Wednesday 20/05/20

  1. In RETAIL NEWS, Walmart and Home Depot are on a run, US retailers phase out hazard pay and French Connection is in trouble
  2. In SOCIAL MEDIA NEWS, Facebook takes on Amazon in online shopping, TikTok gets a Disney chief and Spotify signs up Joe Rogan
  3. In FINANCIAL NEWS, Sony buys the remainder of Sony Financial and investment banking fees suffer
  4. In INDIVIDUAL NEWS, AstraZeneca’s investment in Moderna rises, Johnson & Johnson stops selling baby talc and Compass raises big money
  5. AND FINALLY, I bring you lemon and paintbrush life hacks…



So Walmart and Home Depot see brisk business, US retailers phase out hazard pay and French Connection looks vulnerable…

Over in the US, Walmart sales surge as coronavirus drives Americans to stockpile (Wall Street Journal, Sarah Nassauer) shows that America’s biggest retailer reported a big upswing in quarterly sales as shoppers flocked through their doors to stock up on food and other essentials. Sales were up – and although footfall was lower, spending per transaction was 16.5% higher over the quarter. There was a spending boost in April when customers spent government stimulus money and e-commerce sales shot up by 74% (the number of new customers trying its online grocery pick-up and delivery services quadrupled since mid-March!). Despite significant additional costs related to raising wages for warehouse workers and hiring new staff to cope with the increased demand, Walmart still managed to report a higher operating profit over the period. Although it did well overall, execs said they would not publish financial forecasts for the rest of the year given current economic uncertainties. Home Depot reports higher revenue despite coronavirus impact (Wall Street Journal, Matt Grossman) shows that the DIY retailer saw higher sales in the first quarter, but reported an 11% fall in earnings over the period because of higher staff costs in terms of pay and benefits. Revenues rose by 7.1% over the period, which was better than expected, and sales from its digital platforms grew by around 80%. Like Walmart, Home Depot also announced that it would withdraw full year guidance for the same reasons. Fun fact: Home Depot is the second best performer on the Dow Jones this year – only Microsoft is ahead of it!

Both of the retailers I’ve just mentioned experienced higher wage costs. Well Retailers phase out coronavirus hazard

pay for essential workers (Wall Street Journal, Jaewon Kang and Sharon Terlep) shows that some of the biggest US retailers are starting to phase out the extra “hazard pay” they gave their frontline workers as the coronavirus ramped up. Amazon, Kroger and Rite Aid are some of the companies who have started to phase out the payments although workers and unions argue that they are still facing the same risks. To be clear, the rises were always temporary anyway and the original period they had agreed for these higher payments has already been extended.* SO WHAT? * Retailers are finding it hard because minimum wages were already rising before the coronavirus hit and so offering higher hourly rates and one-off bonuses will be even more difficult going forward. The other thing is that unemployment has risen exponentially since the outbreak started, so employers will be able to have their pick of employees. I suspect we shall see similar things happening at retailers around the world.

Back in the UK, French Connection warns it is running out of cash (The Guardian, Sarah Butler) highlights the ongoing travails of already-troubled apparel retailer French Connection as it has announced that it will run out of cash within the next few months if it doesn’t get a cash injection and/or an uptick in sales. Like other fashion retailers, it had to close all of its stores and concessions both at home and abroad. Although online sales have jumped by 44%, the company has said that this is not enough to sustain the business. It is, like other non-essential retailers, preparing to reopen UK stores on 1st June under the government’s current coronavirus plan. * SO WHAT? * French Connection was already struggling before the outbreak and so I would say it is unlikely that it will be able to come out of all this unscathed. 40% of the company is owed by founder Stephen Marks and Mike Ashley’s Fraser Group (formerly known as Sports Direct) owns a 26% stake. It just seems to me that this company is destined to fail after losing its way – let’s hope someone comes along to breathe some life into what was once a very popular brand!



Facebook takes on Amazon, TikTok gets an American chief and Spotify signs up Joe Rogan…

In Facebook takes on Amazon with online shopping venture (Financial Times, Hannah Murphy) we see that Facebook has unveiled “Facebook Shops” which will enable sellers to create digital storefronts on Facebook or Instagram and let them gather data on what shoppers want. Users will be able to browse, message businesses re purchases and buy directly (in most cases) via a new checkout. Chief exec Mark Zuckerberg said he’s accelerated the launch of Shops in order to take part in the current boom in online shopping. He added that he would be able to use the data to improve its advertising service, enabling him to charge more. * SO WHAT? * This could potentially be huge given Facebook’s 2.6bn user base and it comes at a time where third party sellers have been complaining about dodgy practices from Amazon in hogging all the data and using it to compete against them (that’s the allegation anyway!). This could also be interesting from a food delivery angle as it could become a competitor to the likes of Grubhub because, longer term, Shops could host restaurant and food ordering services. Facebook will work with existing ecommerce services such as Shopify and integrate everything with shipping and logistics. This sounds like a VERY interesting development and brings them closer in functionality to other “super apps” such as China’s WeChat where you can message, buy products and send money all on one platform. This could be an excellent way for Facebook to promote Libra as well, I would imagine!

