Wednesday 31/03/21

1. In VACCINE & MACRO NEWS, Merkel and Macron crawl to Putin, Le Pen gathers pace, Suez repercussions will reverberate and the UK’s economic looks towards recovery
2. In CONSUMER & RETAIL NEWS, we go mad for Easter eggs, the over-65s return to the shops, Lululemon and Chewy do well and GameStop gets an Amazon chief
3. In TECH NEWS, Xiaomi announces plans to make EVs, Foxconn warns of continued component shortages and Renesas continues efforts to diversify
4. In M&A AND IPO NEWS, Spotify buys Locker Room, Deliveroo goes low, Oxford Nanopore aims to float and bankers count fat IPO fees
5. AND FINALLY, I thought I’d leave you with some Aldi tricks and the world’s best sausages

So Merkel and Macron seek Russian help, Le Pen makes progress in France, the Suez blockage could have lasting repercussions and the UK teeters on the brink of recovery…

When you read the lead story of the Daily Telegraph today, Merkel and Macron turn to Putin for vaccines (Daily Telegraph, Laura Donnelly, Ben Riley-Smith and Justin Huggler), you imagine President Putin in his office rubbing his hands together and perhaps having a celebratory drink as the two European leaders asked him last night via video call to provide the Russian Covid vaccine to the EU after Merkel suspended the use of the Oxford/AstraZeneca vaccine for the under-60s. This must be particularly galling for French President Macron, whose foreign minister Jean-Yves Le Drian only a few days ago accused Russia of using its vaccine as a “propaganda tool”. * SO WHAT? * What an absolutely massive gift for Putin! He must have thought that all his birthdays and Christmases had come at once! He is going to gain massive leverage with Europe (potentially weakening any anti-Russia sanctions both now and in the future) and probably get greater domestic take-up of the vaccine as Russian citizens see others receiving the jab into the bargain. I bet Biden won’t be too pleased about this.

Then in Marine Le Pen touts national unity government for France (Financial Times, Victor Mallet) we see that the leader of the far-right Rassemblement National (formerly known as the Front National) is continuing to consolidate her position one year out from the next French presidential election as she is running almost neck-and-neck with Macron in the opinion polls. She has been doing a massive overhaul of her extreme-right party over the last ten years, ran Macron close until the final round of the last election

and will probably find it easier to recruit ministers in a future government given her rising popularity. She is saying that voters are no longer left or right, but nationalists or globalists and touts BoJo’s success at the most recent General Election re getting lefties to vote for him as something she would aspire to. * SO WHAT? * Macron is not doing well at the moment and will really have to turn things around over the course of the next year in order to fend off the likes of Le Pen. It is amazing to think how far he has fallen given the landslide victory he enjoyed in the last election but a year is a long time in politics! France’s modest and quietly unassuming president has still got plenty of time to muck things up even more/improve greatly 😂.

Meanwhile, Suez Canal opens, but shipping will be snarled for months (Wall Street Journal, Alistair MacDonald, Costas Paris and Jennifer Smith) contends that although the current logjam will be cleared in three to four days, according to officials, congestion at ports and costs are highly likely to increase given how finely balanced their sailings and loadings are.

Elsewhere, UK economy poised to recover after second wave (The Guardian, Richard Partington) is a really interesting article that takes a look at different economic indicators such as retail sales trends (total sales volumes are now approaching pre-pandemic levels but record numbers of shops have closed down), population mobility (there’s more activity going on on the roads at the moment but it’s still way lower than pre-pandemic levels), rising stock markets (although the FTSE100 is still 1,000 points below its pre-pandemic peak), low inflation due to record amounts of support from governments, better-than-expected unemployment figures and rising house prices. * SO WHAT? * Overall, there are signs of recovery here, albeit from a horrendously low base of last year – and it all depends on the ongoing success of vaccine rollout and how willing the government is on extending things like furlough and the stamp duty holiday.

We look at what consumers are spending money on and how GameStop has made a decent hire…

So just what are consumers spending their money on these days? Britons splash out £50m more on Easter treats before Covid lockdown eases (The Guardian, Zoe Wood) cites the latest figures from Kantar which show that we have spent more money on Easter treats as the prospect of meeting friends and family over the Easter weekend looms large! Interestingly, the figures also showed that grocery sales volumes are starting to revert to normal levels after the lockdown frenzy as they weakened by 3% versus March 2020 (which is when everyone was panic buying pasta and toilet rolls!). Online groceries boom slows as over-65s return to shops (Daily Telegraph, Laura Onita) highlights another trend of older people, being emboldened by vaccinations, returning to shops at double the national rate while online sales growth is slowing down. * SO WHAT? * I maintain my opinion that there will be a spending boom in the UK when lockdown lifts and that people saying things like “the way people shop has changed forever” and “no-one will ever work five days in the office again” are wrong (and usually talking their own book). They will most certainly change in the short term, but I still think that we will revert to old habits in increasing numbers over the mid-to-long term. 

Elsewhere, Lululemon bolsters revenue, profit (Wall Street Journal, Charity L. Scott) shows that Lululemon Athletica displayed continued strength in both sales and profit to cap a highly successful fiscal year. Unsurprisingly, there was a chunky rise in online revenues over lockdown and it aims to increase its share of male customers in 2021 with new products. Clearly, every Pelotoner needs nice stuff to sweat in! Then in Chewy turns quarterly profit as Covid-19 boosts online sales (Wall Street Journal, Maria Armental) we see that the online pet products retailer benefited both from the rise in online shopping, but also for the trend of buying pets under lockdown. * SO WHAT? * Both companies did well from the online boom last year and although I think they will continue to do well this year as people try to lose their lockdown pounds and feed their lockdown pets, the growth rate is bound to slow down unless they can find new and untapped areas.

