Investing in Europe #28
Luxury numbers, Just Eat Takeaway higher losses, Europe's new climate policy and more
Welcome to a new issue of Investing in Europe, a weekly curated newsletter on what’s happening in European companies and markets. Your feedback is very important. Please comment below or DM me on Twitter. If you are not a subscriber, please sign up to get full access and never miss an update. 🙏
Company news and results
A few companies in the luxury and retail space reported numbers this week. Q2 2020 was the quarter most impacted by the pandemic last year. As economies reopen, we are seeing some very strong numbers. Market’s reaction was meh - I knew it.
Richemont reported the strongest results imo. Sales were up 22% compared to 2019 in the Apr - Jun 2021 quarter. The Jewellery Maisons division was up +43%. Note that Europe and Japan are still below 2019 levels (still not many tourists). The Online Distributors segment remains disappointing (no pandemic boost?).
Swatch H1 2021 sales were almost +55% up year-on-year at constant exchange rates, but still -12.3% below 2019. Operating cash flow is already above. They expect H2 sales to be higher than pre-pandemic levels.
The already very high consumer demand will be enhanced by the further easing of Covid restrictions in many markets and generate additional growth. Swatch Group expects higher sales in local currencies in the second half of 2021 in comparison with 2019
Burberry issued a Q1 trading update (Apr-Jun). Comparable store sales were up 1% compared to 2 years ago, with full price items +26%. Americas was the strongest region, up +34% compared to 2 years ago.
Outlook:
FY22 guidance remains unchanged except wholesale, which is now expected to increase by approximately 60% YoY in H1 due to a stronger order book and FX that we now expect to be a £114m headwind on sales and £40m headwind on adjusted operating profit for FY22 based on 25 June spot rates. The medium-term guidance for high single digit top line growth and meaningful margin improvement remains firmly on track.
The CEO Gobbetti left last week, but Burberry is confident the creative director Riccardo Tisci will remain.
Finally, Brunello Cucinelli reported strong numbers as well. The founder sold some shares the day after the results.
In the online retail space, Asos trading statement for the 4 months to June showed sales increasing below market expectations. The outlook implies a slowdown:
Trading in the last three weeks of the period was more muted, as continued COVID uncertainty and inclement weather, particularly in the UK, impacted market demand. We anticipate a measure of volatility to continue in the near term, given the rapidly evolving COVID situation worldwide. As a result, we expect our underlying P4 growth rate to be broadly in line with the prior year comparable period. We expect overall full year adjusted PBT to be in line with our expectations.
Adevinta, the online classified company, reported strong numbers. The eBay Classifieds Group acquisition was completed on 25 June.
Just Eat Takeaway issued a trading update for Q2 2021, the first time with GrubHub’s numbers. The good: order growth was ok and full-year guidance increased; they are continuing to gain market share in London. The bad: the profitable marketplace business slowed down to almost flat in the UK; in the US, growth was negative; the EBITDA guidance for the full year was well below expectations. Just Eat Takeaway is heavily investing in logistic/own delivery (44% of orders now) and markets expected underlying losses in line with Q4 2020 (they started the investment program in Q3). The guidance implies more than that, even adjusting for the fee caps impact in the US and Canada. While the marketplace growth is expected to improve in Q3 and the long term opportunity seems to be still there, on the logistic side it will take some time to see if and when today's investments will pay off. The competitive environment will deteriorate in Germany, but the ball is still in their court. The valuation gap with companies like DoorDash is telling us markets don’t believe they will be very successful, but it doesn't mean they are right. Time will tell.
Other news
Campari is partnering with LVMH on wines and premium spirits ecommerce
Volkswagen revealed its 'New Auto' business strategy
Revolut raised $800mn at a $33bn valuation
The European Commission introduced a new climate policy package, “intended to facilitate a European Union greenhouse gas emissions cut of 55% by 2030 compared to 1990”. This is how it is going so far:
Have a great week and good investing!
If you are not a subscriber, please sign up to get full access and never miss an update. If you like what you read, please share with your colleagues and friends.
Disclaimer: this newsletter is for informational purposes only and does not represent investment advice. I might have a position in some of the stocks discussed. Always do your own research before investing. Your feedback is important - please contact me on Twitter