To infinity and beyond for TikTok under Disney’s ‘Buzz’ (Daily Telegraph, James Cook) highlights the appointment a new chief exec with clout, former Disney dealmaker Kevin Mayer – the man who led the launch of Disney+.

ByteDance-owned TikTok has seen downloads push through the 2bn mark last month and data from Sensor Tower says that TikTok has grown faster that its rivals in terms of downloads since the beginning of this year. * SO WHAT? * This is a key appointment that may go some way in calming American suspicions that China might be able to access user data in that there will be someone for US officials to bring to account. Since the concerns were voiced, ByteDance has moved to separate TikTok from its Chinese operations – and this appointment should help to satisfy the sceptics in some way. The other thing is that this new appointment could signal a wave of acquisitions, given that Mayer had form in this area at Disney with acquisitions of Pixar, Marvel, LucasFilm and 21st Century Fox. TikTok has generally stayed away from acquisitions thus far but given its popularity and Mayer’s history, it would be reasonable to assume that this will change! In addition to becoming TikTok’s chief exec, he will also become parent company ByteDance’s COO. I think that this sounds like an inspired appointment and will turbo boost the company’s fortunes both in terms of potential content AND advertising revenues.

Spotify strikes podcast deal with Joe Rogan worth more than $100m (Wall Street Journal, Anne Steele) highlights a new exclusive deal for Joe Rogan to take his famous podcast to Spotify. This is one of the biggest ever licencing agreements in the podcasting arena. His “vod-cast” – video podcast – format has become incredibly popular over the years and he has witheld it from Spotify, saying that it did not pay enough and that he was getting decent money from the likes of YouTube. His full library of podcasts goes back 11 years and will be available from September 1st, becoming exclusive to Spotify thereafter. * SO WHAT? * This is really interesting and signifies Spotify’s commitment to podcasting and improving the array of its content outside music. According to data from the Interactive Advertising Bureau, US ad revenue from podcasts shot up by an estimated 42% last year.



Sony buys out Sony Financial and investment banks suffer fee losses…

Sony offers $3.7bn for rump of financial services division (Financial Times, Kana Inagaki) highlights Sony’s bid to buy out the remaining shareholders in its financial services arm to get full control of a unit that it already holds 65% of. This division actually generates a lot of the company’s profits and will be a slap in the face for US activist investor Third Point who has been pushing for Sony to break it off and focus on entertainment. * SO WHAT? * This looks like a particularly opportune purchase as Sony Financial’s share price has fallen by more than 20% since early February – mind you, the offer has not been made at a premium to the market price before this was announced, which goes against normal practice. Shares in both Sony and Sony

Financial rose after the announcement and it seems that, strategically, Sony could do with exposure to Sony Financials’ life insurance, reinsurance, online-only banking and credit card settlement businesses – especially considering the upside potential of digital banking in Japan.

Banks suffer £143m decline in fees as deals dry up (Daily Telegraph, Vinjeru Mkandawire) shows that fees for investment banks’ advice plummeted by £143m (63%) last month as corporate M&A just dried up. The total number of deals done in April fell by a whopping 87% versus last year and it was the quietest month for over thirty years! * SO WHAT? * These numbers just reflect what’s going on around the world at the moment as global deal making has fallen to its lowest level for seven years. I would expect this to pick up in the coming months as surviving companies look to consolidate for protection or to grow by buying assets that had previously been too expensive to pick up.



AstraZeneca has its fingers in the Moderna pie, J&J stops sales of baby talcum powder and Compass tries to raise a lot of money…

In a quick look around some other big stories today, AstraZeneca investment in Moderna hits $2bn as vaccine hopes soar (The Times, Alex Ralph) highlights the value of AstraZeneca’s stake in American biotech-of-the-moment Moderna, whose share price has quadrupled this year and shot up by 20% on Monday after reporting positive early trial results for a Covid-19 vaccine. It has a stake of around 7.7% of the company and this little burst has helped to make AstraZeneca the most valuable company on the FTSE100!

Johnson & Johnson to stop selling talcum baby powder in US, Canada (Wall Street Journal, Peter Loftus) highlights

the impact of all those lawsuits that have accused its most famous product of causing cancer in women and sowed the seed of doubt in many a would-be customer. As of March this year, roughly 19,400 plaintiffs have filed lawsuits against the company. J&J continues to argue the safety of its product, but the lawsuits will continue to drag on and sales of other products continue to be tarnished by the allegations.

Then in Compass seeks £2bn as canteens lie idle (The Times, Dominic Walsh) we see that the world’s biggest catering company is taking precautionary measures to shore up its finances in these uncertain times by launching a fundraising to attract money from retail and institutional investors. The pandemic has hit the caterer extremely hard as canteens, schools and educational establishments around the world shut down – so although this is fairly chunky in terms of size, it is probably a wise thing to do given the uncertainty of lockdown lifting.



…in other news…

I thought I’d leave you today with a couple of life hacks: Woman praised for sharing paintbrush hack that will save you so much time (The Mirror, Paige Holland and Trick to squeeze lemons without a mess shows we’ve been doing it wrong for years (The Mirror, Luke Matthews Well I never!

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Some of today’s market, commodity & currency moves (as at 0738hrs 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 **
6,002 (-0.77%)11,075 (+0.15%)4,464 (-0.77%)20,595 (+0.79%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

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