WSJ : Telecom Italia Gets $1.6 Bln in Bridge Financing Until Close of Network Sa

Telecom Italia Gets $1.6 Bln in Bridge Financing Until Close of Network Sale
The financing deal, with a maturity of up to 18 months, strengthens the company’s liquidity structure

Telecom Italia TIT -1.23%decrease; red down pointing triangle said it signed an agreement for 1.5 billion euros ($1.63 billion) in bridge financing to cover its needs until completion of a planned sale of its fixed-network unit.

The Italian telecommunications company said Friday that the deal, with a maturity of up to 18 months, strengthens its liquidity structure and seeks to cover its refinancing needs until the network deal is completed.

Conditions of the agreement are in line with market benchmarks, the company said.

WSJ : Samsung Doubles Down on Texas as U.S. Chip Epicenter

Samsung Doubles Down on Texas as U.S. Chip Epicenter
South Korean firm ramps up investment to $44 billion for hub near Austin making advanced semiconductors

Samsung 005930 -0.94%decrease; red down pointing triangle Electronics plans to more than double its total semiconductor investment in Texas to roughly $44 billion, according to people familiar with the matter, a significant breakthrough in the U.S.’s quest to make more of the world’s cutting-edge chips.

The South Korean company’s new spending will be concentrated in Taylor, Texas, where Samsung is building a semiconductor hub and has other nearby existing operations, the people said. The additions include a new chip-making factory, and a facility for advanced packaging and research and development.

Samsung is one of just three firms, along with Intel and Taiwan Semiconductor Manufacturing, capable of producing advanced logic semiconductors vital to artificial intelligence and national defense. These companies sit at the heart of the Biden administration’s push to strengthen the U.S.’s chip-making capabilities, as Washington simultaneously seeks to undercut Beijing’s tech advances.

To help finance the broader Texas expansion, Samsung is expected to receive billions of dollars in subsidies from the U.S. Chips Act, the people said. Talks with the Commerce Department remain ongoing, though Samsung is expected to receive one of the largest payouts given to a single company.

An event to announce Samsung’s broadened investments is expected to be held on April 15 in Taylor, according to the people familiar with the matter. Samsung declined to comment. The Commerce Department declined to comment, saying that it is unable to discuss any specific company projects.

Samsung’s additional investments add to the $17 billion that the company had previously committed more than two years ago to Taylor, located just outside of Austin, for a cutting-edge chip-making plant.

The factory broke ground in 2022, with plans to start mass production as early as this year. The costs of building this first chip-making plant have increased due to inflation and other factors, requiring several billion dollars in extra investment, according to people familiar with the matter.

The second Taylor-based chip factory is expected to cost more than $20 billion, the people said. Samsung’s R&D efforts are expected to be warehoused inside those two plants. The size of the investments in these two factories could shift depending on market conditions.

The planned facility for advanced packaging—a key final step in the production of high-end AI chips like those made by Nvidia—will have a price tag of roughly $4 billion, the people said.

Earlier on Friday, Samsung said it expects a 10-fold increase in its first-quarter operating profit, to roughly $4.9 billion. This tops industry analysts’ estimates, as the chip industry awakens from a protracted downturn.

Samsung’s supersize chip investment in Texas adds fresh momentum to one of President Biden’s marquee domestic agendas as he seeks re-election in November. Many of the highest-profile projects have seen costs rise and face delays.

U.S. chip-making dominance has been a priority for Washington, which has earmarked tens of billions of dollars in subsidies to woo back local production that had migrated to Asia.

The Chips Act, which passed two years ago, set aside $53 billion in grants for projects like Samsung’s—and the money has only recently begun to flow.

Intel was awarded $8.5 billion for several chip plants planned in the U.S. last month, following a $1.5 billion grant to GlobalFoundries for projects in New York and Vermont in February. TSMC and Idaho-based Micron, a memory chip maker, are also expected to receive grants under the program.

The spree of projects aims to bolster domestic supplies of critical semiconductors. The U.S. share of chip-making declined to about 12% in 2020 from 37% in 1990, a fall that is increasingly seen as a national-security liability in an age when chips underpin advanced weapons, cyberwarfare and AI.

