Daily Brief – John Lewis

John Lewis

Not our normal area of reading but last week’s 6 months John Lewis results showed that despite sales up 2% to GBP 6.3 Billion LTBE or Loss Before Tax and Exceptional Items increased from GBP 34 million to GBP 89 million due to “investment and a challenging economic climate.” Customer satisfaction, the Group stated, remains strong. Having had a smashing time this summer, I needed to replace some wine glasses and consequently decided to buy the same John Lewis stocked brand that I had bought nearly 20 years ago. At 11am last Wednesday I was on the Lower Ground Floor of the flagship John Lewis Oxford Street store and as a customer I was, I confirm very satisfied . Plenty of willing shop assistants and the Michelangelo brand in many shapes and sizes on the shelves. How many shoppers were vying for the goods on display? None. I was the sole customer on that vast subterranean shop floor. That challenging economic climate looks like continuing for John Lewis and its new CEO Will Kernan.

GBP/USD 1.3485.

Commerzbank

Before you look away, this is a story of our times that promises to continue to be a case study for EU politik versus hard commercial reality. Many will recall that UniCredit, the Italian bank led by Andrea Orcel wants to create a European heavyweight bank that can effectively challenge the global US banks. Over the past 3 years Andrea Orcel a consummate ex UBS dealmaker has stalked and acquired slices of Germany’s Commerzbank. Commerzbank resisted with the strong support of the German government, but as Orcel gained firstly an influential then a commanding 47.6% shareholding, the Commerzbank CEO Bettina Kopp called for constructive talks with UniCredit earlier this year. The German government however with its 12% stake in Commerzbank continues to resist and reasons that it is all about the preservation of jobs and the financing of the German mid-market economy that Commerzbank has traditionally provided. Commerzbank employs 41,000 staff and while doubtlessly UniCredit will seek to continue financing the German Mittelstand, it will be on commercial terms rather than the cosy boys club basis that Berlin has come to expect from the German banking sector.

EUR/GBP 0.8561.

Federal Reserve

Tonight’s decision by the Federal Reserve on US interest rates has become a test of not one but two open questions: has the Federal Reserve (finally) realized that the hike in energy prices is not a blip and that the 3.4% US inflation rate must be addressed? Secondly, is nearly new Fed Chair Warsh prepared to ignore the strident assertions from POTUS for lower interest rates and assert himself by not merely holding interest rates but raising them? The market is expecting the answer to both questions to be in the affirmative.

EUR/USD 1.1546.

Offshore Energies UK (OEUK)

According to OEUK, the UK could supply 50% of its energy needs if changes were made to the windfall taxes on energy firms and the offshore oilfields Jackdaw and Rosebank were opened up to drilling by the granting of licenses which would unleash a wall of investment funding of up to GBP 50 billion. In 2024 the oil and gas industry supported as many as 180,000 jobs across the UK. No issue is more pivotal to demonstrating that new PM Andy Burnham can see his way through untangling that energy/jobs/environment/commercial Gordian knot..

Brent Oil USD 106.63.

Working man’s Blues #2

This day in 2006 Bob Dylan at the age of 65 became the oldest artist to notch up a Number One album with Modern Times, a collection of critically acclaimed fine songs. The album was also a monster commercial success too, selling 4 million copies and supplementing Bob Dylan’s already swollen pension pot.

There’s an evenin’ haze settlin’ over town
Starlight by the edge of the creek
The buyin’ power of the proletariat’s gone down
Money’s gettin’ shallow and weak
Well, the place I love best is a sweet memory
It’s a new path that we trod
They say low wages are a reality
If we want to compete abroad

My cruel weapons have been put on the shelf
Come sit down on my knee
You are dearer to me than myself
As you yourself can see
While I’m listening to the steel rails hum
Got both eyes tight shut
Just sitting here trying to keep the hunger from
Creeping it’s way into my gut

Meet me at the bottom, don’t lag behind
Bring me my boots and shoes
You can hang back or fight your best on the frontline
Sing a little bit of these workingman’s blues

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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