Then in GameStop shops at Amazon in online push (The Times, Callum Jones) we see that GameStop has recruited a new chief growth officer from Amazon as part of an ongoing management shake-up being instigated by Chewy co-founder Ryan Cohen, who is trying to lift the company out of its current rut. Elliott Wilke most recently helped to run Amazon Fresh’s stores and will now overlook growth strategies and marketing. * SO WHAT? * GameStop garnered a huge amount of attention from the whole Reddit/WallStreetBets/Melvin Capital thing, but it still needs to address the underperformance of its core business. It sounds like things are starting to happen, though, although it would be nice for them to announce some kind of punchy mid-term plan!

Xiaomi announces new plans, Foxconn is pessimistic about component shortages and Renesas continues efforts to diversify…

Xiaomi unveils plan to make electric cars (Financial Times, Ryan McMorrow and Christian Shepherd) shows that the Chinese smartphone maker has announced intentions to earmark $10bn to build a smart car within the next ten years. This means it’ll be the latest in a long line of tech companies giving EVs a go after the likes of Baidu/Geely and Apple. Let’s hope it doesn’t end up like Dyson! There were no further details given as to whether it would be launching a new brand or whether it would turn to third parties for outsourcing. * SO WHAT? * This is getting to be a very crowded market! I know this is going to sound cynical but I would have thought that Xiaomi will either break past trends and absolutely knock this out of the park 🤔 or it will go a certain distance and realise the road is too long and that it will consolidate with others. Yes, EVs certainly look like they will see a huge uptick in growth but as Tesla has found, it is a long long road to get ahead – and then when you get there you’ve got all these other carmaking giants to contend with!

Foxconn warns components shortage to last until 2022 (Financial Times, Kathrin Hille) shows that Apple supplier Foxconn (aka Hon Hai Precision Industry on the Taiwan Stock Exchange) believes that the current global shortage of components is getting worse and will last into next year. This news comes shortly after a warning from Samsung Electronics and a string of motor manufacturers and suppliers saying the same thing. The company admitted that it would not be suffering as much as smaller companies (presumably because they are further up the pecking order as a result of the volumes they order), but

they would still feel the pinch nevertheless. The company itself painted a pretty positive picture for itself as demand across all its products was strong, adding that preparations for shifting some manufacturing away from China were proceeding apace. Foxconn/electric vehicles: Apple car inspires supplier’s new business model (Financial Times, Lex) is a really interesting article that looks at Foxconn’s efforts to diversify its business into making an EV platform that will take care of 80% of the development of a car in exchange for carmakers contracting all production to Foxconn. * SO WHAT? * The company is still heavily reliant on Apple iPhone assembly, but given the impetus for everyone to make EVs – and the potential to save time by using Foxconn’s platform – this definitely sounds like an interesting idea with potential. Its aim of taking 10% of the global electric car market by 2025 are certainly ambitious, but given this company’s history, it is eminently possible. The component shortage will be a short-term annoyance but I would have thought that the company itself will be OK.

Chip industry pressure spur Renesas to diversify (Financial Times, Kana Inagaki) shows that Renesas is still going to go ahead with its $4.9bn acquisition of Apple supplier Dialog as a way of diversifying away from automotive chips where it currently generates 50% of its revenues (Dialog makes chips for internet-connected devices). It has come a long way since 2010 when it was rescued by a government-backed fund that merged the chip units of Hitachi, Mitsubishi Electric and NEC. * SO WHAT? * Diversification sounds like a good idea when you consider that pressures are increasing on supply chains that involve China, Intel’s recently stated intentions to build more chip-making facilities and the stranglehold that TSMC has on the automotive sector. Taiwan’s TSMC is the world’s #1 contract chipmaker and it has a market share of 70% of all microcontroller chips used in cars.

Spotify buys Locker Room, Deliveroo lowers its ambitions target price, Oxford Nanopore announces intention to float and IPOs rake in record fees…

In a quick scoot around some of the big M&A and IPO stories today, Spotify acquires sports-talk app Locker Room (Wall Street Journal, Anne Steele) highlights Spotify’s continued move into live audio by buying the sports-chat app, continuing the company’s expansion into podcasting and audio more generally. Locker Room is only less than a year old but has grown exponentially over lockdown, along with other apps such as Clubhouse, Twitter Spaces and Water Cooler. Spotify wants to rebrand and relaunch the app with a focus across sports, music and pop culture.

Things aren’t so good in Deliveroo sets listing price at bottom of initial range (Financial Times, Tim Bradshaw) as the company set the price of its IPO at £3.90 per share, taking £1.3bn off the valuation it had previously hoped for. It blamed volatile market conditions but, let’s face it, it’s because many they are floating at the peak of their powers for an inflated sum.

Things are a bit more positive in Oxford Nanopore (The Guardian, Julia Kollewe and Joseph Smith) as the start-up from Oxford University whose covid-variant tracking tech was bought by the UK government has outlined plans to float on the London Stock Exchange in what could be a very strong debut. This will be something that will keep the party going for investment bankers as Record first-quarter fees for City banks as floats take off (Daily Telegraph, Simon Foy) shows that the banks have raked in record amounts from deal-making, listings and capital raising in the first quarter of the year. It looks to me like the pipeline is still fat and 2021 will prove to be a bumper year!

…in other news…

I thought I’d leave you today with insight into Aldi’s Jedi mind tricks in Aldi’s tricks to make us spend more – customer decompression zone and Easter egg war (The Mirror, Kyle O’Sullivan) and some important news in Best sausages around the world – and top places where you can find them (The Mirror, Nigel Thompson). My personal favourite sausages of the supermarket variety are Pork Whites. Nice 😋