WEBVTT - IAG, Douglas, Wetherspoon

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news, the.

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<v Speaker 2>Stock Movers podcast. This is your roundup of companies making

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<v Speaker 3>Now, let's look at some stocks on the move today

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<v Speaker 3>in Europe. We're joined by Bloomberg's at Markets Today, editor

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<v Speaker 3>Sam On said, good morning Sam, So he throw it's

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<v Speaker 3>closing for the entire day until midnight tonight. The market

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<v Speaker 3>reaction to this.

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<v Speaker 4>So the main market reaction we're seeing is in IAG shares.

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<v Speaker 4>So i aged, the owner of British Airways, he throw

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<v Speaker 4>their home base. So it's a very major disruption. Remember

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<v Speaker 4>they also own Iberia Air, Lingus and a couple of

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<v Speaker 4>a couple of budget airlines as well, so it's a

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<v Speaker 4>really significant disruption for them. In terms of the other

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<v Speaker 4>market reaction actually has been relatively you know small, and

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<v Speaker 4>there's a little bit of you know, easyjets moved to

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<v Speaker 4>He's moved with IAG in particular. The Jeffrey's out this

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<v Speaker 4>morning saying that the earnings for FAG may well take

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<v Speaker 4>a hit one to three percent because of compensation costs.

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<v Speaker 4>Because often even though you could probably make a pretty

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<v Speaker 4>strong argument this is not necessarily the airline's fault that

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<v Speaker 4>this is happening. They tend to bear the brunt of

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<v Speaker 4>those compensation costs and that could hit their earnings. And

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<v Speaker 4>for a g you know, been on a very good

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<v Speaker 4>run and at the start of this year that's been

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<v Speaker 4>dented a bit, and this is another dent in their armor.

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<v Speaker 1>Yeah, indeed, and it's worth remembering that it's not just

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<v Speaker 1>the flights that are to and from London, it's the

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<v Speaker 1>connections of the huge part of their business as well,

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<v Speaker 1>which is why the airline network for that company is

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<v Speaker 1>particularly vulnerable to disruptions as heat throw. And let's turn

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<v Speaker 1>it next to a share in Germany, the perfume maker Douglas.

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<v Speaker 1>What's going on there?

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<v Speaker 4>Yeah, quite a hefty drop there. So they were down,

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<v Speaker 4>as I got up from my desk, about twenty percent,

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<v Speaker 4>down to half their IPO price. Now, so it's actually

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<v Speaker 4>a relatively recent IPO in Germany and has not been

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<v Speaker 4>performing particularly well. Most of that is down to a

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<v Speaker 4>consumer slowdown in France and Germany. They're two key markets.

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<v Speaker 4>And yeah, there shares an enormous amount of pressure and

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<v Speaker 4>as I say, in particular, you know, this is one

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<v Speaker 4>the companies that when they listed, this was held up

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<v Speaker 4>as an example of a little bit of a bounce

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<v Speaker 4>back in European IPOs. It was quite a significant IPI.

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<v Speaker 4>I think it's about eight billion euros they were valued

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<v Speaker 4>at when they first listed. They're at about half that now.

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<v Speaker 4>So not a great story for Germany's consumer market there. Okay,

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<v Speaker 4>it's Friday. Let's talk pubs, shall we.

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<v Speaker 3>How is a Weatherspoons doing in terms of the rising

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<v Speaker 3>labor costs? Because we're in March. The increase in minimum

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<v Speaker 3>wage is going to come into force at the beginning

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<v Speaker 3>of April. This was announced in October, so companies have

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<v Speaker 3>had some time to think about it, maybe to plan

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<v Speaker 3>for it. But it is obviously those industries where they

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<v Speaker 3>have perhaps you know, minimum wage workers the most that

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<v Speaker 3>will be affected badly.

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<v Speaker 4>What about Weatherspoons, Yeah, and quite a significant effect for them.

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<v Speaker 4>So very labor intensive industry, right, So costs are going

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<v Speaker 4>up kind of across the whole industry. But Weatherspoons, remember,

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<v Speaker 4>is to operates at the cheaper end of the market, right,

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<v Speaker 4>so they tend to operate at lower margins than some

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<v Speaker 4>of the pubs that you know, more premium pubs. They

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<v Speaker 4>have a statement in there today sixty million pounds of

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<v Speaker 4>extra costs, so not just the national living wage but

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<v Speaker 4>also the employer's national insurance contributions as well. That translates

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<v Speaker 4>for them to fifteen hundred pounds per week per pub.

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<v Speaker 4>So it's quite a significant increase in costs for them

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<v Speaker 4>and that is likely to weigh on their marches and

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<v Speaker 4>more so for them, as I say, because they operate

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<v Speaker 4>at that lower price point and so consumer weakening there,

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<v Speaker 4>you know, a big squeeze on Weatherspoons.

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<v Speaker 1>And this was coming after what was quite a strong

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<v Speaker 1>festive season, end of year season for pub groups in

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<v Speaker 1>the UK, and that a lass just looking at HSBC

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<v Speaker 1>being reasonably bullish on pubs and a note they put

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<v Speaker 1>out last month because the sales were good. But now

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<v Speaker 1>it's the cast they're coming into focus.

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<v Speaker 4>Yeah, well well I think actually you know, actually even

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<v Speaker 4>in Weatherspoons' is report today, so the main focus and

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<v Speaker 4>the reason their shares are downe and I think they've dropped

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<v Speaker 4>it again when I got up about twelve percent, actually

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<v Speaker 4>hitting a two year low for them. In particular they

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<v Speaker 4>offsetting it becomes much more difficult because they operate at

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<v Speaker 4>that lower price point, right, Their margins are the focus today,

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<v Speaker 4>but actually their sales too have picked up a bit

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<v Speaker 4>so from the first half. Over the course of the

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<v Speaker 4>last sort of eight to ten weeks, Life forlike sales

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<v Speaker 4>growth has actually increased a little bit. So sales are

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<v Speaker 4>going very well, and that's probably the same across the industry.

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<v Speaker 4>But for Weatherspoons, the margins are becoming a much bigger concern.

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