Charlotte Street Partners

DAILY BRIEFING

DAILY BRIEFING

Three years in one

Written by Li-Ann Chin, associate
Edited by Harriet Moll, creative director
5 November 2020

Good morning,

The US Supreme Court, an American institution, was front and centre of the global news agenda yesterday but a British institution was, simultaneously, making headlines here in the UK, also in less than ideal circumstances. 

In 1884, Marks & Spencer was first established when Michael Marks, a Polish refugee opened a market stall in Leeds. On Wednesday, the group posted its first ever loss in its 94-year history as a public company, citing store closures and a slump in clothing sales as the reason for its less-than-stellar performance. In the six months to 26 September, the company made a loss of £87.6 million compared with profits of £158.8 million in the same period last year. 

Meanwhile, John Lewis announced that it will be cutting an additional 1,500 jobs in its efforts to make £300 million in annual cost savings and return to profitability. The latest job cuts come on top of the 1,300 shop roles previously scrapped in the closure of eight department stores earlier this year. A mere three days ago, Primark reportedly saw its full year adjusted operating profit plunge by 60 percent to £362 million, while full year revenues fell by 24 per cent, as a result of coronavirus restrictions and the retailer’s lack of an online presence.

Interestingly, however, a new study by the Local Data Company indicates that small stores have fared better than retail chains throughout the pandemic. According to the research, the rate of shop and restaurant closures increased by more than double during the first half of the year, rising to a net decline of 7,834 units from 3,647 in 2019. And yet, independent businesses – which represent a hefty 64 percent of the retail and leisure market – accounted for less than a third of the net loss of occupied units. 

Having capitalised on their agile, innovative nature and in-depth understanding of the local area, small businesses sought to introduce new product lines, offer food deliveries and pivot online during the first lockdown to fulfil the rapid shift in consumer habits. Their big-name counterparts, in contrast, have seemingly struggled to adapt. 

Asserting that the firm’s performance has been ‘much more robust than at first seemed possible’, chief executive of M&S, Steve Rowe spoke optimistically about how Covid-19 has driven the company to bring forward ‘three years’ of change in one, in becoming a leaner, faster and more digital business

It would appear that independent retailers have, in fact, beaten him to the punch. 

News

As of this morning, the BBC projects that Democrat presidential candidate Joe Biden has won in Michigan while US media forecasts that he has clinched Wisconsin. No result has yet emerged in Pennsylvania. Biden currently maintains the edge in the race at 243 Electoral College votes while Trump has 214

In a House of Commons vote on Wednesday, MPs officially approved the new coronavirus restrictions by 516 to 38, a majority of 478. Pubs, bars, restaurants and non-essential shops are now expected to close across England and remain shut until 2 December. Schools and universities, however, will stay open.

The NHS in England will return to its highest level of emergency preparedness from midnight on Wednesday as it copes with a surge of coronavirus patients that in some areas exceeds the numbers seen at the height of the pandemic in April. (£) 

Business and economy

The Bank of England monetary policy committee confirmed today that it has expanded its virus crisis support by £150bn, to ensure that the UK economy is able to handle a new England-wide lockdown and a contraction in the final three months of the year. Interest rates were also kept low at 0.1 percent, defying speculation among some commentators that it could opt for negative rates for the first time in its history.

Economic recovery in the UK stalled last month as the IHS Markit/Cips purchasing managers’ index for services dipped to 51.4 in October, the slowest monthly growth in the country’s business sector since June. According to Tim Moore, economics director at IHS Markit, the second lockdown in England and a worsening Covid-19 situation across Europe signals that the UK seems set for a double-dip recession this winter and a far more challenging path to recovery in 2021.

Sainsbury’s has announced plans to eliminate approximately 3,500 jobs across Argos stores and supermarkets amid ongoing restructuring. The announcement comes as chief executive Simon Roberts warns the business is down 1.1 percent for the year, with fuel tumbling 44 percent and pre-tax losses of £137million.

