- In CORONAVIRUS & MACRO NEWS, companies see consequences and opportunity, Germany’s wobble continues, the UK Budget will be delivered on time and UK wage growth slows
- In RETAIL NEWS, it’s a mixed bag for Walmart, Beales faces extinction and WH Smith stops selling The Telegraph
- In INDIVIDUAL COMPANY NEWS, some say HSBC’s cuts don’t go deep enough and Nissan announces changes
- In OTHER NEWS, I bring you a floating, self-solving Rubik’s Cube…
CORONAVIRUS & MACRO NEWS
So we see more consequences and an opportunity related to the coronavirus, Germany’s ‘mare continues, the UK Budget sticks to the schedule and UK wage growth slows…
Jaguar Land Rover rushes parts out of China in suitcases (Financial Times, Nikou Asgari) highlights the impact of the coronavirus on car makers as ongoing production disruption in China means that JLR will be facing serious problems in the next few weeks if things don’t start getting back to normal. Transporting parts by air rather than by sea is far quicker, but it’s more expensive and you can’t get the same volumes so JLR is clearly resorting to desperate measures at the moment. Coronavirus hits return to work at Apple’s biggest iPhone plant (Financial Times, Ryan McMorrow, Nian Lui and Kathrin Hille) highlights difficulties at Apple’s biggest iPhone plant, run by Foxconn in Zhengzhou, as workers are returning from the Lunar New Year holiday – just not in sufficient numbers to get up to full production capacity due to travel restrictions and quarantine issues. Fun fact: a mind-boggling 200,000 employees work at Foxconn’s Zhengzhou plant when it’s at full capacity! Virus deals blow to hotel group reeling from Hong Kong unrest (The Times, Robert Lea) shows that Intercontinental Hotels Group is another company that is feeling coronavirus fallout, compounding its suffering from the Hong Kong protests, as it unveiled annual results which showed that revenue per available room (a key industry metric, also referred to as “revpar”) fell by a massive 64% in the Christmas trading quarter. On the other hand, Remote working is on trial in both China and Silicon Valley (Financial Times, Tim Bradshaw and Ryan McMorrow) shows that providers of tech that facilitates working from home – such as messaging app Slack and videoconferencing provider Zoom in the US and Alibaba’s DingTalk and ByteDance’s Lark in China – could actually benefit in the long run from the outbreak. There are two trends at work currently – one being the “enforced” working from home due to the coronavirus and the other being increased demand from workers as a way of improving work-life balance. Ecommerce got a big boost from the SARS outbreak in 2002/3 because people started to shop more online and it seems that the current outbreak is resulting in “explosive growth” for DingTalk, Alibaba’s chat, videoconferencing and task management platform. According to App Annie, a mobile data and analytics provider, DingTalk went from being outside China’s top 250 iPhone apps on January 25th to the #1 position for most of February! In addition to this, share prices of Slack and Zoom have risen 20-30% since the Chinese New Year holiday. * SO WHAT? * Many companies are having a tough
time with the coronavirus at the moment, but it does go to show that even in these difficult circumstances there are still opportunities. I think that remote working is much more do-able in more lines of work than people think and it has positive consequences for the environment (less travelling), work-life balance (being able to do the boring “home” stuff whilst still working) and individual finances (saves on commuting costs, etc.). The coronavirus could well be to remote working what SARS was to e-commerce.
Meanwhile, Germany’s woes continue in Angela Merkel pressed to step down early to ease CDU crisis (Financial Times, Guy Chazan) which follows on from the recent shock news that her preferred successor wanted to step back from it all. At the moment, Merkel’s term is due to end in the autumn of 2021 but there seems to be a lot of grumbling going on in the background which could turn into pressure for her to make an earlier exit. The Christian Democratic Union is just about to start the process for finding a new leader and it is likely that whoever it is will have to work with Merkel, which could prove to be problematic as it will hamper their ability to lead. * SO WHAT? * If an “anti” Merkel candidate wins in the election for the leadership, things could get nasty – but it is actually quite difficult to get rid of a Chancellor under the German constitution. This comes at a difficult time as Germany’s economy continues to struggle – but it’s also going to be holding the rotating presidency of the EU in the second half of this year. Profit warnings hit record in Germany (Financial Times, Joe Miller) shows just how difficult things are at the moment for the country as profit and sales warnings hit new records in 2019 – up by 25% from 2018, according to figures from accountancy firm EY.
Back in the UK, Chancellor confirms Budget will go ahead on March 11 (Financial Times, Laura Hughes, Sebastian Payne and Eva Szalay) shows that the new Chancellor, Rishi Sunak, will be keeping to the original timetable despite being appointed only last week following Sajid Javid’s resignation. There had been speculation that it would be delayed given Sunak’s appointment’s proximity to this key announcement, but clearly that has now been shut down.
