Corona Capital: Fashion, Bank branches, Tourism

Fosun Tourism

16/09/2020 11:19

(The authors are Reuters Breakingviews columnists.  The
opinions expressed are their own.)
    By Breakingviews columnists
    LONDON/HONG KONG, Sept 16 (Reuters Breakingviews) - Corona
Capital is a column updated throughout the day by Breakingviews
columnists around the world with short, sharp pandemic-related
insights.

    LATEST
    - Inditex/H&M
    - Handelsbanken
    - Fosun/Thomas Cook  

    BELT-TIGHTENING. Fast fashion’s thrift comes with a warning.
Zara owner Inditex  ITX.MC  reassured investors by returning to
profit https://www.inditex.com/en/article?articleId=653527&title=Inditex+returns+to+profitability+and+generates+734+million+net+cash+in+the+second+quarter
 in the three months to the end of July. Costs cuts helped as it
slashed its operating expenses by 21%, helping to offset a 31%
decline in revenue to 4.7 billion euros. The news, which follows
similar positive results at H&M  HMb.ST  on Tuesday, lifted
Inditex shares as much as 7% on Wednesday morning.
    There may be darker days ahead. Inditex store sales are
recovering and its online business is thriving. This, however,
is likely to be temporary. Disposable income will fall as
governments unwind furlough schemes and the full scale of the
unemployment caused by lockdowns becomes clear. Finding new
areas to slash may prove tricky, particularly if a second
coronavirus wave pushes up safety costs. The fact that
fast-fashion groups have managed to cut so deeply suggests they
are already preparing for leaner times. (By Aimee Donnellan)

    STOCKHOLM SYNDROME. Handelsbanken’s  SHBa.ST  famously
decentralised, branch-based lending approach appears to have
taken a knock: on Wednesday the $19 billion Swedish lender
announced https://vp292.alertir.com/afw/files/press/handelsbanken/202009157050-1.pdf
 that it would shut nearly half its 380 domestic outlets in the
wake of the pandemic to meet a cost target of 20 billion Swedish
crowns by 2022, a reduction of 1.7 billion Swedish crowns from
last year. Shareholders cheered the latest branch bloodbath
 urn:newsml:reuters.com:*:nL5N2F051C, sending shares up 3%.
    They are right to do so: hitting that goal would give Chief
Executive Carina Akerstrom a peer-thrashing costs-to-income
ratio of just 42%, according to Refinitiv data. It’s not all
about savings, though. The bank is also ploughing more money
into technology, and promising that the branches that are still
standing will offer clients better access to specialist advice
and operate with “an even greater degree of decision-making
authority”. The 1,000 staff deemed superfluous will be less
excited about their newfound autonomy. (By Christopher Thompson)

    TURBULENCE AHEAD. Thomas Cook, the storied travel company
that went into liquidation in September last year, is preparing
to hit the road again. China’s Fosun Tourism  1992.HK  is
reviving the brand –  the collapse of which famously left
hundreds of thousands of holidaymakers stranded – as an
online-only service that will sell destinations on Britain’s
safe travel corridor list  urn:newsml:reuters.com:*:nL8N2GD1QP.
    The International Air Transport Association noted https://www.iata.org/en/pressroom/pr/2020-08-13-01
 in August that European flights are still more than 50% below
the comparable period in 2019, while passenger demand in Europe
is not expected to reach 2019 levels until 2024. One of Thomas
Cook’s biggest competitors, TUI  TUIGn.DE , has had to secure
aid from the German government. So Fosun’s timing might seem
off, especially given that its other travel assets like Club Med
aren’t exactly flourishing. But the Chinese conglomerate, which
snapped up Thomas Cook’s brand assets in November 2019 for 11
million pounds, might as well put them to work and hope things
turn around. (By Sharon Lam)
        
    
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 (Editing by Neil Unmack, Pete Sweeney and Oliver Taslic)