Tag: growth

SA’s GDP nosedives

The South African economy has suffered its worst quarterly GDP performance in 10 years, dropping by 3.2%.

The downturn has been caused by, among others:

– The failure of state-owned enterprises, such as Eskom and SAA
– A slump in manufacturing
– A major downturn in secondary industries, especially construction
– Year-on-year GDP growth of 0% – meaning the economy is stagnating
– Agriculture lost 13% of its output in the first three months of the year
– A decline in household spending: despite spending more on alcohol, food and restaurants, consumers have avoided buying new clothes (down 12.7%) and skimped on transport costs (down 3.1%)

By Stephanie Butzer for The Denver Channel

Amazon will expand its Denver Tech Hub, creating 400 new high-tech jobs in fields like software and hardware engineering, cloud computing and advertising, the company announced Tuesday morning.

Amazon plans to open a new office in downtown Denver to accommodate the new positions. This comes in the wake of the company opening a new office in Boulder in the fall of 2018.

Colorado Gov. Jared Polis said he’s excited the company chose to add 400 new jobs here.

“We have a terrific workforce that continues to attract the ideas and businesses that thrive in a knowledge-based economy and we are a great place to do business,” he said. “Amazon’s current Colorado presence spans from distribution centers to robotics, corporate and operations. It’s wonderful to see their continued investment in our community.”

The new office, which will span 98,000 square feet, will be located in Invesco’s 1515 Wynkoop LEED Platinum building in Denver’s LoDo neighborhood.

Currently, Amazon has more than 350 employees in the Denver area and more than 3,500 full-time jobs in the state. It has invested more than $1.5 billion in the state since 2016.

Death by Amazon

By Rebecca Ungarino for Market Insider

A new “Death by Amazon” index released by the investment-research firm CFRA tracks the stocks its analysts believe could be short-seller targets given their vulnerabilities to competition from Amazon.

The index is full of home goods and electronics retailers like Party City and Bed Bath & Beyond, some of which have seen their entire market value wiped out in recent years.

Investors are familiar with the Amazon effect by now.

The e-commerce juggernaut announces that it is preparing to enter into an industry – be it medication, brick-and-mortar grocery, entertainment, or others – and the stocks of companies in the new target market fall as jittery investors are struck with the fear that irreversible disruption is coming.

So the investment-research firm CFRA created a new index, “Death By Amazon,” that tracks the stocks its analysts think are particularly vulnerable to Amazon’s expansion and offerings.

“The equally weighted index serves as a retail performance benchmark and short-selling idea generation tool for our clients,” CFRA analysts Camilla Yanushevsky and Todd Rosenbluth wrote in a report to clients earlier this month.

To pinpoint the 20 constituents the analysts believe are poorly positioned to compete against Amazon’s efforts in various industries, they evaluated the companies’ “Share of Voice” data that comes from web-traffic analytics company Alexa Internet (which is owned by Amazon as its other Alexa-named product).

That measure shows the percentage of searches for a keyword across major search engines in the past six months “that sent organic traffic to the respective site.”

For example, the analysts compared how much traffic was going to a national jewelry retailer’s website when consumers search for the term “jewelry” versus how much traffic was going to Amazon for the same search term.
With this kind of analysis, you get an index full of brick-and-mortar retailers whose products are available on Amazon – and apparently less popular through online searches – from floor tiles to party supplies.

To be fair, it’s not the first Death by Amazon index. Bespoke Investment Group had already created its Death by Amazon index, tracking the same theme.

Here are all the stocks listed, in alphabetical order, with how their “Share of Voice” scores for various products stack up against Amazon:

  1. At Home Group
    1-year performance: -40%
    % below all-time high: -46%
    Share of Voice score for “seasonal decor”: 4.2%
    Amazon’s Share of Voice score for “seasonal decor: 19.6%
  2. Barnes & Noble Education
    1-year performance: -38%
    % below all-time high: -74%
    Share of Voice score for “textbook”: 1.3%
    Amazon’s Share of Voice score for “textbook”: 6.9%
  3. Barnes & Noble
    1-year performance: -0.1%
    % below all-time high: -84%
    Share of Voice score for “books”: 23.2%
    Amazon’s Share of Voice score for “books”: 12.2%
  4. Bed Bath & Beyond
    1-year performance: -16%
    % below all-time high: -80%
    Share of Voice score for “cookware”: 2.4%
    Amazon’s Share of Voice score for “cookware”: 23.3%
  5. Best Buy
    1-year performance: -14%
    % below all-time high: -19%
    Share of Voice score for “electronics”: 1%
    Amazon’s Share of Voice score for “electronics”: 8.1%
  6. Big 5 Sporting Goods
    1-year performance: -71%
    % below all-time high: -88%
    Share of Voice score for “fitness equipment”: 0%
    Amazon’s Share of Voice score for “fitness equipment”: 11%
  7. Big Lots
    1-year performance: -6.5%
    % below all-time high: -41%
    Share of Voice score for “cookware”: 0%
    Amazon’s Share of Voice score for “cookware”: 23.3%
  8. Dick’s Sporting Goods
    1-year performance: +15%
    % below all-time high: -43%
    Share of Voice score for “sports deals”: 18.7%
    Amazon’s Share of Voice score for “sports deals”: 24.5%
  9. GameStop
    1-year performance: -31%
    % below all-time high: -87%
    Share of Voice score for “video games”: 7%
    Amazon’s Share of Voice score for “video games”: 17.1%
  10. Kirkland’s
    1-year performance: -49%
    % below all-time high: -81%
    Share of Voice score for “home decor”: 5.4%
    Amazon’s Share of Voice score for “home decor”: 10.8%
  11. Office Depot
    1-year performance: -19%
    % below all-time high: -95%
    Share of Voice score for “office supplies”: 33.1%
    Amazon’s Share of Voice score for “office supplies”: 9.8%
  12. Overstock.com
    1-year performance: -67%
    % below all-time high: -86%
    Share of Voice score for “dresser”: 1.3%
    Amazon’s Share of Voice score for “dresser”: 9.9%
  13. Party City
    1-year performance: -49%
    % below all-time high: -65%
    Share of Voice score for “party supplies”: 22.5%
    Amazon’s Share of Voice score for “party supplies”: 13.2%
  14. PetMed Express
    1-year performance: -40%
    % below all-time high: -60%
    Share of Voice score for “pet supplies”: 5.1%
    Amazon’s Share of Voice score for “pet supplies”: 13.7%
  15. Pier 1 Imports
    1-year performance: -65%
    % below all-time high: -97%
    Share of Voice score for “home decor”: 8.3%
    Amazon’s Share of Voice score for “home decor”: 10.8%
  16. Signet Jewelers
    1-year performance: -49%
    % below all-time high: -87%
    Share of Voice score for “jewelry”: 3.8% for kay.com, 2.9% for jared.com, and 0.12% for zales.com
    Amazon’s Share of Voice score for “jewelry”: 10.7%
  17. The Michael’s Companies
    1-year performance: -43%
    % below all-time high: -67%
    Share of Voice score for “drawing supplies”: 13.1%
    Amazon’s Share of Voice score for “drawing supplies”: 24.5%
  18. Tiffany & Co.
    1-year performance: -5%
    % below all-time high: -31%
    Share of Voice score for “jewelry”: 6%
    Amazon’s Share of Voice score for “jewelry”: 10.7%
  19. Tile Shop Holdings
    1-year performance: -36%
    % below all-time high: -85%
    Share of Voice score for “tile”: 2.1%
    Amazon’s Share of Voice score for “tile”: 22%
  20. Williams Sonoma
    1-year performance: +7%
    % below all-time high: -42%
    Share of Voice score for “cookware”: 16.7%
    Amazon’s Share of Voice score for “cookware”: 23.3%

Capitec announces fee cuts

By Angelique Arde for Business Day

Capitec is cutting its fees. The bank, which normally announces its fee increases in March, made the announcement a week before new digital bank TymeBank is due to host an investor day, upping the ante in what could be a banking fee price war.

From 1 March, the monthly admin fee on the bank’s one and only account, the Global One account, will decrease from R5.75 to R5. The price of electronic payments on mobile and internet banking will decrease from R1.60/transaction to R1. Debit order fees will decrease from R3.70 to R3.50. The cost of drawing cash at all Pick n Pay, Shoprite, Checkers and Boxer till-points will drop from R1.60 to R1. And the cost of immediate payments has also decreased from R10 to R8.

International and online card purchases, transfers between own accounts and e-mailing statements on mobile and internet banking will remain free.

The bank has increased a few fees: the fee for in-branch transfers and payments will increase from R5.30/transaction to R6. Cash withdrawals from Capitec-branded ATMs will cost R6 per R1,000, while all other bank ATM withdrawal fees will be lowered to R8 per R1,000. Capitec used to charge a flat fee irrespective of the amount withdrawn.