In a speech in February, Commerce Secretary Gina Raimondo said that based on the level of industry interest in Chips Act funding, the U.S. was on track to produce roughly 20% of the world’s most advanced logic chips by the end of this decade.

Samsung’s big bet in Texas is comparable to those made by its chief rivals. TSMC is building two chip-making factories in Arizona, with a projected investment of $40 billion. Intel’s total investment in U.S. projects in the next five years is expected to exceed $100 billion.

Samsung began semiconductor operations in Austin in 1996, starting with memory chips. The site later transitioned into the contract chip-manufacturing business. The Taylor chip making plants are expected to be filled with equipment for producing the industry’s cutting-edge logic chips for customers.

Two years ago, Samsung floated the prospect in filings made to the Texas controller’s office of potentially investing upward of $200 billion toward building 11 new chip-making plants in Texas over the next two decades.

Samsung, the world’s largest memory maker by revenue, is also racing alongside South Korea’s SK Hynix and Micron for leadership in high bandwidth memory, a critical component of artificial-intelligence computing.

HBM can speed up computing times by stacking multiple DRAM memory—used commonly for helping devices or servers multitask—on top of each other and merging them as one.

HBM has become the go-to type of memory to work in tandem with graphic-unit processors made by the likes of Nvidia that power AI computing. To enable faster data-processing speeds, the two types of chips are currently bundled together using “2.5-D” packaging techniques. Major chip makers including TSMC, Samsung and Intel are investing in 2.5-D packaging as well as next-generation 3-D packaging.

Earlier this week, South Korea’s SK Hynix announced its plans for a $3.9 billion facility in West Lafayette, Indiana, for advanced chip-packaging, mainly for HBM. SK Hynix is the exclusive partner to Nvidia for the most-advanced HBM currently in the market.

Samsung’s planned advanced chip-packaging facility is expected to carry out packaging for HBM and provide 2.5-D and 3-D packaging technologies, according to people familiar with the matter.

At one of his company’s events last month for AI developers, Nvidia Chief Executive Jensen Huang said his company was in the process of determining whether Samsung’s next-generation “HBM3E” product could be a viable option. He stopped by Samsung’s booth and autographed one of the chips. He wrote: “Jensen approved.”

FT : Thames Water parent company says it has defaulted on debt

Thames Water parent company says it has defaulted on debt
Formal notice to bondholders fires starting gun on potentially messy restructuring

Thames Water’s parent company has sent a formal notice to bondholders informing them that it has defaulted on its debt, firing the starting gun on a potentially messy restructuring at the owner of Britain’s largest water utility.

On Friday, one of the holding companies that owns Thames Water announced that interest payments due earlier this week on a £400mn bond “have not been paid” and it issued a “formal notice of default”.

The bonds were issued by Kemble Water Finance, which sits above the nearly £15bn of debt at the Thames Water utility companies. Those companies should be unaffected by the move. Kemble last week told bondholders that it intended to stop paying interest on bonds.

The default threatens to wipe out the stakes of Thames Water’s nine shareholders, which include the Chinese and Abu Dhabi sovereign wealth funds as well as Canadian and UK pension funds. The shareholders last week said that actions by water regulator Ofwat had made the company “uninvestable”.