The U.S. trade deficit narrowed in September as exports continued to recover from the global economic downturn caused by the coronavirus pandemic while imports slowed. On Wednesday, the U.S Commerce Department posted a deficit of $63.86 billion for September 2020, contrasting with $67.04 billion in August and $47.84 billion a year earlier. (£)

Columns of note

When many of us retreated to the safety of our homes to avoid the virus during the first lockdown in April, key workers across the nation were working harder than ever. In the Financial Times, Sarah O’Connor highlights how it is essential for key workers be kept safer during second wave. 

Imagine a woman being elected to the highest office despite her being lousy on the details, indifferent to facts, forgetful and untrustworthy but likeable and — to her supporters — fun. You can’t. It is unthinkable. Voters and allies alike would be repelled by her arrogance and incapacity. In The Times, Jenni Russell presents a compelling argument on how character flaws only seem to matter if you’re a woman. 

Cartoon source: The Telegraph

Markets

What happened yesterday?

After a wild election night sowed confusion across U.S. markets, investors frantically bid up stocks Wednesday, sending major averages to the biggest rallies in seven months, as they grew more confident that the tightly contested outcome would ensure key elements of the bull market remain intact for years to come.

The S&P 500 Index surged 3.4% to 3,483.92 as of 12:34 p.m. New York time, the highest in three weeks on the largest jump in seven months. The Nasdaq 100 Index surged 5% to 11,840.02, the highest in almost three weeks on the biggest jump in seven months. The FTSE 100, on the other hand, climbed gradually to finish up 88 points, 1.5%, at 5,875.2. The FTSE 250 ended up 258 points, 1.5%, at 17,749.9.

The yield on 10-year Treasuries decreased 13 basis points to 0.77%, the lowest in a week on the biggest tumble in more than seven months. Similarly, the yield on 30-year Treasuries decreased 13 basis points to 1.55%.

In terms of commodities, West Texas Intermediate crude increased 3.3% to $38.90 a barrel, the highest in more than a week on the largest climb in more than four weeks. Gold weakened 0.7% to $1,895.86 an ounce, the biggest fall in a week.

In company news:

The founding family of Clarks is reportedly expected to lose control of the shoe retailer for the first time in its 195-year-history following a £100m rescue deal.

Facebook and Twitter scrambled to curb online election interference and misinformation yesterday, adding labels to a stream of misleading posts from President Trump.

Uber and Lyft’s share prices soared after California voted to allow gig economy companies to keep treating their workers as independent contractors.

Lloyds Banking Group is to cut an additional 1,070 jobs – primarily in back-office support operations for technology and retail – despite reporting better-than-expected profits on the back of a UK mortgage boom less than a week ago.

What’s happening today?

Finals
Bowleven
Kin and Carta                       
Rdi Reit

Interims
Auto Trader
Aveva Group
Sainsbury (J)
Trainline
Wincanton
Wizz Air

AGMs
Arc Minerals
JPMorgan Emerging Markets Investment Trust
Panthera Res.
Pci-pal

UK economic announcements
(09:30) PMI Construction

Int. economic announcements
(07:00) Factory Orders (GER)
(13:30) Initial Jobless Claims (US)
(13:30) Continuing Claims (US)

Source: Financial Times

did you know

In the First World War, actor Basil Rathbone led covert missions disguised as a tree.

Parliamentary highlights

House of Commons

Oral questions
Digital, Culture, Media and Sport (including Topical Questions)
Attorney General
 
Business statement
Business Questions to the Leader of the House – Mr Jacob Rees-Mogg
 
Backbench business
Debate on Coronavirus Business Interruption Loan Schemes – Owen Thompson, Liz Saville Roberts
General Debate on the UK Government’s role in ensuring innovation and equitable access to treatment within the international covid-19 response – Wendy Chamberlain, Sarah Champion
 
Adjournment
Offshore wind transmission connections – Duncan Baker

House of Lords 

No business scheduled

 

Scottish Parliament 

Portfolio questions
Ministerial Statement: Young Persons’ Guarantee
 
Stage 1 Debate: Defamation and Malicious Publication (Scotland) Bill
 
Business Motions

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