Brief Multi-Strategy: New J Hutton – Exploration Report (Weeks Ending 30/08/19) and more

In this briefing:

  1. New J Hutton – Exploration Report (Weeks Ending 30/08/19)
  2. The Pick-Up Game
  3. UK: Labour Market Enduring Political Earthquake
  4. Understanding Chinese Monetary Policy: Trying Hard to Ease?

1. New J Hutton – Exploration Report (Weeks Ending 30/08/19)

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2. The Pick-Up Game

  • lululemon: lululemon continues to leverage its cult-like following as it achieves 10% comparable-store sales and 30% e-commerce sales growth in Q2.
  • McDonald’s: The “McDonald’s to Go” concept store could offer a new distribution channel that could be a positive catalyst for McDonald’s.
  • WeWork: Our concerns for WeWork that we shared on August 20 were justified as WeWork is looking to cut its IPO valuation below $20B or shelve it.

The pick-up game is changing the customer and structural capital landscape for companies. I’m excited about McDonald’s new “McDonald’s to Go” pick-up concept store that it is piloting in London as it represents a new distribution channel with promising returns. While the limited menu of “McDonald’s to Go” trades off variety of choice for convenience, lululemon’s order online/pick-up in-store service, which it has now rolled out to nearly all its stores in North America, offers its customers both convenience plus a wider variety of choice. In addition to being a much lower-cost distribution channel than delivery, in-store pick-up and return offers retailers the opportunity to directly interact with customers and enhance the emotional connection. This explains why Nordstrom is making a strange move testing accepting online returns from its rivals at its two new Nordstrom Local stores in NYC. Amazon Go stores are playing pick-up too as Amazon looks to leverage its physical structural capital by trialing pick-up and return options at select Amazon Go stores in NYC and San Francisco. And on a final note, even Facebook is playing the pick-up game — but in a different sense — as it just launched Facebook Dating in the U.S.!

3. UK: Labour Market Enduring Political Earthquake

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  • Headline labour market data were broadly robust in Jul-19 as further upward revisions to wages were joined by a return to the unemployment rate’s 3.8% low.
  • The recovery in GDP growth has not stoked employment, which has been steady at a subdued rate amid a normalising labour force level. Falling vacancies still show the risk of a rapid adverse adjustment if there is a no-deal Brexit, as I assume.

4. Understanding Chinese Monetary Policy: Trying Hard to Ease?

Smartkama

  • Latest RRR cuts are only tactical and do NOT signal strategic monetary ease
  • PBoC liquidity injections are the key monetary signal
  • Liquidity jumped from May through July but August flat and September weak
  • No indication yet that PBoC easing aggressively….but they will

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