Week in Review, May 2

A round up of some of the week's most significant corporate events and news stories.

Doubts on whether iPhone's growth rate can be sustained

Another quarter of record iPhone sales and an expanded $200bn capital return scheme were not quite enough to propel Apple's share price above its all-time high this week, writes Tim Bradshaw in San Francisco.

Apple stock rallied before Monday's earnings report, before it posted its fifth quarter of forecast-busting results. Fuelled by demand from China's middle classes, iPhone sales leapt 40 per cent to 61.2m units.

"You can't grow those kinds of numbers without getting significantly into the middle class," said Tim Cook, Apple's chief executive.

A 50 per cent increase in Apple's share buybacks and dividends meant that the group plans to return a total of $200bn by the end of March 2017.

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However, investors seem uncertain about whether the iPhone's growth rate can be sustained and how much demand there is for the Apple Watch, with the company refusing to reveal sales figures.

Apple's shares fell back about 5 per cent in the days following its quarterly numbers, as reports emerged of production problems holding up supplies of the watch and a small number of early buyers who had complained that its heart-rate monitor failed to work on tattooed skin.

The European Commission's investigation into its tax deals with Ireland is also looming. Apple warned in a regulatory filing after its earnings that if Ireland is required to recover up to 10 years of back taxes, the amount could have a "material" impact on its finances - potentially billions of dollars.

? Related FT Data blog post: Apple's cash pile? Related Short View column: Apple a convert to the buyback craze

Crude crash takes toll on big oil's quarterly earnings

The impact on oil and gas producers of the plunge in crude prices since last summer was highlighted this week by first-quarter earnings statements from many of the world's largest listed energy companies, writes Ed Crooks in New York.

Two clear themes emerged. One was that downstream refining and chemicals operations generally thrived while upstream oil and gas production was suffering. The other was that, within that generally difficult outlook, it was oil and gas production in North America that was hit the hardest.

ExxonMobil, the world's largest listed oil company by market capitalisation, reported a $52m loss from its US upstream operations, impacted by average selling prices that were 55 per cent lower for oil and 47 per cent lower for gas than in the equivalent period of 2014.

Overall, the group reported a 46 per cent drop in post-tax profit to $4.94bn, supported by earnings from refining that doubled to $1.67bn.

Royal Dutch Shell, the largest listed European oil group, posted a 56 per cent post-tax profit fall to $3.2bn, also helped by a steep rise in earnings from refining.

BP managed to limit the drop in its profit to just 20 per cent, owing to more than doubled earnings of $2.2bn from its downstream operations. That included $350m in above-normal profit from its trading unit, one of the industry's most active.

The downside of not having downstream operations was shown by ConocoPhillips, which spun off those units in 2012. It reported an 87 per cent drop in earnings to $272m.

? Related news story: US loss suppresses Chevron earnings? Related Lex note: Royal Dutch Shell - the ugly American

Walmart plans revamp to crack China market

Walmart unveiled plans to expand and revamp its operations in China in the face of competitive pressures that have depressed sales at all the big foreign supermarket chains in the country, writes Patti Waldmeir in Shanghai.

The US retailer's net sales in China fell 0.7 per cent in the quarter ended January 31, while same-store sales contracted 2.3 per cent in the same period.

Walmart said that it would open 115 new stores in China over the next three years, boosting its presence by more than 25 per cent. But expansion is not the only goal, Walmart global chief executive Doug McMillon told a Beijing press conference this week. "Our goal is not to be the biggest retailer in China, we want to be the most trusted retailer."

The company also said it would renovate 50 existing stores and launch a home-shopping app.

Walmart has struggled with food-safety issues in China - a market where foreign brands trade on their reputation for quality, so any safety flaws are particularly bad for brand image.

But it is far from the only foreign grocer to struggle in China in recent years, where shopper habits have changed rapidly in the face of growing affluence and the speedy rise of ecommerce.

Tesco, the UK chain, failed to make it alone on the mainland and was forced into a joint venture with a leading local retailer, China Resources Enterprise, which has also struggled to turn round its ailing business. Competition from online grocers is one of the biggest threats to bricks-and-mortar sales.

Alliance Trust chief remains after 11th-hour fund deal

Katherine Garrett-Cox has survived. The Alliance Trust chief executive remained at the helm of the 127-year-old Scottish group after agreeing a last-minute deal with US hedge fund Elliott this week, writes David Oakley in London.

But institutional investors said the deal, which meant two out of three of Elliott's proposed directors gain places on the board, was a Pyrrhic victory for the feisty Alliance boss, who has been given a year to turn round performance.

Retail investors who gathered in Dundee for the group's annual meeting booed and jeered when they heard that the board had spent £3m fighting proposals from the activist New York hedge fund before drawing up the truce.

Karin Forseke, Alliance chairman who had previously urged shareholders not to support Elliott, admitted that the ceasefire was a U-turn on Alliance's part and had been agreed after the board realised the trust might not have won over enough support to vote down the plan.

Alliance also staved off a revolt over pay, even though Elliott had attacked Ms Garrett-Cox's remuneration, which has doubled in five years to £1.4m.

The deal brought to an end a six-week battle between the groups that had become increasingly bitter. Elliott was the second activist to square up with Ms Garrett-Cox after she faced a campaign against her from Laxey Partners in 2011.

An institutional investor said: "She has survived two attacks, but she has to pull performance round now, or it will be the end for her."

? Related news story: Individual shareholders put Alliance Trust board on notice? Related Lombard column: Alliance chief has problem worthy of agony aunts Cathy and Claire? Related Lex note: Alliance Trust - truce and consequences

And finally ... the lighter side of the news

? PG Wodehouse is not normally found on MBA reading lists, but his tales of Bertie Wooster's excesses and extrication from scrapes find a reflection in Hyundai. The group's decision to go Gangnam Style in its choice of a new $10bn HQ has earned the ire of the Aunt Agathas of the international investment community. The solution? A Jeeves - or, in this case, a committee of them - to smooth relations and keep the high jinks to a minimum.

? There was nothing cloak and dagger about the end of Secret, the anonymous sharing app. Chief executive David Byttow made more noise than an orchestra being pushed down a flight of stairs when he announced that it was shutting. Entrepreneurs do not often trumpet their failures, unless, of course, he was thinking about future fundraising drives when he caterwauled about returning money to investors.

? Keeping a workforce focused on the task in hand can be hard in any company, so it comes as no surprise that Alibaba was looking for a singular individual to act as a cheerleader for its "code monkeys". However, the suggestion that to tick all boxes a successful candidate should have similar physical qualities to porn star Sora Aoi triggered outrage and the advert was withdrawn. No doubt the group's HR team breathed a sigh of relief.

? If there was something rotten in the state of Denmark in Hamlet's day, what would he make of the stink being kicked up amid the upper echelons of Swedish commerce? This week Anders Nyren found himself ejected from the chief executive's office at Industrivarden as allegations about the misuse of corporate jets by executives intensified. Given the whiff of scandal in the air, Mr Nyren might be wise not to seek a golden parachute.

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