Capitec said in a statement on Tuesday that the bank had experienced its highest single-month uptake to date, with more than 266,000 new clients joining the bank in January 2019.

In addition to low fees, Capitec clients get access to four savings plans, offering from 5.1%-9.25% interest per year,” said Francois Viviers, the bank’s marketing and communications executive.

 

How SA climbed its way out of a recession

By Lameez Omarjee for Fin24

The SA economy has officially emerged from recession, Stats SA announced on Tuesday morning, following a 2.2% rise in GDP growth for the third quarter of the year.

The economic growth figures were broadly in line with the expectations of economists surveyed by Fin24 prior to publication, who had projected growth rates of between 0.8 and 2.6%.

The rand firmed by as much as 1% shortly after the release of the results.

However, despite the rebound, economists still expect overall GDP growth for the year to be weak, below 1%.

Here’s what boosted growth in the third quarter:

1. Manufacturing industry expands

Growth was mainly driven by the secondary sector, which grew by 4.5%. This was aided by a 7.5% increase in manufacturing. Large contributions came from steel and metals, and motor vehicle production, among other things.

2. Agriculture rebounds

Even though the primary sector contracted by 5.4% in the quarter – mainly due to a large drop in mining – the agriculture industry rebounded following two quarters of substantial contractions.

During the third quarter, increased production in field crops, horticultural and animal products, helped improve growth to 6.5%.

Earlier on Tuesday, Bloomberg reported that confidence in the industry had declined to its lowest in nine years. The agribusiness confidence index dropped from 48 to 42, mainly due to concerns over weather conditions and a lack of clarity on land reform policy.

3. Transport industry rebounds

The tertiary sector grew by 2.6% during the quarter. The transport, storage and communication industry in particular expanded by 5.7%, rebounding from a -4.9% contraction in the second quarter and improving from 0.9% growth reported in the first quarter.

4. Finance, real estate and business services continue growth trend

Also within the tertiary sector, the finance, real estate and business services industry continued its growth trend, increasing by 2.3% during the quarter.

Additionally, the trade industry – particularly wholesale, retail and food and beverages – and catering and accommodation increased by 3.2%.

5. Expenditure-led growth

Expenditure GDP grew to 2.3%, following a decline of -2.6% and -0.7% reported in the first and second quarters respectively. Government expenditure grew by 2.2%, while household expenditure grew by 1.6%.

However, gross-fixed capital formation declined -5.1% during the quarter, largely due to a decline in investment in construction works, transport equipment and residential buildings, according to the StatsSA report.

By Tia Frapolli for The NPD Group

The holiday season presents consumers with a perfect opportunity to get in touch with their creative side – a behaviour that bodes well for the US office supplies market.

Several arts, crafts, and traditional supplies categories that require creativity and offer an experience will be among the top industry performers this holiday. And, we know from NPD’s Holiday Purchase Intentions Survey that experiential gifting is not only trending with consumers, but set to grow over last year. In fact, the survey found that four out of 10 consumers plan on giving these types of gifts this year.

When it comes to the craft-related categories, consumer shopping behavior indicates a preference for discovering and purchasing these products in-person as opposed to online. Specifically, NPD data shows that acrylic paints, paint brushes, specialty note cards, and canvases all have a very low penetration in the e-commerce channel. In fact, over 95 percent of purchases in each of these categories are made in-store.

Tied to such products, we expect that popular holiday craft activities will include ornament decorating and homemade holiday décor. In addition, as spending time with friends and family is top of mind during the holidays, we expect the ever-popular canvas painting parties to continue to grow this season, and there are the sales numbers to show for it—canvas sales have grown by 20 percent over the past year.

Coinciding with the maker’s movement and popularity of hand lettering, this season we also expect to see a rise in holiday card making with custom lettering. A variety of writing instruments used for this activity are already seeing growth; collectively, sales of gel, porous, and fountain pens as well as dual, ultra, and extra fine color markers have grown by 8 percent leading up to the holiday season.

Without a doubt, consumers let their creativity shine during the holiday season, and this presents a favorable opportunity for the office supplies industry to get in on the action.

Source: The Citizen

WhatsApp vice president Chris Daniels confirmed at an event in New Delhi, India earlier this week that the popular messaging app will start showing users ads in the app’s status feature come 2019.

