Wednesday 03/03/21

1. In MACROECONOMIC NEWS, Biden makes a vaccine pledge, Germany’s rollout continues to disappoint, UK listing rules face changes and the new takeover rules could ease
2. In RETAIL/CONSUMER NEWS, CVS and Walgreens stand to gain on vaccines, Boohoo faces more trouble, Aldi and Lidl lose out and Hotel Choc loves online. Furlough is extended, house prices rise, lockdown spending booms, Flutter benefits from the US and Robinhood might face opposition
3. In CAR-RELATED NEWS, Volvo commits to electrify, Nio suffers chip shortage and Hertz gets a lifeline
4. In INDIVIDUAL COMPANY NEWS, Instacart gets a punchy valuation and Deliveroo is on track for its IPO
5. AND FINALLY, I bring you a parent’s nightmare…

So Biden promises and Germany loses ground while UK listings and takeover rules are likely to face a shake-up…

📢 *** Watson’s Daily – QUICK BITES alert! *** There’s ANOTHER Quick Bites report in today’s e-mail! Have a look!

Biden says US will have enough jabs to vaccinate all adults by end of May (Financial Times, Hannah Kuchler and Kiran Stacey) highlights an important development for the US thanks partly to an unusual production deal between Merck and Johnson & Johnson where the former will manufacture doses of the latter’s Covid vaccine. Biden said that this would accelerate production of the vaccines to the extent that there will be enough doses to inoculate every adult in the US within 90 days – a full two months earlier than had previously been the case. He added that teachers everywhere will be able to sign up for a vaccine via their local pharmacy as part of a push to reopen schools within the first 100 days of Biden getting into office. * SO WHAT? * I think that this is a really creative solution to an immediate problem because although Johnson & Johnson is the world’s biggest healthcare company, Merck is actually better at producing vaccines (although it’s not been successful thus far on the Covid front, ironically). Sanofi – also a major vaccine maker that hasn’t been successful thus far with its Covid vaccines – has also agreed to boost the manufacture of J&J’s vaccine in Europe. J&J’s vaccine is a major leap forward as it is only single-shot and can be kept at normal refrigerator temperatures, making it easier to roll out. This is a great bit of news from Biden. Like everyone, he is trying to get his economy back on track – and the key to doing that is getting the population vaccinated. If the supplies are there by the end of May, his next challenge will be distribution.

In contrast to this, and following on from what I said yesterday (and from today’s Watson’s Daily – Quick Bites article in your e-mail!), Germany loses Covid crown as vaccine campaign falters (Financial Times, Guy Chazan) shows that the country is falling way behind on vaccinations with its 6.2m jabs administered versus 75.2m in the US and 21m in the UK. Staggeringly, it has 2.3m shots gathering dust (many of which are the AstraZeneca vaccines because authorities and media did a great job of effectively slagging it off a few weeks ago) – and although

it now has many more doses flowing into the country after a bit of a bottleneck, authorities are now getting it in the neck for their inability to get it out. The official line is that the doses are being held back to build up stocks for the second dose. My @rse. * SO WHAT? * One of the major problems is that the Germans have to go through a 10-step online process, including 2-factor authentication. In Poland, for example, you just have to enter your social security number. Authorities didn’t cover themselves with glory either when they sent vaccination letters in the post to a number of dead people. Germany has gone from being at the forefront of how to act in the face of a pandemic to the back. Given that it is the engine of the European economy, this is a very big deal.

Then in UK listing rules set for overhaul in dash to catch Spacs wave (Financial Times, Daniel Thomas and Philip Stafford) we see that a Rishi Sunak-commissioned review of the City, due to be published today, will suggest a number of changes to help London compete better with rivals in New York and Europe for listings. New York and Hong Kong have been particularly popular with big tech listings in the last few years and the former has benefited most recently from the SPAC boom. Other measures have been suggested that are meant to appeal to entrepreneurs and the FCA has been asked to make doing business in the UK attractive, with a consultation paper to be published on how to do this by the summer. The government said it would review the recommendations. * SO WHAT? * These measures all sound fairly reasonable, but TBH, they need to be acted on as quickly as possible because every day wasted means we get further behind the competition, edging towards that point of no return where the gap is just too big to breach.

