Adidas sees profits drop by 97%

Sales of Adidas gear fell 6% this winter when compared with last winter.

Sportswear giant Adidas has reported a 97% fall in profits during the January to March quarter after sales were hit in the economic downturn.

Adidas made 5m euros ($6.7m; £4.4m) in pre-tax profits during the first quarter, down from 169m euros in 2008.

Sales were down 6% on a year ago, and the company said it was facing higher raw material and wage costs. Shares in Adidas fell 10% in Frankfurt.

The firm also said it will close some offices and might shut some stores.

Adidas is to close some regional offices in Europe and Asia as it aims to save more than 100m euros per year.

It will also carry out a review of under-performing retail stores.

'Urgent restructuring'

"We are now in a position to make a game-changing structural refinement to our business," said Herbert Hainer, group chief executive and chairman.

"The current economic climate adds urgency to accelerate our plans.

"Our results have been materially affected by higher input prices, currency devaluation effects and restructuring costs.

"Although some of these items will recur again as we go through the balance of the year, I am convinced we will put most of these effects behind us in the current year."

Adidas is the world's second-biggest sporting goods maker after Nike.

The German firm bought Reebok in 2006 to help it compete against Nike, but Reebok still struggles, particularly in North America where Adidas saw its sales fall by 14% in 2008.

In January Adidas announced it would close its Reebok office in Bolton, ending a 116-year association with the town.

Rival Nike has also been hit by falling consumer demand. In March it said it planned to halt production at three shoe factories in China and one in Vietnam.

Swine flu fears hit travel shares

The flu outbreak is causing global alarm

Shares in airlines and travel firms have fallen sharply around the world on concerns about the economic impact of the swine flu outbreak.

With the outbreak in Mexico spreading to the US, Canada, Spain and the UK, shares in British Airways fell 7.7%, while cruise firm Carnival lost 6.8%.

Investors fear the flu outbreak may lead to people cancelling overseas trips, or even to travel restrictions.

But some shares did rise, such as Roche, maker of a key anti-flu drug.

'Real concern'

Analysts said investors were more cautious than panicked, but still concerned that if the outbreak worsened, especially in the US, it could potentially derail economic recovery efforts.

Swine flu is ripping through the markets, creating uncertainty in its wake Manoj Ladwa, ETX Capital Economy braced for swine flu impact

"In essence, this is an already dangerous time for financial markets, so to have this spectre developing right now is just cause for some very real concern," said analyst James Hughes of CMC Markets.

In other developments:

• Shares in most UK-listed travel firms were lower, with hotel business Intercontinental down 4.2%, and tour operator Thomas Cook falling 4.4%

• ABTA, the UK's main travel association, said there were "no suggestions" there had been any outbreaks of the flu in Mexico's main tourist regions, and that normal booking conditions still applied - though tourists have been warned against travel to areas with swine flu by the European Union's Health Commissioner

SWINE FLU Swine flu is a respiratory disease thought to spread through coughing and sneezing Symptoms mimic those of normal flu - but in Mexico more than 100 people have died Good hygiene like using a tissue and washing hands thoroughly can help reduce transmission 'I couldn't get out of bed' Q&A: Swine flu In pictures: Swine flu

• Airlines around the world have seen their shares fall, with Hong Kong's Cathay Pacific ending down 8%, Australia's Qantas losing 4%, Germany's Lufthansa losing 9%, and Air France finishing down almost 7%

• German tour operator TUI says tours it was running in Mexico would miss out the capital as a precaution

• Shares in Swiss firm Roche - the manufacturer of anti-flu drug Tamiflu - rose 3.5% after it said it was increasing production. Shares in UK rival GlaxoSmithKline, which makes anti-flu drug Relenza, also gained, adding 5.7%

• Russia, China, Ukraine and Thailand ban imports of pork from North and Latin America, despite the swine flu in question not infecting pigs

• US soy and corn prices fall on fears that the flu outbreak will cause a slump in demand for pork products, which would hit sales of animal feed

• Oil prices fall on concerns that the flu outbreak will knock the world economy. US light crude was down $1.87 a barrel to $49.68

• The Mexican peso falls 5% against the US dollar, dropping as low as 13.97 per dollar.