>>> US Research Calls

Research Calls
  • Upgrades:
    • Acadia Realty Trust (AKR) upgraded to Buy from Neutral at BofA Securities; tgt raised to $20
    • Agilent (A) upgraded to Buy from Hold at Stifel; tgt raised to $163
    • AngioDynamics (ANGO) upgraded to Outperform from Perform at Oppenheimer; tgt $12
    • Cinemark (CNK) upgraded to Overweight from Underweight at Wells Fargo; tgt raised to $23
    • Eaton (ETN) upgraded to Outperform from Sector Perform at RBC Capital Mkts; tgt raised to $371
    • First Horizon (FHN) upgraded to Outperform from Mkt Perform at Keefe Bruyette; tgt raised to $18
    • Fox Corporation (FOXA) upgraded to Buy from Neutral at Seaport Research Partners; tgt $37
    • Krispy Kreme, Inc. (DNUT) upgraded to Overweight from Neutral at Piper Sandler; tgt raised to $20
    • Lindsay Corp (LNN) upgraded to Buy from Neutral at Northcoast; tgt $142
    • Ollie's Bargain Outlet (OLLI) upgraded to Buy from Hold at Loop Capital; tgt raised to $90
    • Outset Medical (OM) upgraded to Buy from Neutral at CL King; tgt $6
    • Public Storage (PSA) upgraded to Overweight from Equal Weight at Wells Fargo; tgt raised to $310
    • Royal Bank of Canada (RY) upgraded to Outperform from Market Perform at BMO Capital Markets
    • Snowflake (SNOW) upgraded to Buy from Neutral at Rosenblatt; tgt $185
    • SoFi Technologies (SOFI) upgraded to Mkt Perform from Underperform at Keefe Bruyette; tgt raised to $7.50
    • Tanger Factory (SKT) upgraded to Neutral from Underperform at BofA Securities; tgt raised to $31
    • Western Digital (WDC) upgraded to Buy from Neutral at Rosenblatt; tgt raised to $115
  • Downgrades:
    • Achilles Therapeutics (ACHL) downgraded to Neutral from Overweight at Piper Sandler; tgt lowered to $2
    • Altice USA (ATUS) downgraded to Underweight from Equal Weight at Wells Fargo; tgt lowered to $1
    • Core & Main (CNM) downgraded to Neutral from Buy at Citigroup; tgt raised to $64
    • Energous (WATT) downgraded to Neutral from Buy at Ladenburg Thalmann; tgt lowered to $2
    • Gulfport Energy (GPOR) downgraded to Sector Weight from Overweight at KeyBanc Capital Markets
    • Kimco Realty (KIM) downgraded to Neutral from Buy at BofA Securities; tgt lowered to $20
    • Plug Power (PLUG) downgraded to Sell from Neutral at Citigroup; tgt $2
    • Retail Opportunity Investments (ROIC) downgraded to Underperform from Neutral at BofA Securities; tgt lowered to $12
    • Scotts Miracle-Gro (SMG) downgraded to Hold from Buy at Truist; tgt raised to $75
    • ShockWave Medical (SWAV) downgraded to Peer Perform from Outperform at Wolfe Research
  • Others:
    • Ardelyx (ARDX) initiated with an Outperform at Leerink Partners; tgt $14
    • Farmers and Merchants (FMAO) initiated with a Market Perform at Hovde Group; tgt $22
    • Gossamer Bio (GOSS) resumed with an Outperform at Wedbush; tgt $4
    • Immunic (IMUX) initiated with a Buy at Brookline
    • Ovid Therapeutics (OVID) initiated with an Outperform at Wedbush; tgt $8
    • Vertiv (VRT) initiated with an Outperform at Oppenheimer; tgt $96
    • Wolfspeed (WOLF) initiated with a Neutral at Mizuho; tgt $30

>>> US Early premarket gappers

Early premarket gappers
  • Gapping up:
    • GRIN +25.3%, KRUS +7.7%, OLPX +3.4%, CRBU +1.8%, TECK +1%, UTI +0.7%, ACM +0.7%
  • Gapping down:
    • IVVD -4.2%, HIW -2.3%, SNX -1.8%, HUT -1.8%, HIVE -1.3%, SNY -1.2%, TDOC -1.1%, CCCS -0.9%

FT : Hedge funds circle struggling UK investment trusts

Hedge funds circle struggling UK investment trusts
Cornerstone of UK equity market under pressure from low-cost competition and higher interest rates

Hedge funds are pouncing on the UK’s £200bn investment trust sector as it is shunned by investors and hit by competition from cheaper rivals.

Investment trusts, a cornerstone of UK equity markets with roots stretching back more than a century, have seen a gap open up between their share prices and the value of the assets they hold while they battle the worst year for raising capital in a decade.

The discount, which stands at an industry average of 9 per cent to net asset value, has put some investment trusts on the brink of being wound up or targeted by hedge funds including Paul Singer’s Elliott Management and Boaz Weinstein’s Saba Capital.