Ministers narrow list of niche sectors hit by new UK takeover rules (Financial Times, Jim Pickard, Tim Bradshaw and Daniel Thomas) shows that UK ministers are streamlining the list of areas where foreign investments have to be scrutinised under the National Security and Investment Bill that was introduced last November and is currently going through the House of Lords. Under the new measures, prospective buyers of companies, big shareholdings or intellectual property in 17 “sensitive industries”will trigger state scrutiny in order to protect key industries. * SO WHAT? * The main criticisms here have been that if the rules are too strict they will stifle early-stage investment – and if they are too broad in scope, they will cover stuff that really isn’t that key.

US retailers benefit from the jab, Boohoo faces headwinds, Aldi/Lidl lose ground, Hotel Choc gives online fixes while consumers get furlough extension, buy houses and spend money on fun and excitement…

CVS, Walgreens look for Big Data reward from Covid-19 vaccinations (Wall Street Journal, Sharon Terlep) shows that chains such as CVS Health, Walmart and Wallgreens-Boots Alliance are looking to benefit from doling out vaccines by harvesting everyone’s contact details, using them to keep in touch and personalise marketing – even after people have their second shots. The cost of administering the vaccines (including labour, logistics and other things) is covered by the government, so they are effectively getting this information for free! Winner winner, chicken dinner (for the companies)! * SO WHAT? * I think this is a bit naughty. OK, so these places aren’t charities, but harvesting details and then doing things like analysing what people buy after they’ve had their shots and getting staff to cross-sell items like ice packs and ibuprofen etc. seems a bit iffy to me. You can’t really blame the retailers, I guess, as they are just making the most of an opportunity and taking the moral high ground would probably end up boosting their rivals. I do wonder whether there is a case here to be answered for privacy should someone be so minded, especially because the nature of the data is very personal IMO. Usually it’s the Big Tech companies that are under focus for this sort of thing – not retailers – but I think this should be extended.

Elsewhere in retail, Boohoo ruffled by ban claim (Daily Telegraph, Laura Onita) highlights a share price fall yesterday following reports that it might be facing a US export ban related to allegations of poor work practices at its suppliers. Sky News reported that the Customs and Border Protection (CBP) in the US had enough evidence to launch an investigation. * SO WHAT? * An import ban in the US would be a real dent for Boohoo’s international expansion plans, especially because its US sales contributed to about 20% of the company’s revenues. I think that it’s too early yet to get too down on Boohoo as we don’t know how seriously this will be taken but clearly, if the CBP wants to make an example of them, this could be problematic. The thing is, when the Leicester scandal originally broke July, everyone got all incensed about it and the share price tanked. A few months later, though, it recorded record results because I just think that as long as they sell things like £1 beach dresses and  £2 t-shirts, people will just park their morals and feel the bargain.

Elsewhere in retail land, Aldi and Lidl lose out as UK online grocery sales hit new heights (The Guardian, Sarah Butler) cites the latest figures from Kantar which show that both supermarkets lost market share for the first time in over ten years and Tesco actually increased its share for the

first time since 2016. * SO WHAT? * Unsurprisingly, online grocery sales – or lack thereof – are the key here with the established retailers having better online capability and their own distribution networks versus Aldi and Lidl with their much less capable offerings. FWIW, I think that people are going to be ditching the online shop overall (they may drop it altogether or just do it every now and again) and so I think that Aldi and Lidl could start to bounce back. Even if people do stick with online shopping I don’t think it’s going to increase as much as it has done over the last year. Maybe I will be wrong, but I think if you have toyed with the idea of doing your grocery shop online you will have done it by now.

Then in Hotel Chocolat boosts sales as fans feed craving online (The Guardian, Sarah Butler) we see that Hotel Chocolat announced that it had achieved sales growth in the UK in addition to new markets in the US and Japan despite stores and cafes being closed for most of 2020 as online sales almost tripled. It’ll be interesting to see what happens when they open up again, but I would have thought they will have a bumper Easter despite the average price of their eggs 😱!

