Wednesday 12/06/19

1. In MACRO NEWS, UK pay rises and unemployment falls
2. In RETAIL NEWS, it’s crunch time for Arcadia and Ted Baker has another profit warning
3. In INDIVIDUAL COMPANY NEWS, VW breaks off its relationship with Aurora, Marcus links up with Saga and Amazon withdraws from restaurant deliveries
4. In OTHER NEWS, I bring you a scary Airbnb. For more details, read on…

So, despite everything, wages rise and unemployment keeps falling…

Pay goes up as unemployment falls (The Times, Gurpreet Narwan) cites the latest figures from the Office for National Statistics which show that wage growth rose by 3.8% in April – the biggest rise for a single month since May 2008 – while the unemployment rate fell to 3.8% (easy to remember, eh??), a rate not seen since 1974. * SO WHAT? * This is significant given that wage growth was

actually expected to FALL from the 3.5% recorded in January. Interestingly, Tej Parikh, chief economist at the Institute of Directors, said employers were finding it hard to find staff with the right skill set,  which presumably means that they are having to pay more. This all sounds rather counter-intuitive, doesn’t it – what with all the Brexit uncertainty etc. I guess the world keeps on turning despite Brexit and employers still have to continue their day-to-day business activities. Still, I think things are very finely balanced and could change very quickly if we have a bad Brexit OR if Brexit is abandoned altogether.

Arcadia faces a crucial vote and Ted Baker has another profit warning…

Arcadia on the brink after Intu rejects revised CVA plan (The Guardian, Sarah Butler) highlights the fact that today is a key day for the survival of the company behind brands including Topshop, Topman, Dorothy Perkins, Burton, Miss Selfridge, Evans, Wallis and Outfit as creditors are due to vote on seven separate CVAs which all need a 75% approval from voters. This vote was meant to happen last week but was postponed to this week because Arcadia chief Philip Green didn’t think he could hit the 75% mark. His situation has been made more difficult now because Intu, a major landlord which owns 17 big shopping centres in the UK, said that it was not willing to accept rent cuts of around 40% for the Arcadia shops in its properties. Investor M&G is also looking increasingly unlikely to back the CVAs. Crown Estate, Land Securities and Aberdeen Standard and Land Securities are rumoured to be wavering although Aviva, Hammerson and British Land are thought to be prepared to back the deal. * SO WHAT? * If Arcadia loses the vote, there is a very real risk that it could go into administration, putting 18,000 jobs at risk and leaving massive holes in the high street and in shopping malls. Fall of Green’s empire could spell the end for CVAs too (Daily

Telegraph, Ashley Armstrong) points out that failure in today’s vote could also result in CVAs being taken off the table as an option for struggling retailers to pursue – which could hasten the ongoing downfall in the retail sector.

There’s more bad news in Takeover talk at out-of-fashion Ted Baker (The Times, Alex Ralph) which highlights Ted Baker’s second profit warning in less than six months as the disappointing figures in yesterday’s trading update sent its share price plummeting by over 25%. The company blamed severe discounting in global markets, consumer uncertainty, unusually cold weather in North America and the disappointing performance of its spring and summer womenswear collections and added to the gloom by downgrading its future forecasts. * SO WHAT? * The weakness of this formerly stellar performer has triggered rumours that it could now be vulnerable to takeover – but then again you’d need a very brave purchaser to wade into a troubled UK high street in current circumstances. Founder Ray Kelvin resigned in March amid allegations of harassment (and an investigation is ongoing) and so I would have thought that if any buyers do decide to emerge they will want to get that sorted before getting serious about any offers. Who knows – maybe a company like Asos might like to get a high street presence?? The nightmares continue…

VW breaks up with Aurora, Marcus snuggles with Saga and Amazon abandons restaurant deliveries…

Volkswagen breaks with Silicon Valley self-driving start-up Aurora (Financial Times, Patrick McGee) heralds the end of a relationship with Aurora, the self-driving start-up backed by Amazon, after a trial run of a few months. This will make it easier for the carmaker to partner up with Ford’s driverless unit Argo AI as part of the global VW/Ford alliance announced in January to jointly develop future vehicles. Aurora announced a deal earlier this week with Fiat Chrysler to integrate its software into their vehicles. * SO WHAT * This is probably more of a downer for Aurora rather than VW as, strategically, a partnership with Ford makes more sense given that Ford is a leader in the US and VW is a leader in Europe and China. Also, VW is thought to have been not overly-impressed with Aurora’s tech. This is just one of many deals between driverless tech companies and auto manufacturers, so no real biggie. There will be other opportunities!

Goldman’s Marcus teams up with Saga to target over-50s (Financial Times, Oliver Ralph and Sarah Provan) highlights Goldman Sachs’ fast-growing retail bank Marcus’ collaboration with over-50s product specialist Saga on long-term savings products that are due to launch in the autumn. Marcus has grown rapidly in the UK since its launch last September due to having one of the best interest rates in the market and its easy-access savings account. * SO WHAT? * I think this is a canny move by a smooth-operator given that the over-50s account for two-thirds of the £850bn in UK cash savings accounts, according to Saga’s own estimates. It will no doubt have secured favourable terms as well given Saga’s current difficulties.

In Amazon ends restaurant delivery in face of fierce competition (Wall Street Journal, Sebastian Herrera) we see that Amazon has decided to close down its restaurant delivery service Amazon Restaurants, in the US, after four years of competing with the likes of Grubhub and Uber Eats. * SO WHAT? * This just goes to show that even giants fail! Grubhub and Waitr Holdings shares got a 7% and 6% boost on the news, but it just goes to show how difficult this sector is.

And finally, in other news…

I thought I’d leave you today with an example of why you shouldn’t be too nosy about your Airbnb in What was hidden in this Airnbn is the stuff of nightmares (The Poke, https://tinyurl.com/yxltt3f8). Yikes!