home - The Share Centre logo

Your share of investment news and views


Visit Share.com

Bull and Bear – an optimistic and pessimistic view of investment news. Today’s stories: Marks and Spencer versus John Lewis: The mysterious thing about retail success is that there is a mystery. Germany moves towards recession. Jack climbs US beanstalk. Chinese vehicle sales overtake Europe. UK trade 

Marks and Spencer versus John Lewis: The mysterious thing about retail success is that there is a mystery

Why oh why? John Lewis, it appears, can’t put a foot wrong. Sales were up 26.5 per cent in the week ending 22 December on the same week last year. In the five weeks to December 29, like for like sales at the stores were up 13 per cent, while online sales were up 44 per cent.

Do you remember when John Lewis was closed on Mondays and would not accept credit cards? And no, you would not have to have been born when Queen Victoria was queen to remember such a time. In fact, you would only need to be old enough to remember the early years of Tony Blair’s premiership. When the stores changed, and opened on Mondays (and Sundays) and decided to accept credit card payments, you could understand why it suddenly enjoyed such growth. But why now?

Well, the answer is not hard to find. All you need to do is visit your nearest John Lewis, and look around. Your sense of sight, hearing, touch, smell and even taste will tell you why the store is doing so well. Try the Chicken Moroccan soup in its café.

Compare it with Marks and Spencer.  Like for likes in the 13 weeks to December 29 were down 3.8 per cent.

The BBC quoted a so-called expert this morning as saying the M&S: “Sells clothes to middle aged women with no fashion sense.” That may be little harsh, but only a little.

Its array of clothes is just not good enough. Okay, the retailer has overhauled its merchandise team, and that may do the trick, but frankly the evidence is yet to be seen.

In contrast the food part of M&S saw like for likes jump 0.3 per cent. Not exactly a runway boom, but better than a kick in the pants (even if the pants do carry the St Michael tag).

Maybe investors need a salivating counter. If you can visit the M&S food section and not salivate, you are doing well.

Contrast M&S with Next, and it all gets a little worrying. These days Next just has that whiff about it: the clothes selection looks interesting, varied, less dull.

There was a big mess up over the publication of the M&S results. Due to a media leak, the company was forced to reveal its figures 12 hours ahead of schedule.

But frankly, the real mess up is far more serious than that. Maybe it needs to see the return of Stuart Rose, or perhaps it just needs another George Davies.

Before the topic of M&S closes, here is one more observation. Do you remember those days just before Rose took over, when Philip Green tried to buy the company? M&S seemed to be on the road to ruin. It may be in danger of moving back to that road.

Germany moves towards recession

Frankly, Germany has looked to have been close to recession for many months now. Many times last year, the Purchasing Managers’ Index suggested Germany’s economy contracted. But the official data bellied the surveys.

Alas, it’s the official data that is looking worrisome now.

November saw a 0.2 per cent month on month increase in Germany’s industrial production. This follows a 2 per cent month on month drop in October, a 1.2 per cent fall in September and a 0.4 per cent fall in August.

Or look at it this way: industrial production fell 2.9 per cent year on year in November.

There was a hint of good news, but further consideration suggests that even that may prove to lack substance.

The first bit of vague good news: at least November saw a month on month rise. The second bit: manufacturing output rose by 0.4 per cent.

So this begs the question: what will happen next?

Unfortunately the latest PMIs for December hint at a sharp deterioration in the month.

Germany is perilously close to recession.

But there are some more encouraging signs; for one thing Germany is having success selling its wares outside Europe, and for another, as was pointed out in today’s thought for the day, there is a good chance that German wages will increase this year.

Jack climbs US beanstalk

Tim’s gone, Jack looks to be in.

Barring some 11th hour shock, Timothy Geithner’s replacement as US Treasury Secretary is going to be Jack Lew.

So, who is Jack?

He was born in 1955, and is a law graduate from Harvard.

Looking over his CV, there is a distinct lack of the name Goldman Sachs. Or indeed any investment bank, with one exception. As an attorney, he specialised in electric power generation. He also had a spell as Executive Director of the Center for Middle East Research.  He worked as President Bill Clinton’s Special Assistant for a couple of years, and then worked at the department of Legislative Affairs, before joining the Office of Management and Budget (OMB), where – under Bill Clinton – he became the director. During the George W Bush era, he worked in academia, and then in 2006, the name of a bank appeared. He worked as the chief operating officer of Citigroup’s Alternative Investments Unit. Incidentally, this unit shorted US housing stock.

I’m not sure what to make of his bet against the US housing market. Does that make him a shrewd cookie, or one of those wicked speculators? The media may not like it, but the truth is that neither Mr Lew nor fellow contrarian investors caused the US housing market to crash. That job was done by the sheep that backed subprime. Certainly this Jack did not fall down, and did not break his crown.

Under Obama, he was back working for the government, and in late 2010 he became the Director of the OMB again.

He seems like an impressive fellow. He will need to be in order to try to bring politicians on Capitol Hill together, and perhaps issue a trillion dollar coin.

There does seem to be a certain lack of economics in his background. Maybe that is a good thing.

Chinese vehicle sales overtake Europe

14.68 million cars seems like rather a lot. That’s how many passenger vehicles were sold in China in 2012. In the same year, sales in Europe were just 12.5 million. According to the ‘China Daily’, sales in China in 2012 matched the level seen in the US in 2009. The paper quotes a German analyst as predicting the Chinese market could eventually be as big as the European and US market combined. See: Vehicle sales overtake Europe in 2012

Of course, Germany is doing pretty well out of it, as is the German owned Rolls Royce.

UK trade

The latest data on UK trade pointed to an increased chance of UK plc heading back into recession.

The trade deficit in the first two months of Q4 was £7.2 billion, compared to £8.3 billion for the whole of Q3.

The following may interest you.

In November the UK’s top export markets were as follows:

Germany – £3.15 billion
US – £3.02 billion
Netherlands – £2.09 billion
France – £1.75 billion
Irish Republic – £1,45 billion
Belgium-Luxembourg – £1.21 billion
China – £0.84 billion
Spain – £0.72 billion
Italy – £0.69 billion
Sweden – £0.58 billion

Top imports were:

Germany – £4.6 billion
Netherlands – £3.02 billion
China – £2.52 billion
USA – £2.40 billion
France – £1.97 billion
Belgium-Luxembourg – £1.66 billion
Norway – £1.59 billion
Italy – £1.114 billion
Irish Republic – £1.02 billion
Spain – £0.96 billion

These views and comments are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees.


Showing no comment

Add a comment

* - Required Field.

 

Tags