Wednesday 23/09/20

1. In LEISURE/TRAVEL NEWS, Airbus and Tui announce more job cuts as the whole industry suffers
2. In FINANCIALS NEWS, Deutsche Bank decides to axe 20% of its branches and the FCA’s review on insurers reaches a verdict
3. In CONSUMER GOODS/RETAIL NEWS, Nike’s sales bounce, Tiffany gets an early court date, Kingfisher pays back furlough, the race thins out for Asda, Aldi and Lidl fall behind and Greggs will now deliver on roller-skates
4. In INDIVIDUAL COMPANY NEWS, Tesla vows to cut battery costs and Nikola hangs on
5. AND FINALLY, I bring you a fascinating fact…

So the carnage continues in the travel industry…

Airbus and Tui confirm job cuts as travel demand slides (Daily Telegraph, Alan Tovey) highlights more gloom in the travel industry as Airbus aims to cut 1,500 jobs out of the 13,000 in the UK and Tui announced that it would cut 8,000 jobs after summer bookings fell by over 80%. Tui is trying to cut a third of costs and blames “continuous changes in travel advice by various governments” for the drastic action it is having to take. Whitbread lays off 6,000 as it enters the final furlough (The Times, Dominic Walsh) shows that the operator of Premier Inn and Beefeater is responding to the end of furlough next month by axing 18% of its workforce. 4,500 hotel workers will lose their jobs and 1,500 restaurant staff will lose theirs.

In Travel sector: countdown to a fire sale (Financial Times, Lex) we see that companies in the sector are not only

suffering prolonged weakness in bookings – the prices of their assets are also falling, which implies that their ability to borrow money to survive will also be curtailed. It also suggests that companies are going to have to look at what assets they can sell because the full economic recovery they are praying for is likely to take a lot longer than they are expecting. * SO WHAT? * The whole industry is suffering, everywhere you look. Some are trying to keep upbeat about the prospects for next summer but, let’s face it, it’s going to be a hard slog for all concerned just to survive that long. I would have thought that Airbus will be OK – because governments just won’t let it fail – but Tui with all of its fixed assets (a boon when valuations have been rising but a millstone around their neck in current circumstances) will continue to be vulnerable. Things were looking so different for Whitbread last year when it sold Costa Coffee to Coca-Cola for £3.9bn, but it’s really having to hunker down now. On the other hand, I really believe that whoever manages to survive this carnage will make enormous amounts of money when a vaccine is found and business shoots through the roof. Until then, it’s all about survival.

Deutsche Bank announces branch cuts while the FCA’s review on insurers reaches a conclusion…

Following on from last week’s news about Handelsbanken shutting down branches in Sweden, Deutsche Bank plans to close 1 in 5 branches in Germany (Financial Times, Olaf Storbeck) shows further evidence of the continued demise of banks on the high street/strasse/väg as more and more customers use online banking. Local rival Commerzbank recently said that it would not be reopening 200 branches it shut down during lockdown. Deutsche’s retail banking division accounts for over a third of the company’s revenue, so it is obviously crucial for the bosses to get this right. * SO WHAT? * Deutsche Bank has been facing all sorts of problems over the last few years and has been under enormous pressure to cut costs. Meanwhile, the pandemic has accelerated the adoption of online banking and in some ways the coronavirus outbreak has presented the bank with an opportunity for its latest clear-out. Let’s not forget that Deutsche cut its number of branches from over 700 to around 500 as recently as 2016 – so this shouldn’t really come as a shock. The tough times continue. 

Then in Loyal customers should not pay more, says FCA (The Guardian Julia Kollewe and Patrick Collinson) we see that, after an industry-wide review, the financial regulator – the Financial Conduct Authority – is effectively going to ban home and car insurers from charging higher premiums to loyal customers. The FCA has found that those who stay with the same provider in the misguided belief that loyalty counts in their favour have been consistently overcharged. From now, the renewal price must be no more than the price being offered to new customers. The overcharging is bad in car insurance but is even worse for home insurance policies. * SO WHAT? * This represents the biggest crackdown on the industry for years and does something positive for those continually having their faces ripped off by insurers who rely on customer inaction. Ultimately, though, I don’t think insurers will suffer that much (although they may do in the short term). They will probably just whack up insurance premiums for everyone to make up the shortfall. On the other hand, I would have thought that price comparison websites like Uswitch and comparethemarket.com may suffer, though, from less impetus to move from a customer’s point of view as a result of the new rules. Insurers have enjoyed this easy money for years, so they are probably going to be made to work a bit harder now!

