This weeks news includes; Amazon acquires Whole Foods, Lidl and Aldi break into the US, Snap’s share price plummets and McDonalds ends Olympic sponsorship
Our condolences go out to the friends and families of the victims of the Grenfell tower fire in London last week. The fire swept up the 24 floor story building and inadequate fire safety measures led to the blaze being even more deadly. 30 people are confirmed dead with the number of fatalities expected to rise.
Below are our top 10 stories that you need to know about. Be sure to check our twitter page and Facebook page for regular posts of important headlines. Click on the links for full stories. Get all the important stories and insights straight into your inbox by subscribing to our mailing list here.
Opinion articles of the week:
- There has been a lot of press about “Euro clearing” but what is it and why is it important to the City of London? City A.M explores.
- Reuters looks at dealmakers claim that British political uncertainty risks slowing M&A.
- Bloomberg claims that the energy industry is approaching a tipping point.
1. AMAZON TO BUY WHOLEFOODS FOR $13 BILLION
Amazon have announced that they are to purchase US food retail giant Wholefoods for $13.7 billion dollars. This is a part of Amazon’s long term strategic goal to move into the food industry. They recently started their own grocery business Amazon Fresh but growth has been slow. This acquisition however, is set to significantly bolster their presence in the sector.
Whole Foods was founded in 1978 and has nearly 460 stores in the USA, UK and Canada. It pioneered the growth of natural and organic foods in mainstream grocery shopping. Shares rose by nearly 30% after the announcement.
This deal was deemed so significant by investors that it wiped of $40 billion off the stock prices of Amazon’s rivals such as Walmart whose share price fell by 4.6%. (CNBC)
For more on the deal read Reuters analysis.
2. VALUE OF STUDENT LOAN DEBT REACHES £100 BILLION
The value of student loan debts in the UK has for the first time passed £100bn, making it nearly £40 billion larger than the sum of credit card debt. According to the student loans company, as of March 2017 the amount owed by students to the government was £100.5 billion. The debt level has more than doubled since 2011 and analysts argue that the £100 billion figure could double again in another 6 years.
The problem with this debt is that it could leave a massive black hole in future governments’ books. It is expected that almost half of all graduates will not repay their loans within the 25 year deadline, after which loans are written off.
To find out more about the issues of student loans check out City A.M’s analysis.
3. LIDL AND ALDI BREAK INTO THE US
Two of the fastest growing supermarket chains, Lidl and Aldi, have announced their intentions to make inroads into the US. Lidl plans to open its first US stores this week and hopes to open 100 by the end of 2018.
Meanwhile competition Aldi is looking to open over 900 stores across the US over the next 5 years, is looking to spend roughly $3.4 billion over this time period. These expansions could certainly spark a price war in the US, putting pressure on major retailers like Walmart and Kroger.
Bloomberg looks further at the Lidl and Aldi’s US expansion and the US supermarket sector.
4. UK INFLATION AND INTEREST RATES
UK inflation rose faster than expected to a rate of 2.9% according to the Office for National Statistics (ONS). This rise is above the 2% Bank of England target and has been attributed to rising food and clothing costs. The impact of the fall in the value of the pound after the Brexit referendum is now starting to show and prices could continue to rise as our imports get more expensive. The BBC looks further at the figures.
The Bank of England policymakers met last week and chose to keep interest rate at their record low of 0.25%.
5. JAGUAR LAND ROVER INVESTS £20m IN LYFT
Jaguar Land Rover has announced that it will be investing £20 million in Uber’s main US rival, Lyft. This investment is part of Jaguar Land Rovers large scale collaboration with Lyft. They will work with Lyft on its self-driving car technology as well as providing it with a fleet of vehicles. Jaguar Land Rover is just the latest in a list of companies including Google and General Motors looking to partner with Lyft to develop driverless technology.
Lyft is currently valued at $7.5 billion and has been fighting hard to catch up with its much larger rival Uber which is valued at $30 billion. Uber has however been plagued by controversy and scandal in for the past few years and this could take its toll. Last week, CEO Takarnick announced that he would be going on leave indefinitely after issues of sexual harassment within the company.
The Telegraph looks further the deal.
6. ECJ RULES THAT TORRENTING IS UNLAWFUL
The European Court of Justice has ruled that pirate hosting websites are illegal. The ruling stemmed from a case in the Netherlands involving a torrenting website called “Pirate Bay”. Pirate Bay allowed users to upload copyrighted files and videos available for download. The ECJ ruling, despite seeming obvious, was argued on a strong technical point. Pirate Bay argued that their conduct was not unlawful because they were not responsible for uploading any files nor did they own any. The ECJ rejected this argument and stated that the creation of an online platform facilitating the sharing of copyrighted material may constitute unlawful conduct.
City A.M looks further at the case.
7. SNAP’S SHARE S PRICE PLUMMETS
The price of Snap, the owner of social media app Snapchat, fell back to its IPO’s level last week. Snap share prices fell by 4.9% on Thursday to $17.00 a share. Snap’s share price soared to a high of $29.44 a share in the days after its IPO but has since declined as investor confidence waivered.
The fluctuation in investor confidence comes as no surprise as it first ever released financial figures last month proved dire reading, showing a loss of £1.7 billion. Many analysts believe that Snap will never be profitable as user growth continues to slow and tapping into revenue streams from consumers proves ever more challenging.
Reuters looks further at Snap’s share price problems.
8. MCDONALDS TO END 41 YEAR SPONSORSHIP OF THE OLYMPICS
McDonalds has announced that it will no longer sponsor the Olympic Games. The decision was taken after a reconsideration of “business priorities”. Sponsors typically contribute $1 billion to the International Olympic Committee every 4 years and McDonalds deal is worth $100m. The deal was set to end in 2022 but McDonalds have seen a gradual decline in sales and stronger competition. It hopes that pulling out of the sponsorship money will free up capital to invest elsewhere.
City A.M looks more at the end of the sponsorship
9. THREE RECEIVES RECORD FINE FOR EMERGENCY CALL FAILINGS
Mobile operator Three has been fined a record sum of £1.9 million for failing to ensure all users could make emergency 999 calls at all times. The telecommunication regulator Ofcom launched an investigation and found that where there was a loss of service there was no adequate back up service. Ofcom rules stipulate that where technical issues occur, emergency calls should be diverted to a back up route. In Three’s case however, Ofcom found the backup route would not have worked in the event of a local service outage.
To find out more about this issue, check out the Independent’s analysis.
It appears as if Tesco is making a recovery after a tumultuous few years as it posts strong sales figures. Like-for-like sales rose by 2.3% in the last quarter, marginally beating analysts expectation. The key question now is the sustainability of this growth. (BBC News)
It has been a mixed week for them as despite strong sales figures they were wrapped in scandal. Tesco was fined £8 million by for accidently leaking thousands of litres of petrol from a fuelling station into Lancashire river and sewage system. Find out more about this here. (Sky News)