reopening of non-essential shops in England from Monday. He played down an imminent relaxation of the 2m social-distancing rule and reiterated that the hospitality sector is not due to reopen until July 4th as things stand. The relaxation of the 2m rule will be key for businesses like hairdressers, but there will be casualties as per Majority of dentists braced for collapse as high cost of PPE bites (Daily Telegraph, Michael O’Dwyer). Still, even though more shops will be allowed to open, Shoppers still too anxious to head out for spending spree (Daily Telegraph, Laura Onita) cites a report from accountancy firm EY which says that the majority of people it surveyed will not be comfortable returning to the high street next week. 80% say that they do not want to try clothes on in-store and only 25% are happy going to a supermarket. At the moment, the WHO advises at least 1m for social distancing while the UK government is sticking with 2m. Even if the restrictions are eased, it’s by no means certain that shoppers will return in their droves – the lockdown is largely over in China but consumers remain very nervous.

On a potentially more positive note, Property sales at pre-lockdown levels says Zoopla (The Guardian, Patrick Collinson) shows that most of England, apart from London, has seen a strong rebound in property sales as pent-up demand has led to higher prices. Interestingly, Zoopla says that the the average asking price of sales agreed over the last week was 6% higher than the same time last year, but Nationwide figures from last week show that house prices up and down the UK were falling at their fastest rate since the financial crisis. Scottish and Welsh property markets remain closed but this will be under review on 18th and 19th June respectively. * SO WHAT? * It’s clearly early days as far as property data is concerned but I find it interesting to note that searches for property outside London and other “out of city” locations has increased as more people consider the reality of working from home. This may well even property prices out a bit over time. Also I would always caution looking at figures that rely too much on ASKING prices because those figures can reflect more vanity rather than reality and what the punters ACTUALLY pay for the property.

Although I think airline and hospitality staff would beg to differ, Employers ease fears of sharp rise in job losses (The Times, Philip Aldrick) cites the latest data from the Office for National Statistics (ONS) which found that 10% of  businesses trading early last month thought they would have to cut their workforce – a considerably better state of affairs than a month earlier where 30% expected to let staff go. * SO WHAT? * This is good to know and would suggest that predictions of millions of job losses may be premature. Still, we are still in the early days of reopening so we will just have to see how things go in the rollout.

US airlines face major turbulence, the Cathay Pacific bailout calms investors and France pours money into aviation to save it…

Given recent newsflow, I doubt you are going to be that surprised by Coronavirus sends airlines toward record annual loss (Wall Street Journal, Doug Cameron) which cites the latest outlook report from the International Air Transport Association that forecasts a 55% fall in passenger traffic this year and no return to profitability until 2022 at the earliest. * SO WHAT? * Airline share prices have been bouncing back strongly over the last week as travel restrictions have started to ease but everyone involved – including the plane makers themselves – is in for an extremely bumpy ride for the next few years at least.

On a more positive note, Cathay Pacific’s share price shot up by 19% on news that the government was going to take a stake according to Global stock rally pauses ahead of Fed decision (Financial Times, Hudson Lockett) but it then calmed down to close only 1.6% higher and France announces €15bn plan to rescue Airbus and Air France (The Guardian, Gwyn Topham) shows that the French government has announced a package to save the aerospace industry, particularly Airbus and Air France. This

plan includes the €7bn already earmarked for Air France (whose partner KLM is also being backed by the Dutch government) and the boost is also supposed to help Airbus to continue to compete with America’s Boeing and China’s Comac. Unions in the UK are pushing for a similar move.

On the other hand, the warehousing industry continues to power through in Big Yellow still managed to pack a punch (The Times, Robert Lea) which heralded a strong performance from the self-storage company as its business model has proved to be pretty Coronavirus-resistant and Warehouse group Segro seeks to raise £650m for expansion (Financial Times, George Hammond) reflects a degree of self-confidence as it is going to raise £650m via a share placement in order to expand in the UK and continental Europe. The company has been benefiting from providing warehousing to companies providing “last mile” deliveries in cities and their suburbs – a business area that is likely to continue growing. * SO WHAT? * I think that the warehousing sector has been interesting for quite some time now as home deliveries continued to increase but I think it’d be fair to say that the coronavirus outbreak has put this expansion into overdrive. Segro’s chief exec, David Sleath, made the excellent point that the pandemic has highlighted the need for more robust supply chains and this will, in turn, fuel increased need for warehousing. I wonder whether we will see more redundant retail parks turning into warehouse sites in future…

Start-up Nikola becomes more valuable than Ford, Vroom does well on its debut and AMC talks about opening its cinemas…

Electric-truck startup Nikola bolts past Ford in market value (Wall Street Journal, Ben Foldy) shows that the value of Nikola Corp, who most people will never have heard of until it floated on the NASDAQ a week ago, now has a market value higher than Ford Motor Co.! The company is developing commercial and passenger vehicles that run on batteries and hydrogen fuel tech, has not yet sold any vehicles – and yet its share price has doubled since flotation to mean that, at a market cap (stock market valuation) of $30bn it is bigger than Ford ($28.8bn) and Fiat Chrysler ($20.5bn). * SO WHAT? * This just sounds like part of the current investor frenzy for all things EV as share prices of both Tesla and China’s Nio have doubled so far this ear! You know that market saying “buy the mystery, sell the history”? Well there is some crazy mystery-buying going

on right now! Nikola’s most recent sharp share price rise was no doubt due to Nikola’s CEO Trevor Milton tweeting on Sunday night that the company would start taking reservations for a pick-up truck called the Badger on 29th June.

Talking of strong share price performances, Vroom jumps in public market debut (Wall Street Journal, Kimberley Chin) showed that investors got right behind the IPO of this American online automobile seller as they powered the share price up by 83% on its first day of trading yesterday. It seems like the momentum created last week by Warner Music and ZoomInfo’s successful IPOs is gaining pace…

Elsewhere, Movie theatre giant AMC eyes reopening after huge coronavirus blow (Wall Street Journal, Erich Schwartzel) shows that the world’s biggest cinema chain, AMC Entertainment, announced a massive $2.2bn loss for the first quarter and said that it needs to get its theatres open asap. At the moment, it looks like they will be able to open 97% of them in July. Reopening will clearly be the first step on the path back to normality and I am sure others will follow.

…in other news…

You may well have seen this abomination blowing up on Twitter and TikTok, but in case you haven’t, Traumatised Brits say American woman’s cup of tea attempt should be ‘illegal’ (The Mirror, Paige Holland https://tinyurl.com/y9oag2t6). If she needs guidance as to how to do it, she should maybe listen to Doc Brown in his excellent My Proper Tea rap. This guy is a genius! Just to warn you, he does say some slightly naughty words…