Their troubles have weighed down the broader UK equity market. The FTSE 100 is closing in on its February 2023 record, in contrast with US and European indices that have hit a succession of all-time highs this year.

“Investment trusts used to be a uniquely British success story and a vibrant part of the market,” said James de Bunsen, a portfolio manager on Janus Henderson Investors’ multi-asset team. “That has totally gone.”

In recent years the trusts, which act as closed-ended investment funds, have become less popular as higher interest rates lured investors into government bonds. That pushed the discount rate as high as 17 per cent, its widest since the financial crisis.

The proliferation of alternative vehicles allowing easy access to a range of global assets — such as exchange traded funds — has also hurt the sector.

Investment trusts make up 27 per cent of the companies in the FTSE 350 index. They include Baillie Gifford’s flagship Scottish Mortgage Investment Trust, Bill Ackman’s £7.4bn Pershing Square Holdings, and the £2.5bn RIT Capital Partners trust.

They date back to the Victorian era, when they were created to widen access for individual investors to investments across the British empire. They offer a set number of shares, which investors can trade among themselves without affecting the pool of cash managers have at their disposal.

That makes it easier for them to invest in assets that are difficult to sell in a hurry, such as property or private equity. This is in contrast with open-ended funds, which constantly issue and redeem new shares or units in response to demand.

“Once upon a time you couldn’t buy shares in emerging market tech so you bought an investment trust,” said one hedge fund executive. “Today there are many ETFs that track emerging market tech and investors have a lot more choice; what was once a very unique product is not that unique anymore.”

Their woes, which are a further drag on London’s already underperforming stock market, have attracted the attention of activists who are pushing trusts to return capital to investors.

Last month Elliott disclosed a 5 per cent stake in Scottish Mortgage Investment Trust a week after the FTSE 100 trust announced a £1bn stock buyback to try and prop up its ailing share price. The US investment firm had been a shareholder for several months before the disclosure.

Saba has built a stake of about $1.3bn in derivatives and shares in UK trusts, according to a source familiar with the matter.

These positions include a £70mn stake in Baillie Gifford’s US Growth Trust, an $88mn stake in JPMorgan’s European Discovery Trust and a £62mn stake in the BlackRock Smaller Companies Trust, according to regulatory disclosures the past few months.

Others are following Scottish Mortgage’s example. Industry buybacks hit a record £3.6bn last year, according to the Association of Investment Companies. Others have cut fees, closed or merged their funds, including the £1.2bn consolidation agreed by Fidelity and Abrdn last year.

“We strongly support the company’s recently announced £1bn buyback — the largest buyback programme ever announced by a UK closed-end fund — and look forward to continuing our engagement,” said Nabeel Bhanji, partner at Elliott, in a statement. Scottish Mortgage declined to comment.


But other investment trusts face a battle to survive. Capital raisings, the industry lifeblood for new funds, have dried up. Last year there were just two initial public offerings, worth a total of £43mn, while secondary fundraising dropped from £5.2bn in 2022 to £1.1bn, according to the Association of Investment Companies.

A number of investment trusts that invest in green energy have been unable to raise equity as a result of their discounts, fuelling fears that the sector’s woes are starving the UK of badly needed green investment.

Many trusts are required to hold a vote if the discount between its share price and its net asset value hits a threshold. Several environmentally focused trusts, including the UK’s largest, the £3.2bn Greencoat UK Wind, are close to this threshold or have crossed it.

Elliott is not planning to sell its stake in SMIT, according to a person familiar with the fund’s strategy, who added that the investment trust has “more to do” regarding buybacks. However, Weinstein is considering several tactics, including share buybacks or pushing for fund liquidations in extreme cases. Saba Capital declined to comment.

Some fund managers also blame regulatory changes for choking demand. In 2022, the way investment trusts’ fees were presented to some investors was changed, in response to new guidance on rules originally introduced in 2018. Critics argue that the UK’s interpretation of the rules — which also cover EU funds — means British trusts’ fees are artificially inflated.

