MarketLine Blog

Posts written by Nicholas Wyatt

Foot Locker: Share price slides on disappointing results

MarketLine

On Friday August 18, Foot Locker announced financial results for its second quarter ended July 29 and they were not what the markets had expected. In fact, they were way short of what the markets anticipated and consequently, the company’s share price plunged. There is a suggestion that product may be at least partly to blame and as Foot Locker is reliant on the goods manufactured by the likes of Nike and Under Armour, the news had a detrimental impact on their share prices too. High-priced products that have failed… Read more

Netflix buys Millarworld as it looks to backwards integrate

MarketLine

Online television subscription service Netflix is now a firm fixture in millions of homes across the world. It has enjoyed great success in recent years, adding subscribers en route to becoming a $9bn business. One of the key drivers of this success has been the company’s Netflix Originals shows. These are created by the company itself and provide a USP as the content is exclusive to Netflix. The company is aware of how vital these shows are and continues to develop more. The acquisition of Scottish comic book firm Millarworld… Read more

Another headache for RBS as European Commission probes plan to abandon Williams & Glyn sale

MarketLine

It seems like an eternity since the European Commission (EC) told RBS that it needed to divest of some of its banking operations as a result of receiving state aid in the form of a bailout. The EC argued that it would be unfair to enjoy such a position of power in the UK banking market (particularly in the SME segment) having needed such an injection of government cash. Almost nine years on from receiving that funding, the bank is no closer to any such divestment, having seen three separate… Read more

South Korea and China: WTO complaint must be resolved swiftly and amicably

MarketLine

In July 2016, American and South Korean military officials agreed to deploy the Terminal High Altitude Area Defense (THAAD) missile defense system in South Korea. China was unimpressed, seeing the move as an act of aggression and intimidation by the US close to its borders, as well as citing concerns that it could interfere with the efficacy of its own military capabilities. On March 20, 2017, South Korea complained to the WTO that China’s unease with the THAAD situation has caused it to retaliate economically, although it was keen to… Read more

Sky high golf equipment prices counter-productive

MarketLine

Sales of golf equipment have fallen noticeably in recent years, with the sport’s traditional markets of the US, Europe, and Japan particularly affected. Falling participation levels are driving a fall in equipment sales as people baulk at the price of golf and slow play issues make a sport for which many simply do not have time in a society that demands people spread themselves thinly hard to access. This has impacted manufacturers with TaylorMade-adidas in particular experiencing severe problems. A constant churn of new equipment has led to a need… Read more

Trump’s win is good news for US economy

MarketLine

Donald Trump’s whole mantra during his campaign (as evidenced by his rather natty headwear) has been to ‘Make America Great Again.’ In order to do this, he knows he must make the US competitive on the global stage. He has pledged to reduce taxes heavily for low and middle income Americans and also to make sure that the wealthy (including corporations) do not pay too much as that undermines jobs. This should help boost the currently questionable level of job creation and to increase spending power, which should in turn… Read more

Uncertainty over political events trumps fundamentals as markets fall

MarketLine

On Thursday June 23, 2016 the UK went to the polls to decide on its future as a member of the European Union (EU). By a small margin, the country opted to leave and despite the fact that no steps to enact Article 50 have yet been taken by Theresa May and her government, speculation about an imminent implosion of the British economy has been rife, damaging the value of the Pound and serving as a rather convenient scapegoat for everything from companies’ poor performance to increased prices, to political… Read more

China’s banking industry: BIS scaremongering unwarranted but warning signs must be heeded

MarketLine

China’s economic growth has been slowing for a while now and while it remains healthy, there are concerns over the state of the country’s banking industry. Non-performing loan (NPL) rates have been increasing, with some of the country’s biggest banks seeing a surge in that particular metric. Bank of China and ICBC saw noticeable increases in their NPL rates during 2015, necessitating greater allowances for credit losses, while Agricultural Bank saw something of a surge from 1.54% to 2.39%, with the retail and wholesale industry the main cause for concern…. Read more