Wage growth slows despite robust labour market (Financial Times, Valentina Romei) cites the latest data from the Office for National Statistics which shows that wage growth fell to its slowest rate in over a year at the end of 2019, but employment hit its highest level since records began in 1971. The unemployment rate now stands at 3.8%. * SO WHAT? * I would have thought that the wage growth thing was a blip in that we were facing a lot of uncertainty going into the end of 2019. Given that confidence seems to be bouncing back in many areas and that we continue to have a tight labour market, I think that wage growth should recover once more.
In Walmart posts mixed holiday sales (Wall Street Journal, Sarah Nassauer) we see that the US retailer (which is also the world’s biggest retailer) unveiled uninspiring holiday sales on the one hand and solid online sales on the other while its UK problem child – Asda – continued to disappoint. Asda’s Christmas sales slide as shoppers rein in spending (The Guardian, Mark Sweney) shows that its customers cut back on spending in the run-up to Christmas and its clothing line, George, took a big hit. * SO WHAT? * Given that Walmart failed in its bid to sell the Asda business to Sainsbury’s last year and that it’s not doing particularly well at the moment in a highly competitive UK market, you would have thought that Walmart would be very open to offers for the business. Whether there’s anyone out there who actually wants to buy it is another question!
On the UK high street, Bell tolls for Beales’ department stores (Daily Telegraph, LaToya Harding) heralds the potential final demise of one of the UK’s oldest department stores. It closed 12 of its 23 stores this month after falling into administration last month – the remainder are expected to trade for the next eight weeks while closing down sales take place. The search for a buyer continues.
WH Smith excludes Daily Telegraph from shops at railway stations (Financial Times, Alex Barker and Mark Di Stefano) shows that the high street retailer has stopped selling the Daily Telegraph at its railway outlets (for maximum pain!) in protest at shrinking margins. The Telegraph has hiked the cover price of its newspapers by almost 25% this month but it did not increase the amount paid to retailers by the same amount. * SO WHAT? * Newspapers are sold at around 54,000 outlets in the UK and WH Smith and supermarkets are the main sellers. The banning of a national publication is extremely rare and just goes to show the extent of WH Smith’s frustration at the trend for newspapers hiking their prices while paying less to the sellers. I would have thought it would be very much in the interest of the Daily Telegraph to pony up the money otherwise its hard copy sales will really suffer – and, given falling circulation trends these days, it needs to make sure it is not biting the hand that feeds it.
INDIVIDUAL COMPANY NEWS
Critics say that HSBC’s cuts don’t go deep enough and Nissan makes promises…
You will recall that I mentioned the dramatic cuts being undertaken by HSBC yesterday – well HSBC plan to cut 35,000 jobs leaves investors disappointed (Daily Telegraph, Lucy Burton) says that HSBC’s share price fall in trading yesterday implies that investors don’t think it’s going far enough. Analysts are predicting that 15,000 of the 35,000 roles will be in the UK, with many of them being at
its Canary Wharf HQ. The bank also reported a $3.9bn fourth quarter loss as annual pre-tax profits fell by one third. Tough times.
New Nissan boss signals pay cuts and deeper restructuring (Financial Times, Kana Inagaki) tells of a two-and-a-half hour grilling yesterday by disgruntled Nissan shareholders of the newly appointed chief exec Makoto Uchida, over the company’s poor performance. Uchida said he would step down if he fails to turn the company around. He announced cuts to executive pay and deeper restructuring measures. * SO WHAT? * Big deal. Japanese bosses say this kind of thing all the time. The proof of the pudding will be in the eating, so Nissan needs to take swift and drastic action as global car sales continue to suffer.
And finally, in other news…
I thought I’d leave you with something pretty amazing today in Cool automated Rubik’s cube found at Maker’s Faire floats, solves itself, blows our minds (SoraNews24, Dale Roll https://tinyurl.com/u8ls4ro). You really should watch this – it is highly entertaining!
Some of today’s market, commodity & currency moves (as at 0728hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!
|FTSE 100 *||Dow Jones *||S&P 500 *||Nasdaq**||DAX *||CAC-40 *||Nikkei **||Shanghai **|
|7,382 (-0.69%)||29,232 (-0.56%)||3,370 (-0.29%)||9,733||13,681 (-0.75%)||6,055 (-0.53%)||23,194 (-1.40%)||2,994 (+0.31%)|
|Oil (WTI) p/b||Oil (Brent) p/b||Gold Per t/oz||£/$||€/$||$/¥||£/€||$/₿|
(markets with an * are at yesterday’s close, ** are at today’s close)