As for consumers, Budget to give £20bn extension to UK Covid support until September (Financial Times, George Parker, Chris Giles and Delphine Strauss) will be music to the ears of many as this is likely to avert sudden mass unemployment and House price growth shows February rebound to 6.9% (The Times, Gurpreet Narwan) shows that those who can are moving house, according to the latest figures from Nationwide. An extension to the stamp duty holiday would surely boost prospects for the housing market as we move into spring and summer.

In the meantime, we get an insight into what consumers are spending their money on in Lockdown spending on fun and games hits record £9bn (Daily Telegraph, Laura Onita) as data from the Entertainment Retailers Association said that UK consumers spent a record £9bn on music, videos and games as well as spending more on groceries last year and Flutter reports surge in US customers as states loosen gambling rules (Financial Times, Alice Hancock) shows that Americans are turning to online gambling in increasing numbers. The group, which owns brands including Paddy Power and SkyBet said it got more customers in the week before the Super Bowl this year than it did in the entirety of 2019! Talking of gambling, Robinhood at risk of arrows from Biden’s pick for SEC (Daily Telegraph, James Titcomb) shows that there may be trouble ahead for the online trading platform as president Biden’s incoming choice for the Securities and Exchange Commission, Gary Gensler, has already indicated that he will be investigating the business models of trading groups including Robinhood. They appear to users to be “free” when actually the companies make money by sending on their flow to market makers. This could be an unwelcome development as Robinhood is thought to be making preparations for a flotation in the next few weeks.

Volvo announces electric intentions, Nio has chip problems and Hertz gets a lifeline…

Following recent commitments to electrify by rivals such as Ford and Jaguar Land Rover, Volvo says it will make only electric cars by 2030 (The Guardian, Jasper Jolly) highlights the Geely-owned Volvo Cars announcement. It added that it would sell its electric cars direct to consumers – rather than via independent dealerships – via an online portal. * SO WHAT? * This is just an opinion, but I would have thought that Volvo is well-placed to benefit from the ongoing EV revolution as it has a decent product and a good name. I’m not so sure about the bypassing of the dealerships though, because Tesla faced an enormous backlash when it announced it was just going to sell online – only to have to reverse that decision very shortly afterwards. I have talked about my concern regarding these promises being backed by action last week due to the fact that there are limited supplies of things like cobalt and lithium but I would have thought that having a Chinese backer would be pretty useful in this regard because Chinese seem to have a decent hold in supplies already.

Talking of shortages, Chinese electric carmaker Nio warns of hit from global chip shortage (Financial Times, Christian Shepherd) shows that Chinese EV specialist Nio has warned that battery and chip supply problems are going to restrict production, making its aggressive growth targets that much harder to achieve. Nio shares shot up by over 1,000% last year!

Then in Hertz receives $4.2bn rescue offer in effort to exit bankruptcy (Financial Times, James Fontanella-Khan) we see that Hertz has received a rescue offer from a consortium of travel industry investors who want to take the car rental company out of bankruptcy. The plan needs to be approved by a bankruptcy court – and a hearing is due on April 16th. The troubled rental company filed for bankruptcy in May last year.

Instacart raises more money and Deliveroo approaches a listing…

Instacart valued at $39bn in funding round ahead of IPO (Financial Times, Dave Lee) shows that the US grocery delivery app has just raised a whopping $265m from existing investors, effectively doubling its valuation. It said that it would use the money to increase headcount across the business. It is inching ever-closer to a much-anticipated IPO…

Deliveroo reroute on riders could put brakes on listing (Daily Telegraph, Morgan Meaker) shows that investors may push for lower valuations in Deliveroo’s upcoming IPO in light of the recent UK Supreme Court decision that forced Uber to reclassify its drivers as workers – and not contractors – thus upping the company’s fixed costs. If you are interested in the ins and outs of this gig economy business model, I would recommend you read this article because the contractor/employee thing has been going on for quite some time now. Will they change??

…in other news…

I thought I’d leave you today with one of the horrors of parenthood in Mum threatens to put kids on eBay after they redecorate house with talcum powder (The Mirror, Luke Matthews). This is not what you want as a parent 😱!!!