The WhatsApp status feature was launched early last year to mimic Snapchat’s stories feature which was later co-opted by Instagram and Facebook and it allows users to share text, photos, videos and animated GIFs that disappear after 24 hours.

According to India’s Economic Times, Daniels told journalists “we are going to be putting ads in ‘Status’. That is going to be primary monetisation mode for the company as well as an opportunity for businesses to reach people on WhatsApp.”

The new feature will take effect in 2019 but Daniels could not lock down an exact date.

Facebook CEO Mark Zuckerberg’s goal to monetise WhatsApp has forced the social media messaging service’s co-founders to leave the company reports Economic Times.

On of the app’s co-founders Brian Acton told Forbes that the move would undermine elements of WHatsapp’s encryption technology and that Zuckerberg was in a rush to make money from the app after purchasing it for $19 billion four years ago.

By Bekezela Phakathi with Andries Mahlangu for Business Day

The government will reprioritise about R50bn within its existing budget to reignite economic growth and create jobs, President Cyril Ramaphosa said last Friday.

Presenting the government’s much-anticipated grand plan to kick-start SA’s stalling economy, Ramaphosa also announced the establishment of an infrastructure fund that is a core part of the package. He said R400bn will be leveraged from various development finance institutions, pension funds and ordinary investors, among others over the medium term to drive the infrastructure fund.

“We are establishing a dedicated infrastructure team in the presidency that has project management and engineering skills which will identify shovel-ready public sector projects such as roads and dams,” Ramaphosa said during a briefing at the Union Buildings.

“We have limited fiscal space to increase spending or increase borrowing … we do not have have fiscal space to pour money in the economy … we have to resort to re-prioritising our spending and budget within the current fiscal frame work,” the president said.

The package also includes the new Mining Charter, major changes to visa requirements to boost the tourism sector, the development of industrial parks and township businesses, and reforms in the telecommunications industry, particularly the release of spectrum to create competition and drive down the cost of data.

“The stimulus package consists of a range of measures, financial and non-financial, to ignite economic activity and restore investor confidence, and prevent further job losses, and create new jobs,” Ramaphosa said.

The measures give priority to those sectors that can revive the economy, including agriculture.
Ramaphosa said more details on how the budget will be reprioritised will be provided when finance minister Nhlanhla Nene presents the medium-term budget policy statement. Nene said most of the funds for the stimulus package would be moved from under-performing departments.

Ramaphosa first proposed the stimulus package in July, in a bid to boost SA’s sluggish economy and tackle the unemployment crisis, which at just more than 27% remains a major headache for the government more than two decades since the official fall of apartheid. However, Ramaphosa’s plan to reignite growth was dealt a heavy blow with shock second-quarter GDP data indicating that SA had entered a technical recession.

The rand extended gains and government borrowing costs fell following the speech. The rand was at R14.22 against the dollar, its best level in about four weeks, while the yield on the benchmark R186 bond was at 9.03% from 9.08%.

Naspers to unbundle and list MultiChoice

By Nick Hedley for Business Day

The transformation of Naspers, which was founded more than a century ago to produce Dutch-language newspaper De Burger, into an online-only behemoth is almost complete.

Africa’s most valuable company, which owns a 31% interest in Chinese internet giant Tencent, said on Monday it planned to unbundle its pay-TV business MultiChoice onto the JSE.

Naspers will hand its interest in the DStv operator to its shareholders.

Investors cheered the news. After falling 3.2% earlier in the day, in line with Tencent’s decline in Hong Kong, Naspers rallied to close 0.7% up at R3,206.42, valuing the company at R1.4-trillion.

Naspers hopes to list the new entity MultiChoice Group, which includes its local and rest-of-Africa pay-TV business along with Showmax Africa and security company Irdeto, in the first half of 2019. The unbundling will cap off a remarkable transformation at Naspers, which was mostly a publishing and pay-TV business until its 2001 investment in China’s Tencent.

Naspers would not raise funds through the deal, said CEO Bob van Dijk, but its shareholders would benefit as the market currently ignored MultiChoice when valuing the group.

In its sum-of-the-parts valuation, US bank JP Morgan calculated that Naspers’ majority-owned MultiChoice unit is worth $8bn. More than 90% of that value sits in SA, according to the bank. That implies that MultiChoice Group is worth more than Shoprite.

Van Dijk said Naspers plans to give MultiChoice SA’s BEE investors another 5% stake in the local pay-TV business. “Besides unlocking value for our shareholders, maybe more important we think it will also unlock value for [BEE scheme] Phuthuma Nathi, which is already one of the most successful broad-based BEE schemes.”

