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Capital Calls

19 May 2021 By Breakingviews columnists

Concise insights on global finance.


– U.S. retail sales

Retail races. The last three months were a bonanza for U.S. retailers. Supermarket colossus Walmart reported a 5% year-on-year rise in U.S. sales in its first quarter. Target, while smaller, grew four times as fast, as did pile-it-high specialist Costco Wholesale and home improver Lowe’s. Home Depot did even better, notching up 33% growth. Amazon.com, which reports a month earlier, managed 40%.

To put this into perspective, consider overall U.S. retail sales, which are rocketing. They grew around 18% between February and the end of April, according to the U.S. Census Bureau, after stripping out gas stations, motor vehicle sales and restaurants. That suggests Walmart is losing market share, Home Depot and Amazon are gaining it and the others are treading water.

There’s still much to play for. Census data suggests Americans spent around $200 billion more in those retailers’ first quarter than they did two years ago, a period unaffected by Covid-19 distortions. Yet many economists reckon the United States is awash in perhaps $2 trillion of excess savings waiting to be spent. Even the losers have time to improve their fortunes. (By John Foley)

Legal aid. Ryanair has scored half a legal victory over state aid to its rivals. Europe’s second-highest court ruled on Wednesday that the European Commission was wrong to approve a 3.4 billion euro Dutch government bailout for KLM and a similar 1.2 billion euro Portuguese package for local carrier TAP. That sounds like an important affirmation of the rules governing the fairness of the bloc’s internal market. The snag is that there’s no chance of either airline having to pay back the money.

With European governments calling for the creation of national champions in everything from media to microchips, such rulings don’t exist in a vacuum. The same is true of the court’s recognition that unwinding the Dutch aid would have “particularly damaging consequences” for the Netherlands’ economy. Ryanair’s consolation prize is knowing that its lawyers probably helped keep the bailouts within the bounds of acceptability. (By Ed Cropley)

Rising rents. Empty offices are delivering surprisingly full valuations. That’s the message from swanky London landlord Great Portland Estates, which revealed on Wednesday that its office values had declined by a mere 1.7% in the 12 months to the end of March. Even more eye-catching is the 1.8 billion pound owner of buildings along London’s Southbank predicting that rents could grow as much as 5% in the coming year.

Chief Executive Toby Courtauld is also betting more on offices. He plans to splurge 900 million pounds on eco-friendly “flexible” office spaces to encourage businesses to get staff physically back to work. KKR has already banked a big win on Great Portland’s recovery, having bought in last September when the stock was languishing around 550 pence a share. Its shares are now trading at 729 pence, although that’s still 21% below their pre-crisis high. A return to offices and a rent bump could close the gap. (By Aimee Donnellan)


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