Last month, a group representing 109 trusts wrote to chancellor Jeremy Hunt warning that the current set-up “cannot be allowed to continue”.

It added that the rules were driving investors to EU-domiciled funds and exacerbating the poor performance of the UK stock market. A regulatory overhaul could unlock £7bn per year of lost investment to the UK at no cost to the taxpayer, it concluded.

“This is a self-inflicted own goal,” said Baroness Ros Altmann, who last year proposed a private members bill last year to change the regulatory requirements. “Other countries are taking advantage of our companies . . . the industry is dying.”

A Treasury spokesperson said: “We recognise [the] industry’s concerns and are working at pace with the FCA to repeal and replace EU-inherited retail disclosure rules, including for investment trusts.”

But activist hedge funds say the trusts must prove their value to investors, rather than waiting for government intervention.

“The reality is that some of these discounts are driven by things which are fixable,” said the hedge fund executive. “Sometimes you need to change the manager, sometimes the mandate, and sometimes the governance structure.”

FT : The Steve Jobs of China turns car salesman in Xiaomi’s EV evolution

The Steve Jobs of China turns car salesman in Xiaomi’s EV evolution
Lei Jun aims to match his smartphone success in the electric vehicle market

A little over a decade after founding Xiaomi as an Apple copycat, Lei Jun has finally upstaged his Silicon Valley rival. 

While Apple this year quietly abandoned a decade-long, multibillion-dollar project to build an electric vehicle, the Chinese group now has EVs rolling off Beijing production lines every couple of minutes.

Lei’s marketing flair and penchant for turning ideas into products has earned comparisons with Steve Jobs for Xiaomi’s chief executive and chair, and the moniker “Lei Jobs” in China. Last week, he took to a Beijing stage in a teal blazer to gush over his triumph of making a car just three years after unveiling his ambition.

“It was so difficult [to build a car] — so difficult that even a giant like Apple gave up,” he told hundreds of cheering fans.

The hard work shows signs of paying off: Xiaomi shares rose 12 per cent on Tuesday in response to strong demand for its SU7 model after the launch event. The company has received more than 100,000 pre-orders, though many of those are refundable deposits.

Since founding Xiaomi with seven colleagues in 2010, Lei, 54, has built the company into the world’s third-largest phonemaker and assembled a product line so diverse that Xiaomi’s logo adorns everything from suitcases to “smart” washing machines.

In 2021, Lei made the group’s most audacious bet yet, announcing a plan to mass-produce cars in 2024 on the back of an initial Rmb10bn ($1.5bn) investment in what he said would be his “last big entrepreneurial endeavour”. The new car slots into Xiaomi’s product universe, allowing drivers to turn on everything from home lights to the rice cooker from their centre console.

“Trying to make a car these past three years, every day I’ve been trembling with fright,” he said last week. “It’s been a huge weight on my mind.” 

A person briefed on the initiative said Lei has devoted 70 to 80 per cent of his time over the past year to Xiaomi’s car project, starting at the office at 7am and working until 10 or 11pm. “Lei has an ambition to turn Xiaomi into one of China’s top three EV makers,” the person said. 

That would also make Xiaomi one of the world’s largest EV manufacturers. Its plant on the outskirts of Beijing can make 150,000 cars a year, with expansion plans that would double capacity, according to state media. Executives have said Xiaomi’s global footprint, with smartphone distributors and stores around the world, would accelerate overseas car sales.

Yet it is launching in a highly competitive Chinese market that is in the midst of a price war. The country’s vast supply of sleek, cheap and high-quality electric cars has made Citi analyst Jeff Chung less sanguine on the prospects for Xiaomi’s new offering, which closely resembles the Porsche Taycan and has a starting price of Rmb215,900.

“Ultimately everyone could be a loser within the Rmb200,000-Rmb300,000 [pure battery-powered vehicle] segment,” he noted.

The group’s rapid transition from EV wannabe to mass production has been aided by the rise of a mature supply chain in China for the electric car industry. Domestic EV makers, along with Tesla, which has a major factory in Shanghai, have fostered a huge talent pool and a new breed of suppliers from battery giants such as CATL to aluminium parts maker Wencan Group.