Nike’s sales rise, Tiffany gets a court date, Kingfisher pays back, Asda sees a bidder drop out, Aldi and Lidl fall behind and Greggs wants to deliver sausage rolls to you on roller-skates…

Nike’s sales bounce back from coronavirus slide (Wall Street Journal, Khadeeja Safdar) shows that Nike had a strong summer quarter as strong digital sales offset weaker sales at traditional stores. Chief exec John Donahoe said that the company gained market share and returned to growth in key international markets such as China and Europe. * SO WHAT? * This was a real contrast to the spring quarter which showed the company’s revenues collapse by 38% amid store closures. Nike’s share price is now trading near all-time highs!

Then in Tiffany wins speedy trial over LVMH’s bid to ditch takeover deal (Financial Times, James Fontanella-Khan, Alistair Gray and Sujeet Indap) we see that Tiffany now has a trial date in the diary for January. This represents a victory of sorts for the US jeweller. * SO WHAT? * Tiffany wanted to have a trial sooner rather than later whereas LVMH wanted to delay it, ostensibly because it was “too complex” (my @rse 😂!). Let’s be honest, it would have suited LVMH to drag things out in order to put Tiffany under more pressure to do a deal at a much lower price. Well done Tiffany for sticking to your guns! Mind you, nothing is

certain at this point. Tiffany had wanted to get a trial before November 24th, the deal’s deadline – so getting a January date was not a total victory.

Meanwhile, back in the UK, B&Q owner buoyed by lockdown home improvement drive (Daily Telegraph, Simon Foy and Laura Onita) shows that the DIY store’s owner, Kingfisher, managed to do pretty well through lockdown – so well, in fact, that bosses have now pledged to return furlough money. Pre-tax profits were up by 62% versus a year earlier! * SO WHAT? * This is great, but I have to say that if I were running the company, I would have kept the cash for a bit longer because I suspect sales are not going to be red-hot for too long. We are now heading into winter and more employment uncertainty so I’m not really sure how much DIY will be going on. Still, it has at least seen some joy over lockdown.

Elsewhere, Private equity group Apollo leads £6.5bn race to buy supermarket chain (The Guardian, Sarah Butler) shows that things are getting to the final stages for who will be buying Asda as rival Lone Star Funds has now dropped out of the running. Aldi and Lidl at back of queue during UK pandemic (Financial Times, Jonathan Eley) highlights how the discounters have missed out during the pandemic due to the massive increase in online grocery shopping. The discounters tend to do well in recessions as shoppers look to cut costs but it seems that this time around, their upside may be limited due to weaker online capability versus their “traditional” rivals. One other thing I wanted to highlight was Sausage rollers (Daily Telegraph) which showed that bakery chain Greggs has teamed up with Just Eat to trial the UK’s first home delivery service for sausage rolls on roller-skates! Superb!

Tesla wants to cut battery prices and Nikola hangs on…

Tesla ‘Battery Day’ spotlights Elon Musk plan for $25,000 electric car (Wall Street Journal, Tim Higgins and Heather Somerville) highlights Elon Musk’s plan to build cheaper electric cars by drastically lowering the price of batteries – although it could take three years to see this vision come

to fruition. * SO WHAT? * Battery costs still form a huge part of the cost of an electric vehicle – so if he (or anyone else) can crack this, they are onto a winner!

Then in Nikola finance chief defends business model (Wall Street Journal, Mike Colias) we see more hilarious defence of Nikola’s dodgy practices. I bet that General Motors, who committed to buying a 10% stake in the company and a joint venture on an electric truck, is frantically looking at how it can reverse out if things continue to get worse. What a mess!

…in other news…

I thought I’d leave you today with a fascinating fact in Woman freaked out after discovering cause of small black dots around her home (The Mirror, Luke Matthews). Well I never!