Wednesday 12/08/20

  1. In CORONATRENDS NEWS, we look at jobs, what’s happening in the office market and what we’ve been eating at home
  2. In RETAIL NEWS, Debenhams makes deeper cuts and Brooks Brothers finds buyers
  3. In FINANCIALS NEWS, Prudential spins off its US business and Revolut counts the cost of hiring
  4. In INDIVIDUAL COMPANY NEWS, Apple heads towards $2tn, TikTok uses naughty practices and Airbnb aims for a flotation
  5. AND FINALLY, I bring you a very cool BBQ…



So we look at what’s going on with jobs, offices and eating habits under lockdown…

730,000 workers fall from UK payrolls between March and July (The Guardian, Phillip Inman) cites the latest figures from the Office for National Statistics which show that the youngest and oldest workers are suffering the most from the coronavirus-led employment crisis. Paid employment fell for the fourth month in a row in July although the rate of job losses appears to be slowing down. Pay and bonuses were also down – the first time this has happened since records began in 2001. Workers in the 18 to 24 and over 65s suffered the worst fall in employment since records began. Mind you, Rise in vacancies lifts hopes before furlough ends (Daily Telegraph, Tim Wallace) looks at whether a rise in job vacancies can potentially offset an expected rise in redundancies when furlough ends. Some recruiters are talking a good game (but then again they would – it’s how they get paid!) but economists are more sceptical and many recommend extending the Job Retention Scheme (JRS) for sectors that have been particularly hard hit. * SO WHAT? * I don’t think there’s any getting away from a big wave of unemployment when the JRS comes to an end – as things currently stand. Keeping it going in certain targeted sectors may be a good way of finessing the transition but it may still support zombie jobs that are only being kept alive by this scheme. Although there will also no doubt be calls for government spending on training, that takes a lot of time and a lot of money – commodities that many people don’t have. Unfortunately, this means that a lot of workers will have to pivot into something completely new – which means that many will probably have to take a big pay cut just to keep the home finances going. Let’s hope things improve sooner rather than later so people can get their full earning power back.

I think that everyone would agree that working practices have changed considerably during the pandemic. London office market yet to feel ‘true impact’ of coronavirus, says landlord (Financial Times, George Hammond) cites one of London’s leading landlords, Derwent London, as saying that the full impact of changing working practices has not yet filtered through fully given that it expects more job losses and business failures to result in a rise in vacancies and a fall in rents. Interestingly, there was still demand for new space including from Netflix and Slaughter & May, but it seems that tenants’ priorities are moving away from hot-desking and towards more collaborative, less sedentary space. Interestingly, Paul Gold, co-founder of Hedge Real Estate, believes that those who have taken on long leases in the last few years are more likely to sublet to others at a

big discount because they just want to get someone in the space – which is likely to undercut those whose business it is to lease offices out. BP mulls radical reduction of office space in move to flexible working (The Guardian, Jillian Ambrose) shows that the oil giant is thinking about a massive reconfiguring of its offices which could result in a halving of its property portfolio in some locations as it considers moving almost 50,000 employees to remote working and reconfiguring existing layouts to having more flexible workplaces. This dramatic overhaul could result in BP ditching up to 75% of existing offices in some countries and taking on smaller and more adaptable locations. At the moment it has 70,000 employees in 79 countries, but said earlier this year that it would be aiming to cut the number by about 15% by the end of 2020. * SO WHAT? * I think that such working patterns were bubbling away in the background before the advent of Covid, but the outbreak has effectively stamped onto the accelerator of change. For some, such as BP, it is a prime opportunity to do massive restructuring quickly with a minimum of resistance (you can pretty much blame everything on the outbreak), but others will have more difficulties in making the change. It remains to be seen whether these changes persist when a vaccine is found and things start to return to normal.

Meanwhile, at home, Domino’s reports bumper demand in summer of staycations (Financial Times, Alice Hancock) shows that Domino’s UK is forecasting better-than-usual summer sales due to the late end of the Premier League and more people taking staycations. The company has managed to do quite well through lockdown as more people ordered food and, as a result, it did not furlough any staff or apply for any government supports schemes. Apparently, in the second week of lockdown, it sold seven pizzas per second on average! On the other hand, it could be hit by the government’s clampdown on obesity and fast-food advertising, so the company said that it is accelerating its development of healthy pizzas.

Talking of food under lockdown, HelloFresh has recipe for success during lockdown (The Times, Ashley Armstrong) highlights the boom in demand for the mealkit provider’s services as it almost doubled the amount of households using it – the CEO said that demand was so high in March that it had to close its website for a week! . The Frankfurt-listed company has done so well that it expects sales for 2020 to be 75-95% more than it made in 2019. Rival Gousto recently affirmed the trend for mealkits. * SO WHAT? * In answer to whether or not this is just a coronavirus spike that will tail off once normality prevails, a recent survey carried out by Barclays of 1,000 people found that 44% of customers who had bought a mealkit said that they would do so again after lockdown.



