Wednesday 27/05/20

1. In RETAIL NEWS, Amazon is in talks to buy Zoox, Macy’s puts up properties for collateral, Boohoo gets a thorn in its side and we see mixed views on what’ll happen once UK shops reopen
2. In CAR NEWS, President Macron boosts the French car industry, UK drivers save money but McLaren cuts staff and Aston Martin ditches its chief
3. In AIRLINE NEWS, Lufthansa’s bailout is likely to come with strings, Latam Airways files for bankruptcy and Ryanair plots a return
4. In INDIVIDUAL COMPANY NEWS, we look at some pharma developments, Stripe’s expansion, Quibi’s ad renegotiations and Warner Music’s flotation
5. AND FINALLY, I show you how to fix stuff…

So Amazon goes shopping, Macy’s puts up collateral, Boohoo has a naysayer and UK shop reopenings divide opinion…

Amazon in talks to buy driverless car start-up Zoox (Financial Times, Patrick McGee) highlights an interesting direction for Amazon as it is in advanced talks to buy self-driving start-up Zoox. Zoox is unusual in the space in that, since it was founded in 2014, it has tried to create a driverless system, a network and an autonomous vehicle at scale, all at the same time! Given that it doesn’t have a major auto manufacturer backer – and that the coronavirus has dented its prospects – it is perhaps unsurprising that it is considering a sale to keep the money flowing. Amazon was also a lead investor in a $530m funding round for rival Aurora, but what might be piquing Amazon’s interest here is the potential for it to slot into its logistics offering. Neither party commented on the story – but it is interesting! Zoox was last valued at $3.2bn two years ago, but you would have thought that any negotiations going on now would be for a significant discount.

Macy’s pledges stores as collateral in $1.1bn bond deal (Financial Times, Alistair Gray) shows how the US department stores chain is putting up some of its properties as collateral in order to get better terms on a bond offering to raise money. It estimates its property portfolio to be worth $2.2bn, which is more than its market capitalisation. * SO WHAT? * Many retailers have suffered hammer blows from the coronavirus outbreak – Neiman Marcus and J.Crew will readily attest to that as they both

recently file for bankruptcy – but Macy’s is in a better position balance sheet-wise. Its chief exec, Jeff Gennette, thinks that any recovery is likely to be gradual.

In the UK, ‘Dark Destroyer’ leaves Boohoo investors with reasons to be tearful (The Times, Miles Costello) shows that there’s danger lurking for Boohoo as a short-seller, dubbed the “Dark Destroyer” on account of the effect he can have on companies, alleges that Boohoo overstated the profitability of Pretty Little Thing. Shadow Fall is the one doing the shorting on the back of research by Matthew Earl which says that the company has also been misrepresenting its free cashflow to investors for the last six years. This could turn out to be a nasty fly in the ointment if Boohoo is not careful…

Then there are different views on imminent UK shop openings in Reopening of shops will not end England’s woes (Financial Times, Jonathan Eley and Peter Campbell) which points out that the sector was already struggling before the coronavirus hit and that the retailers’ industry body, the British Retail Consortium (BRC), is continuing to call for more government help whereas Need for retail therapy ‘will boost footfall’ (Daily Telegraph, Hannah Uttley) cites findings from data company Springboard which showed that there was a rush to go the shops over the bank holiday weekend, which implies that when they actually return, the consumer will be there (albeit not all at the same time as they will be social distancing). * SO WHAT? * Although there may not be so many customers coming through the doors it will be interesting to see whether the ones that do go are more likely to buy things – and possibly more of them per shopper. After all, if you have to queue outside for a while before going in I would have thought that there is much more of a chance that you’d buy something, no?

President Macron tries to save the French car industry while in the UK, drivers save money on petrol, McLaren cuts staff and Aston Martin boots its chief…

In Macron’s €8bn incentive to push electric car sales (Daily Telegraph, LaToya Harding) we see that the French President has announced an €8bn bailout plan for the French car industry in return for PSA and Renault promising to focus on production in France. The plan includes things like grants of up to €7,000 to encourage people to buy electric vehicles and, from June 1st there will be an additional offer of €3,000 for converting from a petrol-fuelled car to a cleaner one and up to €5,000 to trade up to an electric vehicle. Around three quarters of the French population would be able to access these incentives. * SO WHAT? * This sounds like a great idea in theory, but the success will all be in the execution. It will no doubt be the sort of thing that other governments could consider as well in order to revive an ailing car industry.