Nike: England sponsorship deal in jeopardy

MarketLine

In modern sport, funding is a large key to success and in no sport is that more apparent than football, the ultimate game of the haves and have nots. International football has not escaped the phenomenon with England plowing in money as if it is an endless resource while Ghana’s players insisted on cash only payments at the 2014 World Cup amid fears that they would not be paid otherwise. Wembley Stadium, world-leading salaries and a state-of-the-art football center do not come cheap and the money has to come from… Read more

Williams & Glyn: RBS abandons spin-off IPO plan

MarketLine

To comply with European Commission State Aid requirements, RBS agreed in 2009 to a series of restructuring measures that were to be implemented over a four year period. One of these measures was the divestment of the RBS branch network in England and Wales and the NatWest branches in Scotland. This was scheduled to be completed by 2013, but an extension was granted after the original bidder, Santander, pulled out. A consortium known as Corsair stepped into the breach and invested, facilitating a later sale or, more likely, an IPO…. Read more

Sports Direct: Working conditions scandal fallout must be managed to minimize damage

MarketLine

Recent revelations about Sports Direct’s working practices have been largely made via exposé reporting from The Guardian. Secret filming in the company’s Shirebrook warehouse led to claims of a culture of fear, pay of less than the national minimum wage, unpaid after-hours work, and questionable punitive practices. This was then followed by written reporting and interviews with workers, both from the warehouse and from stores. Although terminology like ‘Victorian workhouse’ and ‘Gulag’ is sensationalist and unwarranted, Sports Direct was forced to respond to the claims in a bid to limit… Read more

Williams & Glyn: Future of RBS spin-off in doubt as launch delayed

MarketLine

Overly ambitious growth strategies initially brought great success for RBS and the company was seen as the darling of the stock market, consistently delivering double digit growth. However, the company swelled to such a size that its assets were twice the size of the UK economy and a woefully ill-advised acquisition of ABN Amro in 2007 as part of a consortium tipped the bank over the edge as it took ownership of a large amount of toxic assets. The weakness was ruthlessly exposed during the global crash of 2008/2009 and… Read more

Corporate Sponsorship: Companies hypersensitive to damaging controversies

MarketLine

When a company is giving serious thought to sponsoring an event or club, or signing an individual to a costly endorsement contract, it takes several factors into consideration. The benefits that a company is seeking by entering into such arrangements are namely revenue growth, an improved corporate image, and increased brand equity as a result of greater consumer awareness. This is a double-edged sword however, as scandals involving sponsored celebrities or organizations can reflect badly. In many instances, there is no obvious link between the sponsor and the sponsored party…. Read more

Youth unemployment in Germany: Low rates disguise true picture of growing Hartz-IV dependency

MarketLine

Compared to many neighboring European countries, of both similar and lesser levels of economic development, Germany’s youth unemployment rate is healthy. It is the lowest of any country in Europe except Iceland and is way below both the Euro Area and EU average. Whereas many European countries encourage their people to pursue academic studies at university to further themselves, Germany has long had a policy of creating and offering vocational training places for those who either do not want to attend or who are not suited to university and this… Read more

BT Sport and UEFA: Poor European football viewing figures continue to cause concern

MarketLine

BT turned up the pressure on its rival Sky in November 2013 when it announced that it had acquired the rights to become the exclusive UK broadcaster of the UEFA Champions League from 2015. The Champions League is the pinnacle of European club football and the presence of clubs such as FC Barcelona, Bayern Munich, Manchester United, and Real Madrid ensures that there is great global interest. The competitions final is now the worlds most-watched sporting event, attracting a global TV audience of around 180 million in 2015. By way… Read more