A supplier of automation equipment to Xiaomi’s factory said there were dozens of former Tesla employees working inside the plant. “Tesla is like the Whampoa military academy of EVs,” he said, referring to the 1920s training ground for Chinese forces that would go on to unite the country. Similarly, Apple also raided Tesla’s Silicon Valley talent in the early days of its car project.

A spokesperson for Xiaomi said the company received 30,000 résumés from people with experience at major carmakers soon after announcing its EV business, with 3,000 engineers now on staff in the unit.

Lei began his career as a programmer in college in the central Chinese city of Wuhan. In 1989, along with an older alumnus, he released his first product: encryption software sold on a floppy disk. 

His next company, started in a local hotel room, sold computers and software, along with printing and photocopying services. “As the business grew in different directions, it became harder and harder to make money,” he recalled during a recent Xiaomi event.

Eventually, he became head of Kingsoft, a Chinese software maker that produces productivity tools similar to Microsoft Office. He continues to hold 23 per cent of the shares of the company, which is listed in Hong Kong and valued at HK$31bn (US$4bn).

Three years after Jobs released the first iPhone in 2007, Lei assembled a team to build a smartphone with similar features. Xiaomi’s handsets became known for their high specifications yet affordable prices. Heavily marketed by Lei, they quickly gained a legion of fans. 

But the image of being a value player has been hard to overcome. Lei has repeatedly tried to make premium phones but failed to find many buyers at prices close to Apple’s. It has left Xiaomi selling top-notch products at razor-thin margins: the group’s profit margin was 6.4 per cent last year compared with Apple’s 26 per cent. Investors value the group at just under $50bn, or about one-fiftieth of Apple’s market capitalisation.

Frank He, a tech analyst at HSBC, said Xiaomi made about half its profits from services sold to users, especially from the group’s app store in China, which takes the place of the banned Google Play store.

He said he expected Xiaomi’s cars to sell at a loss for the next two years as the carmaker scaled up but that eventually the group would turn a small profit on each car sold and profit from services sold to drivers.

“Chairman Lei wanted to have a new growth engine with a bigger addressable market,” he said. “The unique advantage for Xiaomi is the brand power. It’s both in China and outside of China.”

Christoph Weber, general manager of engineering software company AutoForm, has worked with Xiaomi’s car unit in Shanghai and said Lei appeared poised to repeat his success in starting with a high-quality car.

“They think as a tech company, not a traditional auto company,” he said.

FT : Germany’s robotic stores must rest on Sundays, too

Germany’s robotic stores must rest on Sundays, too
Regional chain Tegut forced to close automated shops to comply with centuries-old ban

When it launched its fully automated stores four years ago, Germany’s regional supermarket chain Tegut billed the experiment as a window into the future of shopping.

But the Fulda-based retailer has since been embroiled in a legal fight over a centuries-old principle enshrined in the German constitution: Sunday rest.

Be they robotic or staffed by humans, most shops in Germany are not allowed to open on the last day of the week — and courts have upheld that ban.

“This is entirely grotesque,” Tegut management board member Thomas Stäb told the Financial Times. He said that the small robo-shops were “basically walk-in vending machines” that should not be affected by the ban.

The Fulda-based retailer owns about 300 traditional supermarkets and 40 fully automated mini-shops. It was forced to comply with a December ruling by the highest administrative court in the state of Hesse that said Sonntagsruhe must be observed even if no workers were involved.

The judges said the small self-service store qualified as a “shop” under German law, and therefore must abide by legislation on opening hours.

Housed in prefabricated wooden containers that resemble an oversized barrel with a grass roof, Tegut’s self-service stores offer almost 1,000 items deemed essential for daily life including milk, butter, fresh fruit and vegetables, as well as condoms and pregnancy tests.

During the week, staff visit shops to service them for a few hours a day, but on Sundays no employee interaction is necessary, Stäb said.

The legal battle was triggered by Germany’s service sector union Verdi after the first automated store opened in Fulda four years ago. The union fundamentally opposes Sunday shopping, arguing that retail staff, who already have to contend with highly flexible working hours during the rest of the week, need Sunday as a guaranteed day off to spend time with family and friends.

