Wednesday 29/07/20

1. In TECH NEWS, the Biggies go to Congress, we look at why Silicon Valley is interested in India and Facebook wants TikTok creators
2. In RETAIL/HIGH STREET-RELATED NEWS, UK retail sales surge, Games Workshop and B&M are sitting pretty while Travis Perkins recovers and Selfridges, Greggs, McDonald’s and Starbucks suffer
3. In INDIVIDUAL COMPANY NEWS, Nissan has a ‘mare, Peugeot’s owner posts a profit and Reckitt Benckiser cleans up
4. AND FINALLY, I bring you a brilliant builder’s note…

So Big Tech presents to Congress, we look at why they’re all interested in India and Facebook wants to lure TikTok creators…

Big Tech goes to Washington (Financial Times, Lauren Fedor, Kadhim Shubber, Dave Lee, Hannah Murphy, Patrick McGee and Richard Waters) highlights a historic meeting where the heads of Amazon (Jeff Bezos), Apple (Tim Cook), Alphabet (Sundar Pichai) and Facebook (Mark Zuckerberg) are, for the first time ever, going to be testifying in front of Congress together (over video link). * SO WHAT? * This signals the culmination of an investigation that’s taken just over a year into whether they have used their size (their combined market cap is almost $5tn!) to crush the competition. A report is expected to be published after the hearing and before the end of the year which could lead to new laws that will regulate Big Tech. Although the investigation is mainly about antitrust issues, it is highly likely that the companies will be questioned on things like what they are doing about hate speech and how they are going to cover the upcoming presidential election. Amazon and Apple are likely to be facing questions over whether they are abusing their power as gatekeepers of their own marketplace platforms. Amazon faces criticisms that it copies successful products and sells them in their Amazon Basics line and that it encourages companies to use its own delivery services over competing offerings from the likes of FedEx and the US Post Office etc. Apple is being criticised for taking too large a slice of revenues for the privilege of listing on their app store and having too much power over the apps themselves. Facebook and Alphabet will face allegations that they have become too powerful in social media on online research by either crushing rivals or buying them. Their dominance of online advertising is likely to be probed as well and their allegedly biased political coverage.

What is Silicon Valley’s plan in India? (Financial Times, Benjamin Price and Richard Waters) is an interesting article that looks at why Big Tech is pouring so much

money into India at the moment. Facebook has invested $5.7bn and Google has invested $4.5bn since the beginning of the year and chipmakers such as Qualcomm and Intel  (as well as a number of US-focused private equity firms) have all invested in one company: Jio Platforms, the telecoms and digital services arm of the Reliance Industries conglomerate. Jio only started four years ago but is now India’s biggest telecoms operator and now has designs on being the leader in the country’s digital economy. It is aiming to use the new money to push forward on all fronts, culminating in an IPO within five years. * SO WHAT? * Clearly, Big Tech wants to have a Big Slice of the action in India, arguably the market with the biggest growth potential in the world. Facebook has been working with Reliance’s on e-commerce by integrating JioMart into WhatsApp to connect customers and local retailers and Google is planning on working with Jio to produce low-cost smartphones on Android OS. Intel and Qualcomm have “only” invested $253m and $97m, but they are also collaborating with the company on engineering and product expertise. There could be huge gains for all concerned and it will be interesting to see what others, such as Apple, plan on doing.

Facebook offers money to reel in TikTok creators (Wall Street Journal, Euirim Choi) shows that Facebook’s Instagram is now offering money to TikTok stars with massive followings to use their competing service called Reels, which is to be launched next month (funnily enough, its last attempt at something similar, called Lasso, was canned this month). TikTok will try to counter this by offering a $200m fund from tomorrow that will help creators “realise additional earnings that help reward the care and dedication they put into creatively connecting with an audience that’s inspired by their ideas” (🤷‍♀️?). Interestingly, some TikTok creators say that they will be signing up to Reels whether they get asked to or not because they are concerned about TikTok’s future in the US. * SO WHAT?* This is yet another example of Facebook using its power and money to copy someone else’s ideas! Still, given TikTok’s massive popularity and the uncertainty of its immediate future, now is clearly a great time for Reels’ launch.

It’s a mixed picture when you walk down the high street at the moment…

Surge in retail sales fuels hopes of ‘V-shaped’ recovery (Daily Telegraph, Lizzy Burden and Laura Onita) cites the latest survey of business leaders by the Confederation of British Industry (CBI) which shows that retail sales grew at their fastest pace for over a year in July. The spike was powered by grocery sales but the CBI’s chief economist Rain Newton-Smith says that the figures show clear winners and losers. * SO WHAT? * At least things seem to be going in a positive direction – but I really don’t think we are in V-shaped (i.e. sudden) recovery mode at the moment.