Under Armour issues new shares, underlying concerns persist

MarketLine

On March 16, 2016, Baltimore-based performance apparel giant Under Armour announced it was to issue new stock in the form of new Class C shares. The new shares, which do not carry voting rights, became ‘live’ on April 8, effectively halving the share price. These shares are traded under the ticker UA:C, while the Class A shares continue to float under UA on the NYSE. Both classes of these openly-traded shares exist alongside the company’s Class B shares, all of which are beneficially owned by founder and CEO Kevin Plank,… Read more

Adidas and Manchester United: Top of the merchandise league

MarketLine

As explored in the MarketLine case study adidas AG: Bumpy road on Route 2015, adidas invested significant funds to become Manchester United’s official outfitter and merchandiser and so far, it looks a shrewd investment as sales of this season’s kits have broken all records. In July 2014, adidas announced that that it had signed a deal to become the official outfitter and merchandiser to English football club Manchester United, believed to be the best supported in the world. The deal, worth £750m ($1,235m) over 10 years, more than doubled the… Read more

UK High Street’s worst summer for six years

MarketLine

The UK high street has suffered its worst summer since 2009 amid concerns over a potential interest rate rise and unseasonably cold weather. According to BDO’s High Street Sales Tracker, like-for like sales fell 1.1% in July, marking the third consecutive month of decline, the first time such a streak has been seen since the summer of 2009. Fashion retail was hardest hit in July, down 1.4% year-on-year, while lifestyle goods and homewares saw drops of 0.5% and 1.1% respectively. As analyzed in the MarketLine case study The UK High… Read more

Market maturity and intense competition forces banks to expand overseas

MarketLine

Overseas expansion is a key trend in the global banking industry as many major players look to reduce their reliance on mature and intensely competitive domestic markets. The push for overseas expansion is beginning to kick start M&A activity within the sector. CCB, ICBC, Credit Agricole, and Mitsubishi UFJ have all engaged in M&A deals that involve the purchase of at least a stake in a non-domestic player since 2013. As explored in detail in the MarketLine case study Top ten global banks: An analysis of financial performance, growth opportunities… Read more

Rise in non-performing loans potential time bomb for China’s swollen banks

MarketLine

As measured by total assets, four of the ten largest banks in the world are now headquartered in China. As the Chinese economy has swelled, so too have the balance sheets of its largest banks. This has spurred great growth in operating incomes and net profit as demand for credit has soared. However, there are signs that the curse of non-performing loans (NPLs) that wreaked such havoc with the West’s banking system could potentially strike China, a ticking time bomb if left unaddressed, with several economic sectors posing a significant… Read more

Spieth Masters win great news for Under Armour

MarketLine

Jordan Spieth’s record-laden charge to Masters victory has made front and back page news and Under Armour is basking in the 21 year old Texan’s reflective glory. On his way to a joint tournament record 18 under par, Spieth broke record after record: best 36 and 54 hole scores in Masters history; most birdies ever recorded at one Masters; only man to ever reach 19 under par at The Masters; first wire-to-wire winner since 1976. The list goes on. If Spieth was the happiest man in the US on Sunday… Read more

Sabadell’s TSB takeover sparks wave of optimism

MarketLine

On Friday (March 20), Spanish banking group Banco Sabadell announced that it had reached an agreement to acquire UK high street bank TSB, sparking talk of a potential wave of M&A activity. The cash offer of 340p ($5.60) per share represents a premium of 30% on the June 2014 flotation price of 260p ($4.28) and a slight premium on the current share price of 333p ($5.48). The advantages for all parties are clear. For its part, Banco Sabadell is prepared to pay a premium for what it sees as growth… Read more

Bank of America and Citigroup: Poor Q4 results see share prices fall sharply

MarketLine

Yesterday (January 15), Bank of America (BoA) and Citigroup announced underwhelming results for Q4 2014 that seemingly caught the market off guard and caused share prices in both banks to fall. Bank of America announced Q4 revenues of $18,955m, down 12.7% on the same period a year earlier. Net income also fell from $3,439m in Q4 2013 to $3,050m, a drop of 11.3%. This has impacted preliminary 2014 full year results as revenue has fallen 5.2% on a year-on-year basis, and net income by a staggering 57.7%. Citigroup’s results did… Read more

