Shein’s UK profits double; Water companies penalised for poor performance; China targets EU brandy – business live

Full story: Shein doubles profits in UK after sales leap 40%

Sarah Butler

Shein, the online fast-fashion retailer founded in China, doubled profits at its UK arm last year as sales jumped nearly 40% to £1.5bn – making it about the same size as its rival Boohoo.

The company, which is considering a £50bn float on the London Stock Exchange, said pre-tax profits at Shein Distribution UK rose to £24.4m, on which it paid £5.7m in income tax, according to accounts filed at Companies House.

More here.

The US trade deficit has narrowed, thanks to a rise in exports and a drop in imports.

America’s goods and services deficit with the rest of the world fell by over 10% in August to $70.4bn, down from July’s $78.9bn.

Exports rose by 2% to $271.8bn, including an increase in sales of consumer goods, capital goods such as civilian aircraft and industrial machinery, and in services.

Imports dipped by 0.9% to $342.2bn, including a drop in industrial supplies and materials coming into the US, and fewer passenger cars.

The US deficit with Canada almost halved – decreasing by $3.8bn to $3.9bn, while the deficit with China decreased by $2.6bn to $24.7bn.

Over in Westminster, Downing Street has dismissed concerns that changing the fiscal rules in the Budget would trigger a Liz Truss-style meltdown, PA Media report.

Following the rise in UK borrowing costs in recent days (see opening post), Keir Starmer’s official spokesperson was asked if the the Chancellor was still committed to the borrowing rules she set out before the election.

Asked whether the Chancellor was still committed to the borrowing rules she set out before the election amid fears voiced by some bond market analysts that a change could unleash chaos similar to Ms Truss’s mini-budget, the Prime Minister’s official spokesman said:

“Well, I would obviously not accept that characterisation.”

The PM’s spokesperson explained that:

The Government has made clear that one of the first steps of this Government is to restore economic stability in the Budget. It will absolutely deliver on that, delivering on the robust fiscal rules that were set out in the manifesto.

“That includes moving the current Budget into balance, it includes debt falling as a share of the economy, and more broadly, as I say, the Budget will be about fixing the foundations of the economy, delivering stability, because it is only with economic stability that we will get the growth and investment that the economy needs.”

As covered earlier this morning, the gap between UK and German borrowing costs has hit its highest level in a year, amid speculation that Rachel Reeves might change the UK’s fiscal rules to allow more borrowing to fund investment.

Pressed on whether the current fiscal rules are set in stone, Number 10 said:

“The Government remains committed to the fiscal rules that were set out in the manifesto.”

Snacks and fizzy drinks company PepsiCo has cut its forecast for annual sales growth after missing Wall Street forecasts today.

PepsiCo posted a surprise drop in third-quarter sales, with net revenues falling to $23.3bn in its financial third quarter, down from $23.45bn a year earlier.

It has now trimmed its outlook for the year, and is forecasting a low-single-digit increase in organic revenue, down from a previous forecast of 4% organic revenue growth.

Revenues at Quaker Foods North America fell by 13%, after it recalled some granola bars and granola cereals listed below because they could be contaminated with Salmonella.

Pepsico’s chairman and CEO Ramon Laguarta says:

“Our businesses remained resilient in the third quarter, despite subdued category performance trends in North America, the continued impacts related to certain recalls at Quaker Foods North America and business disruptions due to rising geopolitical tensions in certain international markets.

Strong cost controls aided our profitability, as we made incremental investments to improve our marketplace competitiveness.”

Aarin Chiekrie, equity analyst at Hargreaves Lansdown, says Pepsico is finding it harder to get customers to swallow price hikes.

Volumes of both food and drink were down this quarter, as consumers chose to leave blockbuster brands like Pepsi, 7up and Lays Crisps on the shelves. Recalls of certain Quaker Oats products, following concerns that they could be contaminated with salmonella bacteria, continue to weigh on performance.

