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Arcadia on brink of collapse; record month for stock markets – business live | Business

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A Topshop branch in Leeds, West Yorkshire, last night

A Topshop branch in Leeds, West Yorkshire, last night Photograph: Christopher Thomond/The Guardian

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Arcadia is on the brink of becoming the biggest corporate casualty of Britain’s Covid-19 crisis. Sir Philip Green’s retail group is expected to filed for administration as soon as today, having failed to agree a rescue deal to keep the company afloat.

The move would put 13,000 staff at risk at Arcadia’s 500 stores, at its Topshop, Burton and Dorothy Perkins chains, and probably end of Green’s career as a retail magnate.

Covid-19 has been a severe blow for Arcadia. Having failed to seize the opportunity of online shipping, it was already struggling to match faster-growing and more nimble rivals like Asos and Boohoo.com.

The pandemic, which has forced its stores to lock down twice this year, has deepened its plight.

As one insider put it to the BBC:


This is obviously a sad day, we tried to save it a year ago when £200m was put into the business and the pension fund, but it’s impossible to operate now.

“You don’t know when you’ll be open, you don’t know what stock to buy.”

Arcadia’s current and former staff also face uncertainty now – as there’s a black hole up to £350m in its pension fund. Add in the bills owed to suppliers, and Arcadia’s collapse could cause serious damage to the wider UK retail sector.

Markets round off record month

Arcadia’s plight is the climax to a particularly dramatic November. There’s been plenty of bad news this month, with Covid-19 deaths approaching 1.5 million, and cases surging at a record rate in America.

In Europe, the second set of lockdowns are threatening to push the eurozone and the UK towards double-dip recessions.

But November has also brought uplifting news – encouraging vaccine trial results, and the prospect that president-elect Biden will attempt to tackle the pandemic while also pushing through a new stimulus package.

And for those reasons, this has been a staggeringly successful month for share prices.

MSCI’s All Country index of stocks has surged by over 13% this month, hitting fresh all-time highs, and on track for its best month since it was created in 1990.

ACEMAXX ANALYTICS
(@acemaxx)

(global equities) MSCI all-country Index is on track for the biggest monthly gain since 1990 inception, chart @BloombergTV https://t.co/hUImQCXNSm pic.twitter.com/t3q0FnVXDL


November 27, 2020

The UK’s FTSE 100 has also had a stellar month, having underperformed for most of the year. With one day to go, it’s gained over 14% during November, close to the record month – January 1989, when it jumped 14.4%.

Chris Weston of Pepperstone says November has been “a breathtaking month for equities, and a poor month for the US dollar and gold”.

Why? Because investors are anticipating a return to normality in 2021 as vaccines are rolled out, and – crucially – as central banks continue to provide unprecedented support (through record low interest rates, quantitative easing, and cheap credit).

European markets are expected to dip back this morning, though.

IGSquawk
(@IGSquawk)

European Opening Calls:#FTSE 6330 -0.60%#DAX 13251 -0.64%#CAC 5567 -0.56%#AEX 608 -0.62%#MIB 22230 -0.55%#IBEX 8144 -0.57%#OMX 1921 -0.84%#STOXX 3502 -0.73%#IGOpeningCall


November 30, 2020

The agenda

  • 9.30am GMT: UK mortgage approvals figures for October
  • 1pm GMT: German inflation figures for November
  • 2.30pm GMT: Bank of England policymaker Silvana Tenreyro speaks at a Resolution Foundation event
  • 3pm GMT: US pending home sales figures for October



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American Airlines (AAL) and Southwest (LUV) results Q4 2020

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Southwest Airlines flight 1117 from St. Louis lands at Boston Logan International Airport on March 13, 2019. (Photo by John Tlumacki/The Boston Globe via Getty Images)

John Tlumacki | The Boston Globe | Getty Images

American Airlines on Thursday reported a record quarterly loss and faces difficult months ahead as new travel restrictions and a slow rollout of vaccines cloud hopes for a near-term recovery.

American posted a net loss of $2.2 billion in the fourth quarter. Revenues tumbled more than 64% to $4.03 billion, compared with $11.3 billion a year earlier. Sales were above analysts’ forecasts for $3.88 billion for the quarter. Shares were up 30% in premarket trading amidst the frenzy of retail buying of stocks with large short interests. American has much more short interest in its shares than other U.S. carriers.

The airline said it expects capacity in the first quarter of 2021 to be down 45% compared with 2019, before the coronavirus pandemic sapped travel demand. It expects revenues to be off 60% to 65% lower for the first quarter compared with the same months of 2019.

Here’s how American performed in the fourth quarter, compared with what Wall Street expected, based on average estimates compiled by Refinitiv:

  • Adjusted EPS: a loss of $3.86 versus an expected loss of $4.11.
  • Revenue: $4.03 billion versus expected $3.88 billion in revenue.

Earlier Thursday, Southwest Airlines reported its first annual loss since 1972 and said it would remain conservative with capacity through March citing weak demand.

Southwest expects average core cash burn of about $17 million a day in the first quarter “as a result of continued softness in demand and a seasonally weaker travel period in January and February 2021, as well as rising fuel prices.” That’s up from the $12 million a day in in the last three months of 2020.

