CITY 45
10 August 2019 THE WEEKGlobal stock markets continued to take
abattering after China dramatically
devalued its currency–the latest strike
in its trade war with America. Amid
deepening concerns about the health
of the global economy, investors sought
refuge in the comparative safe havens
ofgovernment bonds,the yenandgold.
Central banks in India, New Zealand and
Thailand cut interest rates by more than
expected. Meanwhile, President Trump
renewed his call on the US Fed, which
announcedaquarter-point cut last week,
to move “bigger and faster”.
In Europe, concerns were centred on
Germany,whereasteep fall in industrial
production has raised fears that the
eurozone’s largest economy could be
heading for its first recession in six
years. There was, though, better
economic news in Britain, where the
services sectorwas unexpectedly
revitalised in July, hitting its highest
level in nine months–calming fears of
an imminent recessionary dip.
The Big Fouraccounting firms–EY,
KPMG, Deloitte and PwC–indicated
they are preparing to purge risky or
unprofitable audit clients, after being
tarnished byastring of corporate
collapses and scandals.Aweek after
declaringHouse of Fraser’s problems
to be “terminal”, Mike Ashley, the
acquisitive chief ofSports Direct,
renewed his faith in the high street:
buying the preppy clothing chain Jack
Wills out of administration for £12.75m.Tesco:targets claim 4,500 jobs
Several years after CEO Dave Lewis arrived to sweep the aisles at Tesco, the
supermarket’s muddled growth strategies are still causing havoc, said Elizabeth Burden
in The Times. And now “Britain’s biggest private-sector employer” is taking the axe to
4,500 jobs, mostly from its town centre Tesco Metro shops, The 153 Metro stores,
which date back to 1992, have become white elephants–“alegacy format” jammed
unproductively between Tesco’s smaller Express convenience stores and its out-of-town
superstores, said Jonathan Eley in the FT. Analysts cheered the move, saying it would
help Lewis achieve his “promise” of getting operating margins up to 4% by 2020.
But staff were dismayed at the prospect of more job losses in addition to the 9,000
announced in January. Metro shoppers should also be dismayed, said Nils Pratley in The
Guardian. Tesco argues it has come up with “faster and simpler ways of filling shelves”.
But can these stores really “run withaquarter less staff”? In April, Lewis said he was
“withinawhisker” of achieving his target of £1.5bn of cost-savings. “Yet still the job
losses keep coming.” How about trying to boost the sales line? On that score, Drastic
Dave’s “revolution” still feels “underwhelming”.
Harland and Wolff:hitting an iceberg
So farewell, perhaps, to Belfast’s historic Harland and Wolff shipyard, said Michael
O’Dwyer in The Daily Telegraph. Once the world’s most prolific builder of ocean liners,
it employed 30,000 workers at its peak and famously produced the Titanic. But this
week, the company’s Norwegian owner, Dolphin Drilling, called in the administrators
after failing to findabuyer for the much-reduced operation, now mainly focused on oil
rig and ship repairs. Some 123 jobs are at risk. The loss of Harland and Wolff–whose
giant yellow cranes, Samson and Goliath, “areafeature of Belfast’s skyline”–would
“markasad end for overacentury of shipbuilding in the city”, said James Hurley in
The Times. But workers aren’t giving up easily. Supported by both unions and the
Labour Party, which has called for renationalisation, “employees have been taking turns
occupying key buildings”. The Government has pledged to do all it can to secure the site
–aswell it might, given that the local Democratic Unionist Party “props up” Boris
Johnson’s administration. Trade unionists said they would stand against the DUP in any
forthcoming general election “if the party did not do more to support affected workers”.
Majestic/Naked Wine: strip tease
“Sustaining Majestic Wine’s position as Britain’s leading wine retailer has provedaslog,”
said The Sunday Times. Hence the radical plan to ditch its 180 chain of shops (sold last
week to the US firm Fortress Investment for £95m) and rename itself Naked Wines after
its fast-growing online business–asubscription service with more than 200,000
customers who pay upwards of £20 per month to buy independent winemakers’ wares.
CEO Rowan Gormley, who founded Naked, has big ambitions for the stripped-down
firm: he’s apparently grooming it foraUSlisting on Nasdaq. If so, he’s merely following
the money: Naked’s sales in America rose 21% to £75.6m last year, beating the £71.8m
made in Britain. “In three or four years”, notedasource close to the company, “this is
going to be an American business withaUKand Australian offshoot”.
HSBC: exit Flint, pursued byadragonIn ashock move, the “famously conservative”
HSBC has ousted its chief executive, John
Flint, after just 18 months, said Michael Bow
in the London Evening Standard. Chairman
Mark Tucker–the “hard-hitting finance
veteran” who originally selected the
understated HSBC “lifer” for the top job –
has apparently had second thoughts about
his “pace”. Shares in the bank, which began
life in Hong Kong in 1865, fell 2%.Flint’s premature departure “sparked fevered
speculation” in the City, said Alex Brummer
in the Daily Mail. According to one theory, he
was pushed because he “found himself on the
wrong side of the US dispute with China”. Beijing was reportedly
furious when HSBC disclosures helped US prosecutors build the
case for the arrest of Meng Wanzhuo, CFO of Huawei, the
controversial Chinese telco. Doubtless that imbroglio “didn’t help
his survival chances”, but the broader truth is that Flint was, “insoccer terms”, just “a squad player”. Shares
are down 15% on his watch–reflecting the
fact that “almost every part of the enterprise”
has performed “below par”.In fact, Flint’s departure is more about
“deteriorating relationships” than any kind
of “earnings meltdown”, said Lex in the FT.
“HSBC inhabits the increasingly perilous
interzone between East and West.” It has
asizeable European operation and an
“underperforming US lender”, yet it is also
“the dominant bank in fractious Hong Kong”
and “painfully dependent on growth in
China”. Given that potentially combustible
mix, the boss needs to be “a charismatic diplomat who can make
staff jump to it when necessary”. Flint was “respected for his
quiet intelligence” but wasn’t the man for the job. HSBC’s top
brass are traditionally bank “insiders”; Tucker was an exception.
He now needs to find another “discontinuity candidate”.Flint:a“squad player”Seven days in the
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