Debenhams makes more cuts and Brooks Brothers finds buyers…

Debenhams to axe 2,500 staff with three days’ notice (Daily Telegraph, Laura Onita) shows that the ailing department store is planning on cutting more staff despite actually selling more clothes than expected since lockdown. This latest move comes only months after it cut jobs at HQ where it employs around 3,000 staff. * SO WHAT? * Just more retail carnage. Debenhams seems to be dying the death of a thousand cuts – you do wonder whether it would have been any different under Mike Ashley (boss of The-Company-Formerly-Known-As-Sports-Direct,

Frasers Group, who tried and failed to buy it). I really don’t think that staying alone and avoiding a merging with fellow department store struggler House of Fraser has turned out particularly well.

Then in Authentic Brands-Simon venture to buy Brooks Brothers for $325million (Wall Street Journal, Soma Biswas) we see that a venture called Sparc Group (which comprises of Authentic Brands and mall owner Simon Property Group) has agreed to buy troubled smart apparel retailer Brooks Brothers for $325m and has pledged to keep 125 Brooks Brothers stores open. * SO WHAT? * Good for Brooks Brothers, but then again you do wonder what it will have to do given it specialises in selling smarter office-type clothing in a world that is rapidly getting more casual in terms of home-working. Surely it will have to adapt its offering to tempt shoppers back again.



Pru spins off its US business and Revolut pays the price…

Prudential spins off US business to focus on Asia and Africa (The Times, Katherine Griffiths) shows that the London-listed insurer is going to spin off its American retirement business that will enable it to focus on its Asian and African operations. * SO WHAT? * This just marks the completion of an ongoing move and will give it more financial firepower and ability to focus on higher growth markets.

Revolut pays high price for its campaign to attract customers (The Times, James Hurley) shows that Revolut announced a trebling of losses due to a recruitment drive and high customer acquisition costs. Although the company was pleased with what it achieved in customer growth last year, it said that it is now aiming for profitability. The company has a European banking licence but it has no immediate plans to use it to offer loans. * SO WHAT? * It’s a good job that Revolut managed to get a decent slug of funding before lockdown hit – otherwise things could be a lot worse. Challenger banks are having a tough time, but it seems that Revolut is doing less badly than some of the others! 



Apple’s valuation continues skyward, TikTok gets found out and Airbnb targets an IPO…

Tim Cook joins the billioinaire club as Apple nears $2tn valuation (The Guardian, Mark Sweney) highlights Apple’s continued success under lockdown as it is looking like it could become America’s first company to hit the $2tn valuation level. It was only two years ago that Apple became the world’s first publicly listed company to be worth $1tn!

In TikTok tracked user data using tactic banned by Google (Wall Street Journal, Kevin Poulsen and Robert McMillan) we see that TikTok worked around a privacy safeguard in Google’s Android operating system to track users online,

according to analysis by the Wall Street Journal. The identifiers, called MAC addresses, are commonly used for advertising purposes. * SO WHAT? * Naughty, naughty! This will add fuel to the fire that TikTok could be a data security risk and will put even more pressure on a deal to be done between Microsoft and TikTok’s owner ByteDance. I wonder whether, in Trump style, the Wall Street Journal will ask for a cut of any potential deal for helping to stir things up during negotiations 😂?! I’m sure that would come in useful…

Airbnb plans to file for IPO in August (Wall Street Journal, Corrie Driesbusch, Maureen Farrell and Cara Lombardo) confirms that the company is planning to file IPO documents with the Securities and Exchange Commission, potentially with a view to flotation by the end of the year. This isn’t a given, but the fact that it is confident enough to file now would suggest that things aren’t going too badly. Bookings are up and the US IPO market seems to be recovering quite well from the coronavirus shock.



…in other news…

I thought I’d leave you today with what I think must be the coolest disposable BBQ I’ve ever seen in Japanese Brazillian BBQ restaurants offering take-out disposable grills made of cardboard (SoraNews24, Master Blaster). Doesn’t it look great?? It reminds me of a tastier version of Nintendo Labo 😂😋

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Some of today’s market, commodity & currency moves (as at 0756hrs 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 **
6,154 (+1.71%)27,687 (-0.38%)3,334 (-0.80%)10,783 (-1.69%)12,947 (+2.04%)5,028 (+2.41%)22,834 (+0.37%)3,319 (-0.63%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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