Wednesday 13/11/19

  1. In CAR NEWS, Nissan’s woes continue, German suppliers get hit by sluggish car sales and Tesla announces plans for a Berlin factory
  2. In RETAIL & CONSUMER GOODS NEWS, Aldi and Lidl continue to strengthen, B&M has Germany issues, New Look’s new look is starting to work, Land Securities suffers from retail malaise, Premier foods announces strong figures and Nike stops selling on Amazon
  3. In INDIVIDUAL COMPANY NEWS, Disney+ has a few hiccups, Facebook announces new payment functionality and Vodafone has India problems
  4. In OTHER NEWS, I bring you Potato the cat (yes, that really is his name)…



So Nissan’s woes continue, car parts suppliers suffer from poor sales and Tesla announces a Berlin factory…

Nissan cuts profit forecast as stronger yen hits turnaround plan (Financial Times, Kana Inagaki) highlights the announcement by the already-troubled company of a 35% cut to its annual net profit forecast as new management sweeps in. This cut was deeper than the market had expected and it also cut its revenue targets whilst also putting a question mark over dividend payouts. The current head of its China business, Makoto Uchida, is to take over as chief exec on December 1st. On the plus side, the company is seeing profitability stabilising in North America. * SO WHAT? * Nissan blamed a stronger yen on denting its profits but weakening sales are the real problem here. Some analysts are expecting a big restructuring – and I would have to agree on this given that new management has a tendency to want to put their own mark on things plus sales really are just going down the plughole – not just for Nissan, but for pretty much everyone. Uchida may also want to do something drastic to signal a departure from the whole Carlos Ghosn/dodgy payments problems it’s been having and will no doubt use this as an excuse if he makes major cuts.

Following on from this, Global car slowdown hits German industrial groups (Financial Times, Joe Miller) shows that German manufacturers are suffering from a weakening global car market as semiconductor giant Infineon, parts supplier Continental and sensor maker Osram all reported big falls in automotive-related profits yesterday. Data from IHS Markit showed that light vehicle production numbers were down everywhere in October – but China was

weakest with a chunky 13% drop. * SO WHAT? * All of the companies mentioned were, rather unsurprisingly, pretty downbeat about prospects in 2020. EVs should, in theory, provide an uptick in sales but I think that is going to be a VERY slow burn given the fact that charging networks generally are rubbish. I actually think that all this gloom could dissipate quite quickly if the US and China managed to sort out their trading differences and lift tariffs etc as I think this is a massive logjam not just for automotive sales but for trading globally. There is another caveat in there, though, that once Trump hammers something out with the Chinese on trade I think he’ll turn his full attention onto Europe. In a speech he made yesterday at the Economic Club of New York (sounds like a fun place 😜) he said “European Union – very, very difficult. The barriers that they have up are terrible, terrible. In many ways worse than China”. Mind you, with talk of impeachment in the air and a presidential election coming up next year who knows what will happen?? Things could change very quickly. Still, post-trade-deal euphoria could soon turn to European despair if he decides to attack the European automotive industry. 

Tesla to build European car plant in Berlin, Musk says (Wall Street Journal, Robert Wall) sounds like positive news for Germany as chief exec Elon Musk announced plans to build a facility to assemble electric vehicles as well as an engineering and design centre. * SO WHAT? * The company currently builds cars in the US and China but this latest move is part of Tesla’s plans to become a global car brand and will help sales and deliveries in the region. Given that Norway and the Netherlands are the company’s biggest markets after the US and China, this sounds like a good move. Separately, Tesla is expected to unveil a new pickup truck next week. Newsflow on Tesla certainly seems to be taking a more positive turn at the moment what with their surprise profit announcement last month as well!



Aldi and Lidl strengthen, B&M gets a German pummeling, New Look turns a corner, Land Securities suffers retail fallout, Premier Foods has decent numbers and Nike stops selling to Amazon

In the world of discounters, Aldi and Lidl take another bite out of Big Four’s lunch (The Times, Ashley Armstrong) cites the latest findings from Nielsen, the data provider, which shows that shoppers continue to abandon Tesco, Sainsbury’s, Asda and Morrisons and shop at Aldi and Lidl but it’s quite interesting to see B&M boss insists march of the discounters has further to run (Daily Telegraph, Laura Onita) as a contrast because it is doing quite well in the UK but not so much in Germany where it bought Jawoll for £80m in 2014. Poor performance in the German business was blamed on increased transport and distribution costs. B&M: Grinch resistant (Financial Times, Lex) makes the point that B&M has a robust domestic business, is cash-generative and has prospects on the Continent in its French business. It should also benefit from the weakness of other retailers as the current market slump will give it ample opportunities to buy up real estate at a discount to increase its UK footprint. Any weakness in Germany sounds like it is largely in the price and so there are reasons to be optimistic here.

In New look for shops helps to fashion smaller losses (The Times, Ashley Armstrong) we see that the fast fashion retailer has managed to reduce losses quite considerably but it still saw weaker sales, which it blamed on consumer uncertainty and seasonal volatility. * SO WHAT? * New Look has been particularly weak over the last few years, but this reduction in losses despite weaker sales is quite impressive given the tough trading conditions. It has been refreshing store formats (at only around 10% of its stores so far), so I imagine that the hope will be the benefits of this will start to filter through sooner rather than later.