Wonga to write off debts of 330,000 customers

MarketLine

In an unprecedented move, Wonga has today announced that is to write off the debts of around 330,000 customers who are in arrears of 30 days or more. The controversial UK payday lender has, for some time, been battling a negative public image that has seen it portrayed as something of a ‘predator on the poor’ in certain sections of the media. Wonga was embroiled in its most major scandal yet in June of this year, when it was revealed the Financial Conduct Authority (FCA) had ordered the company to… Read more

Tesco: Fallout from profit overstating continues

MarketLine

Yesterday (September 22), the UK’s largest retailer Tesco had to make the embarrassing and damaging admission that its first half profits had been overstated by some £250m (approximately $390m). Consequently, profits for the period are now expected to be around £850m (approximately $1,328.8m) rather than the originally-reported £1.1bn (approximately $1.7bn); quite a difference. The fallout has been catastrophic and has prompted some serious questions that have led to staff suspensions, a delay in publishing its first half results, and the intervention of legal and accounting firms. Following the shock announcement,… Read more

Barclays: Can global restructuring boost bank’s profits?

MarketLine

In February 2013, Barclays CEO Antony Jenkins announced a new group strategy with the central aims of simplifying the bank’s operations and boosting profitability. The plan, termed by Jenkins as a ‘bold simplification of Barclays’, involves the establishment of a ‘non-core’ operation consisting of assets and businesses that Barclays plans to run down or exit, a noticeable reduction in headcount, a scaling back of investment banking operations, increased automation of banking processes, and changes to the bank’s UK branch network. As explored in the MarketLine case study ‘Barclays PLC: Reshaping… Read more

Nike and Manchester United: end of an era?

MarketLine

As explored in the MarketLine case study “NIKE, Inc.: Building a diverse business“, the US sportswear giant has established itself as a major provider of equipment and apparel in a number of sports including basketball, golf, soccer, and tennis. One of the strategies Nike has used to achieve its goal is to enter individual sports markets on the back of a highly successful individual (think Michael Jordan in basketball or Tiger Woods in golf), or team (Brazil national soccer team). In 2002, Nike furthered its interest in soccer by signing… Read more

Investors still not sweet on Candy Crush creator King Digital Entertainment

MarketLine

As explored in the MarketLine case study King Digital Entertainment plc: Sweet success of Candy Crush but doubts remain King Digital Entertainment plc’s (King) initial public offering (IPO) was preceded by a great deal of fanfare and publicity but failed to reach its target price as investors feared an over-reliance on smash-hit mobile casual game Candy Crush Saga (Candy Crush). Originally incorporated as Midasplayer.com Limited in 2002, King has experienced a period of rapid growth, both in terms of revenues and profits, in recent years. 2013 saw revenues soar by… Read more

Barclays to cut 19,000 jobs in major shakeup

MarketLine

Barclays has today announced that it is to cut 19,000 jobs by the end of 2016 as it plans a major operational shakeup. According to the announcement, almost half the job losses (around 7,000) will be in the UK, with Barclays investment arm most heavily affected as CEO Antony Jenkins comes under pressure to increase profits at the bank. Barclays also announced plans to set-up a so-called ‘bad bank’ to manage, and then either run down or sell off £115bn (approximately $179.7bn) of non-core operations. Unsurprisingly, this includes around £90bn… Read more

David Moyes Sacked as Manchester United Manager

MarketLine

On April 22nd, Manchester United finally brought an end to the unhappy and unfruitful 10 month reign of manager David Moyes. Moyes took over from Sir Alex Ferguson in June 2013 after the Scot had led the club to its 13th Premier League title, but in truth looked overawed by the size of the job from day one. Moyes struggled to cope with the intense media scrutiny and the expectation levels at one of Europe’s elite clubs. While the playing squad undoubtedly needs a major overhaul, Moyes must take some… Read more