'Health emergency'

The declines in airline and travel stocks initially dragged down most stock markets. However, European markets recovered later on, boosted by drugmakers, whose shares were up on hopes of demand for more vaccines.

Shares in airlines have fallen around the world

"The threat of the pandemic will add further weakness to global trade," said Justin Urquhart Stewart, investment director at Seven Investment Management.

"We saw with Sars, tangible percentage points knocked off the index, and that was in a buoyant time. Put that in a weaker time and it is likely to be more unpleasant."

The UK's main FTSE 100 index closed up 0.27% to 4,167, while Germany's Dax gained 0.4% to close at 4,694.

Wall Street's main Dow Jones index was up 32.4 points, or 0.4%, to 8,108.7 in morning trading.

Hong Kong's Hang Seng share index had earlier ended down 2.7%. Japan's Nikkei index managed to end up 0.2% after takeover news in the semiconductor sector.

"Swine flu is ripping through the markets, creating uncertainty in its wake," said trader Manoj Ladwa of ETX Capital in London.

The World Health Organization has declared the flu a "public health emergency of international concern", warning that it could spark a pandemic, or global outbreak.

Does the recession have the potential to help the UK government?

As we all know, binge drinking has become a significant problem for the government to tackle in the UK and the governement might take action. The government's top medical adviser has drawn up plans for a minimum price for alcohol which would double the cost of some drinks in England. Under the proposal from Sir Liam Donaldson, it has been reported that no drinks could be sold for less than 50 pence per unit of alcohol they contain. It would mean most bottles of wine could not be sold for less than £4.50, whilst a can of beer would cost £1. A Department of Health spokeswoman said the government "had not ruled out" taking action on cheap alcohol. Sir Liam's proposal is aimed at tackling alcohol misuse and is set out in his annual report on the nation's health.

In today's economic climate, people have less disposable income, money which is available for them to spend on whatever they like. This means that a possible consequence of raising alcohol prises could be that people don't have enough money to buy those few extra pints, meaning less people getting drunk. Therefore, perhaps binge drinking might become a smaller problem in the UK, only time will tell.

The binge drinking problem in the UK has led to campaigns from the NHS (National Health Service) to prevent it, such as the well-known and publicised "Alcohol, know your limits".

BMW, VW and Saab are suffering!

BMW's net profits tumbled nearly 90% to 330m euros ($423m; £306m) last year, as the global economy weakened and demand for cars decreased. Earnings were hit by 2.4bn euros of exceptional costs linked to bad debts, personnel costs and provisions to cover risks on used car markets. Separately, the European Investment Bank made a 400m euros loan to BMW as part of a wider industry package.

The EIB approved 3bn euros in loans to the European auto industry. The money will go to German, Italian, French and Swedish carmakers. Most of it will be aimed at improving fuel efficiency and cutting carbon emissions. The bank said that it expected to grant a further 2.8bn euros of loans to the industry in April and May. This would take its total lending to the car industry to 6.3bn euros since December. BMW is not the only carmaker to struggle however as VW reported on Thursday that sales fell 15% in January and February.

And troubled carmaker Saab said that it planned to cut 750 jobs in Sweden. Shares in BMW fell 8% to 21.04 euros after the news of its profit fall. BMW did not provide an outlook for the year ahead. However, Norbert Reithofer, BMW's chief executive said in a statement: "The BMW Group has been able to make improvements at an operating level in the midst of extremely difficult economic times." He added: "Cost structures have been further optimised and thanks to rigorous management of free cash flow, the BMW group is in a very solid financial position."

