Stratfor expects that the recent US tax reforms will boost the US economy for years to come, especially as US corporations repatriate many of the funds they hold overseas.  Currently about a trillion USD are held overseas by US companies - over 60% of the savings belong to technology companies and close to 20% to pharmaceutical companies.  Tax cuts provided as a part of the reform will also boost the economy, but this will lead to the Federal deficit growing from 77% to 85% of GDP by 2021, resulting in a (modest) increase in interest rates.  An 85% debt-to-GDP ratio will be high by historical US standards, but compared to some other advanced economies, it remains fairly low.  Over the next few years, Stratfor expects the US economy to grow at an accelerated rate (possibly event at 4% pa) due to the US leadership in the field of ‘Artificial Intelligence’ technologies, which we prefer to refer to as Animated Smart Matter.

Reuters reported that Adidas expects to close down stores in the coming years as part of a shift towards selling more online. Adidas has 2,500 stores globally and 13,000 additional mono-branded franchise stores, according to the Financial Times.  The FT quoted Adidas’ CEO as saying that “Our website is the most important store we have in the world.”  It looks to us that Adidas still thinks in 2015 terms, which are now obsolete.  Retailers’ websites must become their main portal facilitating the Digital Path to Purchase, with an option to accept an order if the customer so desires – not a mere headline store.  Over the counter sales or in-store pickup need to be the primary objectives.  Adidas turns over about 20 billion Euro pa and about 8% of it is sold online.  The CEO would like to lift this up to 20%.  Adidas’ EBIT is around 3-4%, so this doesn’t sound like a good idea to us, as online sales are usually less profitable.

The AFR reported that Metcash is facing staunch opposition to its attempts to change its engagement model with retailers.  Having lost more than half of its market share over the last 10 years, Metcash is looking for a solution, but (in our assessment) what they are planning to do will only make matters worse.  Coles and Woolworths progressive destruction of branded groceries and the narrowing of their range has taken them to a dark alley, where they have to compete on price with Aldi and this is a war they cannot win due to their high-cost structure.  Metcash wants to go there too, by reducing their range.  It also wants to charge a fee for stock bought by retailers directly from suppliers and replace rebates with a promotional allowance that will apply only to stock sold during a promotion.  We have no doubt that this will make the larger chains operating under the IGA banner consider walking away from Metcash.

Technology giants are finally being singled out for increased public and regulatory scrutiny.  Privacy violations, massive power to manipulate public opinions and disruptive market influence are now in the open.  Reuters reported that the US President said that he would take a serious look at policies to address what he says are the unfair business advantages of online retailer Amazon.  We too have a problem with large US technology corporations that use capital from the markets to subsidise their loss-making operations.  This distorts the economic environment – big time.

Matthew Shay, the CEO of the NRF commented on the so-called “retail apocalypse”, which made seemingly endless headlines over the past year, despite reams of evidence to the contrary. Media and various ‘experts’ declared retail dead, dying or totally disrupted by e-commerce.  Shay pointed out that once one considers accurate, complete data on retail overall, it becomes evident that the industry is doing quite well. True, there have been store closings and bankruptcies — that’s inevitable in business. But there are also new entrants and store openings. Retailers are changing, adapting and transforming to compete and better meet customers’ needs. That’s a sign of a healthy, growing and evolving industry. Not a dying one.

The NRF commented about a recent study showing that consumers want personalised voice experiences, but are wary of brands being more present on their voice devices. The report states that families are the biggest users of voice-enabled technology and, while more consumers are attempting to shop using voice, a lack of visual confirmation, high potential for mis-ordering and the inability to easily compare prices and availability are key barriers.

The Australian Financial Review published interesting statistics about the fast fashion segment in Australia.  Three global fast fashion chains (H&M, Uniqlo and Zara) generate about $1 billion annually in Australia, but pre-store sales in the segment have dropped dramatically.  If the AFR figures are to be believed, H&M per store sales dropped by about 25% (6% total sales drop while store numbers grew from 23 to 32).  AFR also mentioned Dotti pre-store sales dropped by around 9% and store closures by Forever 21, GAP and Top Shop.  Clearly, the market is undergoing a major reshuffle.  Some try to blame it on e-commerce, but it looks more like just a simple case of market overcrowding.

The Australian reported that AfterPay shares slumped nearly 6%, seemingly in reaction to claims that its services could be easily used by minors and even people with a fake identity.  We think that the share movement had more to do with speculation whether the original owners will start selling their escrow holdings (23%) when the escrow expires on 8 May.

Mainstream media reported the departure of the NBN CEO, focusing on his remuneration package and progress in NBN rollout.  The NBN-killer, 5G networks have been barely mentioned.  We warned repetitively that this White Elephant Network will cause grief for all involved and will make Australia about $50 billion poorer. Pity to see our predictions come true.