Talking about “winners”, Games Workshop is star player as value tops £3bn (The Times, Ashley Armstrong) highlights the success of the seller of fantasy miniature soldiers and games as it unveiled a record set of results yesterday despite having to close its stores during lockdown. Its share price went up by almost 11% in trading yesterday and it is now worth almost three times Dixons and 50% more than M&S!!!

Then in B&M bargains on a successful summer (The Times, James Hurley) we see that the discount retail chain reported strong like-for-like revenue growth in the latest quarter and that its trading performance over the summer is likely to be above current expectations. The unscheduled trading update yesterday highlighted strong demand for DIY and gardening products but said that “considerable uncertainty” is facing them for the second half of the year given the unpredictability of covid. The company’s next official announcement will be in November when it announces half-year results. Talking of which, DIY group begins recovery despite shaky foundations (The Times, Robert Lea) highlights a recovery of sorts for Travis Perkins, which also owns Wickes and Toolstation, as it

confirmed the trend for people indulging in more DIY during lockdown (which was positive) but a slowdown in housebuilding and commercial construction (which was negative) in a trading update announced yesterday. * SO WHAT? * It’s so interesting to see this because it seems to me that, in the year or so leading into lockdown, home DIY was just getting a bit slow and stodgy whereas businesses more exposed to “trade” were more exciting in terms of growth. Since lockdown, however, that trend appears to have reversed – but it remains to be seen as to whether this is a blip or something that will continue.

Elsewhere, Selfridges to axe 450 to shore up cash (Daily Telegraph, Hannah Uttley and Simon Foy) shows that high street gloom continues as the luxury department store announced cuts to 14% of its employees to save cash, Greggs’ profit winning streak ends in lockdown (The Times, Ashley Armstrong) shows that shop closures during lockdown have resulted in Greggs’ first loss since it listed on the stock market in 1984. However, most stores are now back open and sales last week were at about 72% of last year’s levels. * SO WHAT? * The company said that it needs to hit 80% in order to break even – so it’s not too bad, given the circumstances. It added that it will be increasing its click-and-collect service and offer delivery via Just Eat. Chief exec Roger Whiteside said that he didn’t expect the company to suffer from BoJo’s recent fast-food initiative because Greggs doesn’t advertise on TV and has been working to broaden its healthier options. It sounds to me like the company is doing what it can to get through current circumstances.

Then in Appetite for McDonald’s suffers amid lockdowns (The Times, Dominic Walsh) we see that sales fell by 30% in the second quarter due to worldwide lockdowns, but have started to recover (although the recovery has been weaker outside the US) and Starbucks logs another sales hit from coronavirus (Wall Street Journal, Heather Haddon) highlighted that global same-store sales fell by 40% in the quarter ending in June – which was actually better than analysts had been predicting. The company said that it expects things to bottom out from now and that same-store sales will recover in the US and China by the next fiscal year.

Nissan’s woes, Peugeot’s triumph and Reckitt Benckiser cleans up nicely…

In automobiles, Nissan warns of $4.5bn annual operating loss (Financial Times, Leo Lewis) highlights the firm’s disastrous results for the first quarter and potentially massive $4.5bn operating loss for the year, which it blamed on the coronavirus. * SO WHAT? * I would go further than that and say that it’s because this company is 💩, has a boring line-up and has suffered from a laughably chaotic ousting of its previous chief exec Carlos Ghosn. It announced a turnaround plan whereby it is to streamline its model portfolio, cut production and close down its plant in Barcelona. IMO, coronavirus is just a convenient excuse for its poor results – its problems are much more deep-seated – but it remains to be seen as to whether new chief exec Makoto Uchida is deluded or incredibly astute with his predictions that the company will hit full-year expectations.

On the other hand, Peugeot owner PSA delivers unexpected profit despite pandemic (Financial Times, David Keohane and Peter Campbell) yesterday announced an unexpected profit in the first half of the year and raised cost savings forecasts in its forthcoming €44bn merger with Fiat Chrysler. The merger is currently being examined by the EU competition watchdog particularly due to its combined strength in the European small van market. The merger is going to be called Stellantis. Whoever came up with that genius name probably got paid millions 😂

Then in Reckitt gets lockdown boost from sales of cleaning products (Daily Telegraph, Hannah Uttley) we see that demand for products such as Dettol and Lysol helped Reckitt Benckiser clean up at the consumer goods giant’s first half results. Chief exec Laxman Narasimhan said that the coronavirus was likely to have a lasting effect on consumer behaviour in terms of personal and general hygiene and that strong sales in these areas would continue, albeit at a less frenetic level.

…in other news…

Today, I thought I’d leave you with something that will make you go mushy and say “ahhh” (well that’s what happened to me anyway!) in Builder leaves heartwarming note for customer’s six-year-old and ‘makes his day’ (The Mirror, Paige Holland). What a nice story!