The union was also concerned about potential “knock-on effects” for workers in traditional stores. Tegut’s rivals could soon start lobbying for further liberalisation of Sunday shopping rules, a Verdi official said.

Robert Grabik, a 36-year-old Fulda resident who lives close to one of the automated supermarkets, was a frequent user on Sundays.

“It was just perfect for stuff you forgot to buy during the work week,” he told the FT, adding that the food options were much healthier than those at fuel stations and kiosks. The Hesse court’s decision, he said, was “a complete disaster”.

But as the three judges made clear in their ruling, Germany’s work-free Sundays are about more than just work. They pointed to the Christian origin of the principle which was first decreed more than 1,700 years ago by Roman emperor Constantine the Great.

Sunday rest has been enshrined in Germany’s constitution since 1919 and was upheld by the constitutional court in a 2009 verdict.

“Our society needs a special day per week that has its own characteristics to celebrate Christian spirituality and to have shared experiences with friends and family,” said Philip Büttner, an official at KWA, a body of Germany’s Protestant Church that lobbies for the work-free Sunday.

Both the Protestant and Catholic Churches have formed an unusual alliance with Germany’s powerful unions to defend the status quo for years, and spearheaded the campaign against the Sunday opening of automated stores. In March, the alliance encouraged pastors to criticise the shops in their weekly sermons.

In a country where church membership has fallen by a quarter over the past two decades, and just one in 20 citizens attend Sunday mass, “the current law is completely at odds with today’s reality of life”, said Stefan Naas, head of the liberal FDP’s parliamentary group in Hesse who is lobbying for change.

“A peaceful and quiet Sunday is not undermined by the sale of a bottle of milk and a box of cream,” he said.

Over the past three decades, Germany had already ditched most restrictions that until 1996 forced shops to close at 6.30pm on weekdays. The Sunday ban, however, has been kept in place for most businesses, except restaurants, fuel stations, kiosks and pharmacies.

Stäb was adamant that the impact on religious spirituality was non-existent, and pointed out that Tegut had never faced any conflict with religious communities. “In one case, the Catholic Church is even our landlord, and the pastor never raised any concern.”

Dubbed “teo” in a tribute to Tegut’s late founder Theo Gutberlet, the stores are the size of a one-bedroom flat.

“Tegut’s teo is one of the most innovative new formats in German retail,” said Stephan Rüschen, a retail professor at Baden-Württemberg Cooperative State University in Heilbronn, stressing how important these stores were for rural communities where grocery stores had long disappeared and large shops were often miles away.

New teos were often celebrated with a village party, and “we are getting more requests to open now ones from municipalities than we can satisfy,” Stäb said.

Tegut does not disclose financial details about its automated stores, but Stäb said that “we are more than happy with the sales performance as well as the feedback from local residents”. He also stressed that the shop’s productivity per square metre was superior to traditional supermarkets.

To prevent theft, the shops collects customer IDs from their payment card before entering and rely on CCTV. Once inside, shoppers can walk around and pick products from shelves, which they then scan and pay for at a self-checkout. Stäb acknowledged that shoplifting was a slightly bigger issue than at normal supermarkets but stressed that it did not make them unviable.

For Tegut, losing Sunday sales was economically painful as that day accounted for about 25 to 30 per cent of teos’ weekly commerce, said Stäb.

Since the ruling, Tegut has paused the capital-heavy expansion of teo supermarkets in its home state.

But more than a dozen of its automated shops stay open on Sundays in other German states such as Bavaria and Baden-Württemberg, as the judgment only applies to Hesse. Even on Hessian territory, legal loopholes allow three shops that are near train stations to open on Sundays.

The government of Hesse has meanwhile indicated that it is willing to change the state’s law to create a legal exception for automated supermarkets. Some German states, including Bavaria and Baden-Württemberg, have already created similar loopholes.

Naas from the FDP said the matter could be resolved by the summer.

“The idea that Sundays should be sacrosanct increasingly seems like a leftover from the 1950s,” he said.