All of this retail gloom continues to have repercussions as per Land Securities hit by losses as ‘storm’ sweeps retail sector (The Times, Louisa Clarence-Smith) where one of the UK’s biggest listed landlords announced a half-year loss yesterday due to falling retail property valuations. The owner of shopping centres such as Trinity Leeds and Gunwharf Quays in Portsmouth is now looking to reduce its exposure to the retail sector, which currently accounts for about 40% of its property portfolio. * SO WHAT? * It’s not the only retail landlord to suffer fallout from carnage on the high street as rival Intu is also feeling the pain of disappearing tenants and rent reductions. It’s all very well to say that they are going to reduce their exposure to retail, but you do wonder who is going to be buying out there? Those who ARE in the market to buy property, however, will be able to bag some incredible bargains given the widespread weakness.

In consumer goods, Mr Kipling’s exceedingly good figures (The Times, Ashley Armstrong) shows that Premier Foods announced strong half-year numbers yesterday as the maker of Bisto gravy, Ambrosio rice pudding and Mr Kipling cakes managed to turn last year’s £2.2m loss into a £15m profit, sending its share price up by 9%. It has boosted its product range and will start selling its new vegan range of Plantasic flapjacks at Tesco this month. * SO WHAT? * This is good news for a company that’s come in for a lot of criticism since an abandoned takeover approach from America’s McCormick. It is currently undergoing a strategic review that is due to be concluded soon. Usually, these kind of things tend to result in certain assets being sold amid a new focus on certain product areas or geographies – but we’ll just have to wait to see what happens.

Nike to stop selling directly to Amazon (Wall Street Journal, Khadeeja Safdar) said it would stop selling its apparel and footwear to Amazon as it has decided to focus on selling via its own stores, apps and website. Sports Direct’s CEO Mike Ashley recently called for a review of the power of the likes of Nike and Adidas because they decided not to sell their latest merchandise in his stores but Nike has cut back on the number of retailers it supplies and now gets over 30% of its annual sales from its direct-to-consumer business. It’ll be interesting to see what impact this has on Nike’s sales. I would imagine it’s neither here nor there for Amazon, but it will just take a little bit of shine off its efforts to broaden its apparel offering.



Disney+ has some teething problems, Facebook Pay is announced and Vodafone has reservations about India…

Disney+ streaming service makes debut, with glitches amid high demand (Wall Street Journal, Erich Schwartzel and Drew Fitzgerald) highlights an eventful first day for new streaming service Disney+ as technical glitches prevented some users from logging in and stopped others from watching content as servers were unable to keep up. * SO WHAT? * Ah well – it was the first day! Disney will need to get this sorted pronto, however, otherwise it will lose potential subscribers. Disney+ is just one of a number of new streaming services coming online to take on the might of Netflix and it will need to get its offering right if it is to hit targets. As I keep saying, I believe that there will be too many subscription services available. This is OK when you’ve got a booming economy, rising wages and consumers who spend – but when the economy takes a dive, I would suspect that this will be one of the first areas to get hit when consumers tighten their budgets. When THAT happens, I expect there to be consolidation among streamers and we’ll actually go back full circle to a more comprehensive content offering for a higher price (just like before with the cable/satellite TV companies). It will be a massive bun fight in the meantime, though!

Facebook Pay will let you send money on all its apps (Daily Telegraph, Laurence Dodds) highlights the launch of a new payments system on Facebook that will let you pay companies and individuals via WhatsApp, Instagram, Messenger and Facebook itself. It is called Facebook Pay and shows that the company is approaching similarity with China’s WeChat which lets users perform all sorts of daily tasks within the same app. It will launch in the US this week before a more widespread rollout. * SO WHAT? * This sounds like a really interesting development but it will be interesting to see whether lawmakers and politicians will be willing to allow an American WeChat.

Vodafone in threat to quit India after $4bn ruling (The Times, Simon Duke) heralds a bit of a turning point for Vodafone as it has written off the entire value of its India business after the Indian supreme court decided that Vodafone Idea would be liable for €4bn in backdated fees, fines and interest. * SO WHAT? * Vodafone has a 45% stake in the company that is India’s second largest operator with a 30% market share, so this is a big deal. It has poured billions into its Indian business over the years, but increased competition and tightening regulation has made things much more difficult. Its future looks very uncertain.



And finally, in other news…

I thought I’d leave you today with a rather creepy cheep hotel in Japan’s cheapest hotel charges just 130 yen (US$1.20) for a room, with a huge, no-privacy catch (SoraNews24, Casey Baseel and a rather unusual-looking cat in Potato the googly-eyed cat’s stunned expression makes people think he’s ‘broken’ (The Mirror, Luke Matthews He is certainly eye-catching!

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Some of today’s market, commodity & currency moves (as at 0853hrs 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 **
7,365 (+0.50%)27,6913,092 (+0.16%)8,48613,284 (+0.65%)5,920 (+0.44%)23,320 (-0.85%)2,905
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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