Tesco, Sainsbury's, Exxon Mobil: Business news in brief, Friday 21 October

Supermarket heavyweights fire first salvo in Christmas toy battle; US Oil boss squares up to Saudi Arabia

(Reuters)

Tesco fires opening salvo at Sainsbury’s in Christmas toy battle

Tesco has pledged to match or beat toy prices at J Sainsbury Plc’s Argos stores in a bid to steal a march on its U.K. rival as the Christmas shopping season begins.

Britain’s biggest supermarket said Thursday it would meet or undercut what Argos charges on about 200 toys, as part of a wider price-matching initiative against the catalog retailer on more than 8,000 products. On its shelves, Tesco is displaying its prices side by side with those of Argos, Britain’s largest toy seller, which was acquired by Sainsbury last month and offers everything from computers to garden furniture.

“Tesco have fired a broadside as the start of the Christmas trading period,” Bryan Roberts, an analyst at TCC Global, said by phone. “There’s usually a bit of a set-to between retailers on toys but what makes this more piquant is that Sainsbury’s now owns the country’s leading toy seller.”

Tesco’s move echoes its guarantee to instantly refund customers on branded groceries and could herald a similar battle in general merchandise. Sainsbury bought Argos’ parent company for 1.4 billion pounds ($1.72 billion) to diversify the company amid a brutal food price war that’s eroded profits across the U.K. grocery industry. Sainsbury said last week that it would open Argos branches or collection points inside almost all of its stores.

Among the toys Tesco has cut prices on is the Zoomer chimp — a robotic primate that responds to voice commands — which it sells for £94.99, five pounds cheaper than at Argos. A Lego volcanic exploration base has also been trimmed to £49.49, about five pounds cheaper than its rival.

Bloomberg

Exxon boss tells Saudis their prediction of oil supply crunch is wrong

Rex Tillerson, Exxon Mobil chief executive (Reuters)

Exxon Mobil's boss Rex Tillerson told Saudi Arabia's energy minister on Wednesday that fears of a new global oil supply crunch were exaggerated as the US oil industry was adapting to the low price shock and was set to resume growth.

The remarks by Tillerson, who is due to retire before March next year, about the resilience of the US oil industry come as the Saudis have effectively abandoned their strategy to drive higher cost producers out of the market by ramping up cheap supplies from their own fields.

More than two years of downturn that saw oil prices halve to around $50 a barrel today after a boom in US shale oil production have led to a sharp decline in investment.

But Tillerson, who heads the world's largest listed oil and gas company, said that shale oil producers' resilience in cutting costs to make some wells profitable at as low as $40 a barrel means that North America has effectively become a swing producer that will be able to respond rapidly to any global supply shortage.

“I don't quite share the same view that others have that we are somehow on the edge of a precipice. I think because we have confirmed viability of very large resource base in North America ... that serves as enormous spare capacity in the system,” Tillerson told the Oil & Money conference.

“It doesn't take mega-project dollars and it can be brought on line much more quickly than a 3-4 year project.”

“Never bet against the creativity and tenacity of our industry,” he said.

Reuters

Boots owner beats forecast but warns of impact from weak pound

(Alamy)

The owner of pharmacy and retail chain Boots said the plunging pound and weaker performance in the UK knocked sales in its international division in the three months to August 31.

US-based Walgreens Boots Alliance posted a 10.9 per cent drop in sales across its international arm, which includes Boots in the UK, due to a currency hit. It added that with currency effects stripped out, its overseas retail like-for-like sales fell 1 per cent, dragged lower by UK trading. The firm said group-wide net earnings fell 1.1 per cent to 4.2bn US dollars (£3.4bn) but rose 22.6 per cent on an underlying basis to 5bn US dollars (£4.1bn) for the year to August 31.

AP

Luxury goods market hampered by terror threats, but still tops £1trn

One of Burberry's flagship stores in Shanghai (Getty)

The terror threat in Europe, a strong dollar and uncertainty over the US presidential elections have eroded the confidence of the globe's big-spenders, holding luxury purchases flat in 2016, according to a study released on Thursday.