He said Naspers will continue to invest in its SA e-commerce businesses, which include Takealot, Mr D Food, PayU and AutoTrader. “In the last year, we invested more than R3bn in the e-commerce businesses in SA alone. We expect to continue to invest and we’re looking at interesting prospects.”

It will also retain its interest in Media24, which is moving quickly into online publishing. The pay-TV market was poised for further growth despite pressure from internet-based rivals such as Netflix.

“Even in markets like Europe, people still have traditional TV services and on top of that people have connected services. In Africa the story is even more positive — you see very significant growth in traditional TV … as well as decent take-up already in SA of [streaming services] DStv Now and Showmax. I’m confident it’s a growth story.

“I feel confident about putting the business on its own legs.”

Robert Pietropaolo, a trader at Unum Capital, said the unbundling would be positive for Naspers “but the pressure will certainly be on MultiChoice to stay competitive”.

“MultiChoice themselves have already started cutting their headcount and they have started offering lower-tier packages, which unfortunately does not bring in the desired revenues. MultiChoice will not only have to be nimble from now on, but I think they may have to re-invent themselves to be competitive,” Pietropaolo said.

In the year ended March, the pay-TV operator lost 41,000 premium subscribers across its African markets. Even though the total subscriber base grew — MultiChoice added 563,000 users in SA in the year to March — this growth came from far less profitable lower-cost packages. However, the company remains highly cash generative. Over the same period, MultiChoice generated revenues of R47.1bn and trading profits of R6.1 bn.

MultiChoice SA CEO Calvo Mawela said the company had slowed the decline in high-margin premium subscribers. It lost more than 100,000 of these customers in its 2017 financial year but reduced that number to about 40,000 in 2018.

“Our focus on Premium is beginning to bear fruit.… We’ll continue to focus on Premium to ensure that we do not see further decline in Premium subscribers going forward.”

Source: eMarketer Retail 

When it comes to the US e-commerce market, Amazon is leaving the competition in the dust. This year, the online shopping juggernaut will capture 49.1% of the market, according to eMarketer’s latest forecast on the top 10 US e-commerce retailers, up from a 43.5% share last year. Amazon now controls nearly 5% of the total US retail market (online and offline). The Salesforce website sheds much more light on the tactics that Amazon has actualised to become the leader in eCommerce business.

Amazon will generate $258.22 billion in US retail e-commerce sales this year, up 29.2% over last year. Amazon’s Marketplace sales will represent an increasingly dominant portion of its e-commerce business—68.0% this year, compared with 32.0% for Amazon direct sales. By the end of 2018, sales generated from Amazon’s Marketplace will be more than double that of Amazon’s direct sales in the US.

“The continued growth of Amazon’s Marketplace makes sense on a number of levels,” eMarketer principal analyst Andrew Lipsman said. “More buyers transacting more often on Amazon will naturally attract third-party sellers. But because third-party transactions are also more profitable, Amazon has every incentive to make the process as seamless as possible for those selling on the platform.”

Computer and consumer electronics is the leading product category for Amazon, with sales of $65.82 billion in the US this year, representing more than a quarter of its retail e-commerce business.

In 2017, apparel and accessories surpassed books and music to become the second largest category. Apparel sales will grow more than 38% this year to reach $39.88 billion in the US. This category will represent 15.4% of Amazon’s e-commerce business, and 38.5% of all online apparel sales in the US.

But Amazon’s private-label push is being met with apprehension by several brands and retailers.

“While they are dependent on Amazon as a selling channel, they also recognize the threat to their brands should Amazon decide to compete by introducing its own private labels,” Lipsman said.

Other fast-growing categories for Amazon are food and beverage* and health, personal care and beauty. Food and beverage will grow more than 40% this year, while health and beauty will jump nearly 38%. Still, both categories represent just a small portion of Amazon’s US retail ecommerce sales.

“Amazon’s strategy for food and beverage is no different, in some respects, than it was for books—dominate the category,” eMarketer senior analyst Patricia Orsini said. “However, e-commerce in the grocery sector is a challenge. Share of online sales in this category is low because most people, for a host of reasons, prefer to buy food in brick-and-mortar stores. Amazon has an advantage because its shopper base is comfortable with shopping online. Along with insights gathered about Whole Foods shoppers, Amazon probably has the best chance of converting in-store grocery buyers to online grocery buyers.”

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