And rising geopolitical tensions in certain international markets have also caused unwanted disruptions to operations.

Operating profits in the Africa, Middle East and South Asia region were down 17% in the quarter, and dropped by 28% at Quaker.

The UK arm of fast-fashion group Shein has achieved annual sales of over £1.5bn, as customers continue to flock to its bargain products.

Shein Distribution UK Limited has reported revenues of £1.55bn for 2023, up from £1.12bn in 2022, its latest financial results show.

With demand for Shein’s cheap sweaters, dresses and leggings remaining strong, the company made a pre-tax profit of £24.4m in the UK, twice the £12.2m it made in 2022, after reporting that a ‘cost of sales’ of £1.5bn for 2023.

It also paid twice as much tax – £5.7m, up from £2.35m in 2022.

Shein says its significant milestones in 2023 include opening pop-up shops around the UK, and a Manchester office.

Today’s results come as Shein prepares to hold informal meetings with investors ahead of a planned flotation on the London stock market.

Julian Dunkerton, the boss of SuperDry, has argued that Shein should be paying far more tax in the UK; it uses a loophole that excludes low-value items from import duty and VAT because they send individual items direct to shoppers from overseas.

France’s government is not impressed that China is imposing temporary anti-dumping measures on brandy imports from the European Union (see earlier post).

French trade minister Sophie Primas has told Reuters that the measures are “unacceptable’, and breach international trade rules.

France plans to work with the EU to contest the move at the World Trade Organisation (WTO), she says.

Primas explains:

“This announcement seems to be a retaliatory measure following the (EU) Commission’s investigation into electric vehicles. Such a retaliatory measure would be unacceptable, and in total contradiction with international trade rules.”

Channel 4 revenues dive, but most execs take bonuses

Mark Sweney

State-owned, commercially funded broadcaster Channel 4 has reported the steepest fall in revenues in its 41-year history, but this hasn’t stopped bosses taking bonuses.

Channel 4 has reported a 10% year-on-year fall in total revenues to £1.02bn last year, down £120m compared with 2022, the steepest percentage fall in income in decades.

The broadcaster’s advertising revenue, on which it still relies for 80% of total income, fell by 9.6% from £1.25bn to £1.14bn in 2023, the worst proportionate slump since the advertising recession of 2009.

Channel 4’s latest annual report, published on Tuesday, showed that the corporation’s top executives – the chief executive, Alex Mahon, the chief operating officer, Jonathan Allan, and the chief content officer, Ian Katz – took home £2.15m in pay and bonuses last year.

This included Mahon and Allan accepting £375,000 in bonuses, despite the poor performance of Channel 4, while Katz – once of this parish – declined to accept an award of more than £100,000.

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Over in Stockholm, the “Godfather of AI’, Geoffrey Hinton, has won the Nobel Prize for Physics.

British-Canadian computer scientist Hinton and fellow neural network pioneer John Hopfield have been recognised for their “foundational discoveries and inventions” that enable machine learning with artificial neural networks.

The Royal Swedish Academy of Sciences explain:

When we talk about artificial intelligence, we often mean machine learning using artificial neural networks. This technology was originally inspired by the structure of the brain. In an artificial neural network, the brain’s neurons are represented by nodes that have different values.

These nodes influence each other through con­nections that can be likened to synapses and which can be made stronger or weaker. The network is trained, for example by developing stronger connections between nodes with simultaneously high values. This year’s laureates have conducted important work with artificial neural networks from the 1980s onward.

Hopfield work on neural networks included creating an associative memory that can store and reconstruct images and other types of patterns in data.

Hinton’s research examines ways of using neural networks for machine learning, such as the backpropagation algorithm used to train multi-layer neural networks.

Last year Hinton quit Google, citing concerns over the flood of misinformation, the possibility for AI to upend the job market, and the “existential risk” posed by the creation of a true digital intelligence.