Brief insights into global finance in the Covid-19 era.
– T-Mobile USA
– Ulta Beauty
Super charged. Almost a year since T-Mobile US and Sprint closed theirs merger, the $ 157 billion company headed by Mike Sievert is delivering on its promises of synergies and then some. It could be unwelcome news for rivals Verizon Communications and AT&T.
T-Mobile said Thursday that it has unearthed further cost savings by cutting marketing spend, consolidating IT and the like. Now it expects to to reach $ 7.5 billion in synergies over 2 years, up about 25% from the original $ 6 billion set when the deal was announced in 2018. In turn, T-Mobile expects to return approximately $ 60 billion to investors in share buybacks in 2023-2025.
T-Mobile has also promised that the merger will result in a more competitive market for 5G connections. Bernstein estimates that T-Mobile could more than double its customers from around 20 million in 2020 to nearly 45 million in 2025, targeting home broadband and businesses, typically Verizon and AT&T territory. The telecommunication wars show no signs of respite. (by Jennifer Saba)
New look. Ulta Beauty is changing her routine. The US cosmetics retailer She said Thursday, President Dave Kimbell will succeed CEO Mary Dillon in June. It will be hard to fill Dillon’s shoes. Below her, Ulta’s stock was up more than 250%, more than a 144% return on the S&P price, according to Refinitiv.
Kimbell is also inheriting the persistent side effects of the pandemic. On the same day, the company said sale it fell 17% yoy to $ 6.2 billion in the 12 months to January 30. Sales of cosmetics are still down, Dillon said in an earnings call, and this is its largest category, accounting for 44% of last year’s sales. That overcomes the bright spots like skin care.
The shares fell 10% in early trading in New York. Ulta said sales will not fully recover this year and operating profit margin will not recover in part because trick the recovery in sales is still uncertain. With 32x next year’s earnings according to Refinitiv data, Ulta’s shares are trading higher than retailers like Target, which sell similar skin care products. Ulta’s best hope is to sell more premium products like the $ 50 eyeshadow palettes. Last year was tough, but Kimbell’s tenure will start just as busy. (by Amanda Gomez)
The grace of sewing. Christian Sewing had a good pandemic. The Deutsche Bank CEO’s 2020 compensation increased by 46% year-on-year to € 7.4 million. Compare that to peers like Jes Staley at Barclays, who suffered a 32% pay cut, or recently deceased UBS boss Sergio Ermotti, whose pay has risen by a measly 7%. Sewing’s haul is less than Ermotti’s € 12 million, but bigger than that of Staley and HSBC CEO Noel Quinn. Both banks have larger market capitalizations than Deutsche.
Such simple comparisons are a little out of place, however. Sewing’s year-over-year increase seems high in part because it gave up a big chunk of its bonus in 2019, when Deutsche was in dire straits. And its performance in 2020 probably deserves a premium: the lender’s shares were up 22%, compared to a 26% decline for the STOXX Europe 600 Banks Index. This will not appease employees who have been victims of Sewing’s cost cuts. But at least it gives his luck a rationale. (by Liam Proud)
Bad timing. Setting a new record isn’t always a good thing. UK exports and imports fell by around a fifth in January from the previous month, data shown on Fridays. The main impetus for the revolutionary decline was the collapse of trade with the European Union in the first month of the new Brexit deals. Exports to the EU fell by 41% while imports from the bloc fell by 29%.
True, the numbers are accompanied by health warnings. For example, some stocks may have occurred before the end of the transition period for leaving the EU. And trade started to pick up towards the end of January. However, a survey by the Institute of Administration on Thursday showed that nearly 20% of business leaders trading with the EU stopped doing so in January, with a narrow split between those who said the hiatus was temporary and those who have claimed it is permanent. The effects of Brexit will complicate the post-pandemic recovery of the UK economy. (by Swaha Pattanaik)
Approaching the trench. Asia is helping Burberry strengthen its M&A defenses. Despite mandatory lockdowns in Europe, the luxury trench coat maker on Friday She said Sales of comparable stores in the three months to March 27 were expected to grow between 28% and 32% year-on-year. Analysts like Jefferies previously expected 22%. Burberry shares jumped 9% to their highest since January 2020, before Covid-19 spread globally. Earnings reduce the chances of a detect.
The euphoria may not extend to the rest of the industry. European luxury goods companies such as Hermès International and Kering remained unchanged on Friday. Either they have already enjoyed a rebound in Asia, or their valuations were already pushing down. Hermès is trading 49 times earnings in 2022, compared to Burberry’s 28 times. The good news for CEO Marco Gobbetti is that this gap is narrowing. His twist, which includes a first collection focusing on designer Riccardo Tisci’s menswear, could work. (by Dasha Afanasieva)
Discounted. Hong Kong conglomerate Swire Pacific can learn from its rival. The company just brought back its first ever annual loss of $ 512 million for 2020 and warned that the worst was not over yet. Covid-19 and the city’s political turmoil have battered unit including the airline Cathay Pacific and Swire Properties, a retail company. On Friday, Cathay, burdened by Hong Kong’s extreme three-week quarantine requirement, said passenger traffic dropped 98% year-on-year in February.
Not all of Swire’s rivals are suffering equally. Trading company Jardine Matheson, albeit with a different business mix, just posted a net profit of $ 1 billion for 2020. Even more irritating, Jardine’s historical renovation unveiled on Monday helped tighten its valuation discount: its shares are now trading one-tenth below their post-renewal net asset value, up from 26% before the announcement. Swire offers a 50% discount on the net asset value. Business is tough, but a makeover might help. (by Jennifer Hughes)