Spending on luxury apparel, accessories and other personal items is expected to hold steady at €249bn ($273bn) this year, a study by Bain Consultancy for the Altagamma association of Italian high-end luxury producers. Add in spending on luxury cars, yachts, jets, cruises, hotels, fine art, design and food, and the market tops a stunning €1trn.

As political events and monetary policy exert greater influence on luxury spending patterns, brands have turned their focus to wooing buyers in their home countries rather than counting on tourist arrivals to buoy sales, said Bain partner Claudia D'Arpizio.

Bloomberg

Sky sees ‘substantial’ room to poach mobile customers in UK

(Getty Images) (Getty)

Sky is preparing to take on telecom groups like BT Group and Vodafone and has an opportunity to win a “substantial” number of mobile-phone customers from its U.K. rivals, according to the company’s top executive for the region.

“There are literally millions of customers for us to go after,” Stephen van Rooyen, chief executive officer of Sky’s UK and Ireland unit, said Thursday at the company’s capital markets day west of London. “We’ve long had our eyes on the size of the prize. The mobile market is huge.”

Sky, which operates in five European countries, is expanding out of its home turf in pay-TV to get customers to buy as many as four different products, intensifying a battle with BT and Liberty Global, Virgin Media, which have already moved into mobile. It’s stepping into a UK mobile-phone market of about £15bn, allying with Telefonica’s O2, which will carry the service on its network.

Bloomberg

Roche revenue gains as sales of breast cancer drugs soar

(David McNew/Getty Images)

Roche Holdings' third-quarter revenue rose 4.5 per cent as its trio of breast-cancer therapies offset stagnating sales of some of its older drugs.

Sales climbed to 12.5bn Swiss francs ($12.6bn), the Basel, Switzerland-based company said in a statement on Thursday. That compared with the 12.6bn-franc average estimate of nine analysts surveyed by Bloomberg. Roche doesn’t report third-quarter earnings.

The world’s biggest oncology-treatment maker is counting on new breast-tumor drugs Perjeta and Kadcyla to help it stay in the lead. The next step for Perjeta will depend on whether it’s better in combination with the older blockbuster Herceptin than the earlier drug paired with chemotherapy alone in a study, dubbed Aphinity. Results previously expected by year-end will now probably come in the first quarter, Roche said.

Bloomberg

Intel wins latest round in battle over €1.06bn EU fine

(Rex)

Intel’s fight to overturn a record €1.06 billion European Union antitrust fine received a boost from an adviser to the bloc’s top court in a case that could have ramifications for a growing list of disputes involving U.S. tech giants from Google to Apple Inc.

Intel’s appeal should be totally re-examined by a lower court, which blundered by ruling against the company’s system of rebates for PC makers using its chips, Advocate General Nils Wahl of the EU Court of Justice said in a non-binding opinion Thursday. The top court will decide whether to back his views in a ruling expected within about six months.

“If the court follows, this could be the most important ruling of the past 25 years because it’s the complete destruction of the judgment of the General Court but also of the European Commission’s position,“ said Damien Geradin, a lawyer at EDGE Legal in Brussels.

Bloomberg

VW targets $4bn cost cuts to invest in new technology

Luxembourg is among seven nations under scrutiny by Brussels regulators for failing to impose the kind of penalties VW has faced in the US over its use of illegal "defeat device" (AFP/Getty)

Volkswagen plans to cut €3.7bn in costs at its namesake VW car brand by the end of 2020 to shore up profitability and safeguard investment in future vehicle technology, according to people familiar with the matter.

German factories will account for the bulk of the savings, with a target of about €3 billion. The cost-cutting is designed to prepare Volkswagen’s biggest unit for a fresh start as of 2021 including turnaround plans for struggling operations in the US and South America, they said. Volkswagen declined to comment.

Restoring weak profit at the VW brand is key for Europe’s largest automaker to emerge from the emissions-cheating scandal that erupted a year ago.

Bloomberg