Meanwhile, back home, Drivers save £4bn on petrol as cars gather dust (Daily Telegraph, Jonathan Jones) cites the latest figures from GoCompare – which show that drivers have saved a lot of money by driving much shorter

distances under lockdown. They have saved money on fuel by driving less and the fuel that they actually put in has become cheaper due to the weakened state of the oil price (Tesco, Asda and Morrisons are now charging under £1 per litre at their forecourts, for instance). In addition to this, insurance premiums have come down and some firms are offering refunds for customers whose cars have been idle in the lockdown.

Elsewhere, Formula One carmaker McLaren cuts 1,200 jobs amid Covid-19 crisis (The Guardian, Mark Sweney) highlights big job cuts being made in order to survive – this is significant given that it employs 4,000 workers. It blamed the cancellation of motorsport events (F1 accounts for 12% of the group’s revenues), the shutdown of manufacturing and car sales and a forthcoming Formula One cost restrictions from next season. Aston Martin shares jump as it presses eject button (The Times, Ben Martin) highlights the inevitable demise of Andy Palmer, the chief executive who is being replaced by Tobias Moers, an exec who ran the high performance division of Mercedes since 2013. Palmer did well to revive Aston’s fortunes initially, but someone had to take the fall for the disastrous share price performance of the company since its stock market flotation. * SO WHAT? * None of this is particularly surprising – it’s just more evidence that shows the hurt that is being experienced across the entire car industry at the moment.

Lufthansa’s bailout is likely to be conditional, Latam Airways files for bankruptcy and Ryanair makes plans for a return…

In a quick look at the latest developments in the airline industry, the state bailout of Lufthansa I talked about yesterday looks likely to come at a cost as per Lufthansa’s coveted airline slots under threat after bailout (Financial Times, Joe Miller, Javier Espinoza and Tanya Powley) which says that the airline may have to give up valuable slots at Frankfurt and Munich airports as EU officials are concerned that Germany’s bailout of the flag carrier could give it an unfair advantage over rivals.

Latam Airlines files for bankruptcy after ‘collapse’ in demand (Financial Times, Adam Samson and Michael Stott) shows another airline biting the dust as Latin

America’s biggest carrier filed for bankruptcy protection, following fellow regional player Avianca’s bankruptcy filing on May 10th.

On a positive note, Summer holidays ‘back on’ as Ryanair resumes flights (The Times, Graeme Paton) shows that Ryanair will be introducing a thousand flights per day from July 1st. This is despite recently announced restrictions that means incoming passengers will have to undergo a 14-day quarantine. It will focus on holiday destinations in Spain, Italy, Portugal, Greece and Cyprus. * SO WHAT? * This all sounds lovely, but I do worry that people will just be too nervous to go abroad on holidays because of the quarantine on the way back, the restrictions on what you might do when you get to the destination and the prospect of further coronavirus waves putting any future holiday in doubt. I really think that staycations are going to be the thing this year (if anything) and that Airbnb is well-placed to benefit from people wanting to escape lockdown without having all the hassle of going to a hotel.

We look at pharma developments, Stripe’s expansion plans, Quibi’s ad renegotiations and Warner Music’s flotation…

In other news today, Merck chief casts doubt on coronavirus vaccine timeframe (Financial Times, David Crow) highlights Merck chief exec Ken Frazier’s doubts over the 12-18month timeframe to develop an effective coronavirus vaccine just as the company announced it was buying Austrian biotech company Themis Bioscience that has itself been developing a coronavirus vaccine. Elsewhere, Remdesivir approved for limited use as Covid-19 drug in UK (Financial Times, Donato Paolo Mancini) shows that Gilead Sciences’ experimental coronavirus drug has received the thumbs-up in limited cases in the UK.

Other interesting developments in the papers today include Lockdown supercharges Stripe expansion (Daily Telegraph, Michael Cogley) which shows that payments giant Stripe will be expanding into the Czech Republic, Romania, Bulgaria, Cyprus and Malta next week as part of a European rollout, giving it presence in 39 countries. Advertisers seek to revise terms with streamer Quibi (Wall Street Journal, Benjamin Mullin and Suzanne Vranica) shows that the “premium” streamer Quibi is having to eat some humble pie as its lukewarm launch last month has meant that many advertisers are looking to defer payments while the company itself is looking to cut costs and Beat goes on for Warner flotation in New York (Daily Telegraph, Chris Johnston) shows that one of the world’s big three recorded music companies (the other two being Universal Music and Sony Music) is continuing with plans to float on the NYSE after originally announcing plans to list in early February. The company continues to benefit from more people streaming under lockdown and so sentiment is actually pretty good.

…in other news…

I thought I’d highlight this rather useful article today: From wonky tables to broken printers: how to solve the most irritating household problems (The Guardian, Emine Saner https://tinyurl.com/ycual43g). If you have a bit of time and the wherewithal, you could save yourself quite a lot of money here!