It forecast January revenue will be down 65% to 70% compared with 2019, slightly better than a decline of as much as 75% it previously forecast after cancellations stabilized. Southwest said February revenues will likely fall 65% to 75% compared with the same month of 2019.

Its share price was up 3% in Thursday’s premarket.


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10,000 stores set to close in 2021, Covid keeps pummeling retailers

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A man passes by a Banana Republic store, which is going out of business, in New York, January 10, 2021.

Scott Mlyn | CNBC

One retail research and advisory group is forecasting there could be as many as 10,000 store closures announced by retailers in the United States this year, which would set a new record, as the Covid pandemic continues to take a toll on the industry and companies rethink how many locations they’re able to keep open.

10,000 closures would represent a 14% uptick from 2020 levels, Coresight Research said in a report released Thursday. Coresight is also forecasting retailers will announce 4,000 store openings in 2021, driven by growth from grocery discounters and dollar store chains.

Last year, in the thick of the pandemic, Coresight predicted in the June that there were going to be as many as 25,000 closures announced by retailers in 2020. But it ended up tracking just 8,741, along with 3,304 openings. That was a deceleration from the 9,832 closures it tracked in 2019 — the highest number Coresight has seen as long as it has been following retail closings and openings.

The reason for the large gap between the final tally and its initial prediction, Coresight said, was because some companies have been “holding out for an upturn in store-based sales.” Many retailers have also been able to buy more time by reducing their rents and striking deals with their landlords to be able to stay open a little longer, it said.

“In 2021, the rollout of [Covid] vaccination programs should result in a partial recovery in store-based sales,” Coresight CEO and Founder Deborah Weinswig said. “However, these programs may take many months to reach a wide base of consumers.”

Some companies won’t be able to wait much longer, Weinswig said, especially those that didn’t have the holiday season they were hoping for. Consumers are going to continue to spend more of their money online, which is another reason for the heightened store closure forecast this year, she said.

As of Jan. 22, Coresight said retailers in the U.S. have already announced 1,678 closures, which include ones by Bed Bath & Beyond, Macy’s and J.C. Penney.

Weinswig also pointed to a pattern that took shape in the retail industry after the Great Recession, which could repeat itself this year.

“Although retail was significantly impacted in 2008 and 2009, the repercussions in terms of retail bankruptcies peaked in 2010,” she said. “We could see history repeat itself in 2021, resulting in greater numbers of store closures this year than we saw in 2020.”

Coresight said apparel retailers, including Ascena Retail Group and The Children’s Place, accounted for 36% of all store closures in 2020, tallying more than 3,000. The apparel category will likely make up a substantial portion of closures this year, too, it said.

A study released earlier this week by First Insight found 40% of consumers plan to shop for apparel in brick-and-mortar stores either the same amount or less after being vaccinated, implying there won’t be an immediate rush back to the mall.


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McDonald’s (MCD) Q4 2020 earnings miss estimates

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People wear protective face masks outside McDonald’s in Times Square as the city continues Phase 4 of re-opening following restrictions imposed to slow the spread of coronavirus on September 18, 2020 in New York City.

Noam Galai | Getty Images

McDonald’s on Thursday reported that its U.S. same-store sales jumped to 5.5% in its latest quarter, but the coronavirus pandemic is still adding costs and slowing recovery in many of its international markets.

Shares of the company fell less than 1% in premarket trading.

Here’s what the company reported for the quarter ended Dec. 31 compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: $1.70, adjusted, vs. $1.78 expected
  • Revenue: $5.31 billion vs. $5.37 billion expected

The fast-food giant reported fourth-quarter net income of $1.38 billion, or $1.84 per share, down from $1.57 billion, or $2.08 per share a year earlier. The company reported that higher restaurant closing costs of $30 million and lower gains on the sales of restaurant businesses hurt profits for the quarter.

Excluding gains related to the sale of McDonald’s Japan stock and other items, McDonald’s earned $1.70 per share, missing the $1.78 per share expected by analysts surveyed by Refinitiv.

Net sales dropped 2% to $5.31 billion, falling short of expectations of $5.37 billion. Worldwide same-store sales shrank by 1.3%, but improved from the third quarter.

In the United States, same-store sales were positive for the second straight quarter. The company’s home market reported same-store sales growth of 5.5%. The company credited marketing investments and promotional activity, including those focused on core menu items like the Big Mac. The consumer trend of spending more per order stayed true during the quarter as well, although traffic remained negative.

McDonald’s international operated markets, which includes France, Germany and Australia, was the laggard of the quarter. Its same-store sales fell 7.4%. Resurgences of Covid-19 hit most of the segment’s markets, leading to increased government restrictions. However, the company reported that the United Kingdom and Australia both reported positive same-store sales growth for the quarter.

The chain’s international developmental licensed markets segment fared better. Its same-store sales fell just 3.6% in the quarter. Japan showed strong same-store sales growth, but it wasn’t enough to offset declining sales elsewhere in Asia and Latin America.

Read the full earnings report here.

This story is developing. Please check back for updates.


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