Volkswagen said that 2009 sales and profits would not match the record levels of 2008. "The group's sales revenue in 2009 will be below that of the previous year due to the declining unit sales situation," VW said in a statement. "In such a situation, it will not be possible to reach the high level of earnings achieved in previous years," it added. Separately Saab, whose US parent General Motors wants to sell it, announced job cuts. "We announced this morning we would see to make 750 redundancies in our production facility in Trollhaettan," Saab spokesman Joe Oliver told the AFP news agency. "This is a necessary action to increase liquidity and the top priority for Saab at the moment is to reorganise efficiently in order to attract new investors."

JJB's and Microsoft's answers to the recession

Strange ways firms are cutting back

Believe it or not but some firms have been reducing their costs in strange and different ways than people would believe. In recent weeks with the economic situation we are in, firms have been cutting jobs, such as BT (British Telecom) cut back 10,000 jobs at the end of November last year. However the popular sports retailer JJB has decided to cut back in another way before cutting jobs, it sold its 2 helicopters! The chairman of retailer JJB Sports has ordered the sale of the Wigan-based chain's two corporate helicopters in an attempt to shave £1m a year off the company's overheads. The firm's Agusta 109 has already been offloaded to a Middle Eastern buyer for £4m and the other is on the market, with a deal expected within weeks.

(Left -this helicopter is sky-high - not like JJB's sales!)

(Right - the old CEO Chris Ronnie)

When Sir David Jones started, he began an immediate review of JJB sports when he took over as chairman earlier this month. He is looking to slash its costs and reduce its debts while aiming to restore it to profitability. The retail veteran transformed Next in the early 1990s and made the sale of the chain's helicopter one of his first decisions. "They cost £1m a year to run and as the company is doing whatever it can to survive the recession, he has decided they must go. He has also instigated a reduction in stock levels as an urgent measure to further cut the company's costs as part of his restructuring and recovery plans."

Microsoft
The Wall Street Journal reports the rumored
Microsoft job cuts may come as early as next week. It is uncertain if the job cuts will actually happen, the Wall Street Journal said Microsoft is looking for alternatives to cutting jobs. Those numbers are likely going to be “far less than the 15,000 positions” first thought, sources tell the paper.

Microsoft, like Google, rarely has job cuts. Microsoft has over 91,000 employees, and has grown the employee base by 15%, from 2007 to 2008. It would be interesting to see if Microsoft does cut jobs. It would be a bold statement from Microsoft to not cut jobs and snuff Google’s latest job cuts and product slashes.

We should find out soon enough, so keep checking the blog for the latest information - it'll keep you posted!

France, a time of troubles?

The recession in France

On Thursday this week (22/01/2009) a Peugeot factory in Poissy, just west of Paris, annonced it was going to operate shorter weeks, due to a decrease in car sales. This will help them to reduce some of their variable costs in employment.

It shut down completely for four weeks over Christmas. Some people were lucky enough to be able to keep their jobs however others were less fortunate. 700 workers who previously had temporary contracts have lost them. “There’s a real fear that redundancies could be next,” says Georges Martin, a union official who has worked there for 33 years.

The French may not be troubled by heavy mortgages, or credit-card bills, but fears of unemployment are rising as recession takes hold in the country. In November France’s unemployment total reached 2.1m, compared to an 8.5% rise on a year earlier. Other European Union countries such as Spain and Ireland are seeing even sharper rises in unemployment, as Europe’s economies head into what European Commission forecasts suggest may be their worst year since the 1970s (see chart). French unemployment, now 7.9%, could top 10% by 2010. Joblessness is growing fastest among under-25s, many of whom are being laid off as firms cut those on short-term contracts.

The government is most worried about the car industry, which directly employs 700,000 people in France (6,600 of them in Poissy), and indirectly 2.5m. This week François Fillon, the prime minister, told car-industry bosses that state help would go only to firms that kept production (and jobs) in the country. The Europe-wide concern that rising unemployment could provoke social unrest is particularly acute in France, where even in good times protesters take readily to the streets.

There have been various outbursts in recent weeks. When President Nicolas Sarkozy dropped in on a town in Normandy, the police had to use tear-gas to control a crowd of protesting students and teachers. Militant unions in Paris forced the closure of a railway station, Saint-Lazare, for a day, and have paralysed public transport in Marseille. In December Mr Sarkozy postponed a school reform out of fears, prompted by riots in Greece, that French high-school protests could get out of hand and even set off a rerun of May 1968.

NEWS - UK is officially in recession (23/01/09)

The UK is now in recession for the first time since 1991.

Gross domestic product (GDP) fell by 1.5% in the last three months of 2008 after a 0.6% drop in the previous quarter. It represents the biggest quarter-on-quarter decline since 1980 and a 1.8% dcrease from the same quarter a year ago. (GDP is the most commonly used indicator of national income - it measures the sum of incomes received by the various wealth-creating sectors of the economy, from manufacturing and retail to agriculture and service industries.) This means that people have been earning less because of reasons such as jobs being cut. Consequently people tend to have a fear of spending too much money which might cause them financial problems later on as nobody can be certain of what the future holds. This actually puts the economy under even more pressure as the key solution to the problem is trying to get consumers to spend more.


Bleak retail sales have forced firms such as Woolworths into admission accelerating unemployment within the UK.

The Office for National Statistics (ONS), revealed that manufacturing made the largest contribution to the economic slowdown. The industry fell by 4.6% despite hopes that the weak pound would help exporters. The ONS also revealed that all elements of the economy shrank from the previous three months except for agriculture.

Could anything have been done or be done?

There have been many efforts to prevent the recession deepening, although critics say they have not gone far or done enough. For instance, the Bank of England has aggressively cut interest rates to 1.5%. The reason being they tried to drive down the cost of lending so that it would make it easier for consumers and businesses to access credit. However on the other hand banks have been reluctant to lend sufficiently, despite a £37bn injection into major banks, and a scheme to offer insurance to banks against potential losses on risky loans.

Furthermore a temporary cut in value added tax (VAT), from 17.5% to 15%, was an attempt to encourage consumers to spend and boost the retail sector and wider economy.

The school library has now subscribed to the online edition of The Economist. You can access the account by using the following;

username: antonella.brasey@britishschool.fr
password: library

This site will be of great use to sixth form students particularly.

The UK housing market - Will it crash?

House prices in the UK have recently shown a significant drop in the past 4 months.
This was inevitable as the price of houses have been consistently increasing (5000%) since 1983.

Economists have predicted that price of houses will have an average drop of 15% at the very least up till August 2009. This graph just shows exactly that.

House buyers all over the UK have been buying less due to such high prices.
It is for this reason that the chancellor Alistair Darling axed off the stamp duty for 12 months.
This means that all houses on the market for less than £175,000, house buyers won't have to pay this added tax (between 1-4% of stamp duty depending on the price of the house).

What caused this? First of all, the demand for houses has been constantly increasing every year due to groing population. Secondly, interest rates are too high which puts off customers from borrowing. This leads to a decrease in spending because don't have the money to do so. And finally, banks don't lend money as easily as before due to borrowers who do not have a reliable and regular source of finance.

As a consequence of the house prices slowly decreasing, the price of building companies drop. This has made a huge impact on this company as the value of their shares is lower than when the conmpany first started.This gaph shows exactly this.

2008 Results at the BSP

A great year for results for the subject area and one that sets us up well for the changes to the A Level courses this year and the GCSE changes planned for September 09.
Our GCSE grades were exceptional, with 95% of students gaining A* - C, with 52% of the year gaining A* or A. Lachlan Glascott has been commended by EDEXCEL for being in the 'top ten' of the 17,000 students who took the exam this year. Lachlan gained 171/181 possible marks in both the exam paper and the coursework - an achievement to be proud of. This is the second time a GCSE student from the BSP has gained such an award, Lachlan following the success of Sonia Gough five years ago.
A2 grades are also excellent, with 100% of students gaining A - C grades. In many units taken by the y13 students, several candidates scored 100%. One particular paper saw 12/14 students score an A - a suitable reward for the hard work of all the students concerned. All of the students are now waiting to start their university courses, many of them choosing to study in the UK.
A fantastic end to the academic year 07 -08 and a great springboard for this year's work.