Business

One of your columnist’s favourite ways of passing a hot afternoon in Monterrey, three hours south of Mexico’s border with Texas, is with a cold bottle of locally brewed Bohemia beer alongside a plate of cabrito (roast kid). For a business writer, it is a justifiable use of the expense account. Beers like Bohemia helped make Monterrey the industrial hub that it is. The Cuauhtémoc brewery, now owned by Heineken, a global giant, was started in 1890 by members of the Garza and Sada families, who went on to become Mexico’s biggest industrialists. Lacking suppliers in the arid north, they made their own bottles, caps and packaging, giving rise to conglomerates that fuelled the country’s modernisation. Today Mexico is the largest exporter of beer in the world. Monterrey is still awash with beer. But it is also stricken by drought. This has left millions of residents reliant on leaky public pipes desperately short of water, even as the industries that employ them guzzle the stuff, thanks to higher-quality private infrastructure. The brewers say they consume less than 1% of the local water, most of which is used by farmers who have no incentive to conserve it. That has not stopped President Andrés Manuel López Obrador, never one to waste an opportunity to bash the rich, from blaming the industrialists. He has told the beer firms to up sticks and move south, where rivers still run in torrents. The industry is keeping its head down, treating this as populist rhetoric rather than a genuine threat to transplant breweries lock, stock and barrel to the other end of the country. Yet the imbroglio is illustrative, too. It shows how water shortages, combined with reputational damage and regulatory overreach, could affect many hydro-dependent industries, from food production, mining and power generation to apparel and electronics. Colin Strong of the World Resources Institute (wri), an ngo, says that though the private sector is trying to use water more efficiently, scarcity will be exacerbated by climate change, population growth and the greater water use that comes with growing prosperity. He quotes a pithy refrain common in environmental circles. “If climate change is the shark, water is its teeth.”Heat and drought are leaving teeth marks everywhere. In Chile, the world’s biggest copper producer, the driest decade on record has forced mining firms such as Anglo American and Antofagasta to reduce output this year. In recent days companies such as Toyota, a carmaker, and Foxconn, which makes iPhones for Apple, halted production in south-western China after a drought caused hydropower shortages. On August 16th the American government took unprecedented steps to reduce water consumption in states in the Lower Colorado River Basin to safeguard reservoirs crucial for generating electricity. Norway, known as the battery of Europe for its abundant hydropower, says that water shortages may force it to curb supplies to its neighbours’ grids. In Germany, the Rhine has fallen so low that it has affected the ferrying of cars and chemicals north, and coal and gas south. Across unusually rain-free Europe, grain crops have frazzled in the heat. So have cotton fields in thirsty Texas.The problem is not a lack of water per se. Climate change may make some places drier and others wetter. It is the uneven distribution of freshwater—of which fast-growing places like India are woefully short—that provide the conditions for a crisis. This is made worse by waste, pollution and the near-universal underpricing of water. Some governments, notably China’s, have created pharaonic projects to transport water to where it is needed. Others, such as Mr López Obrador’s, peddle the quixotic idea of moving demand to where the water is. The best outcome in the long term, on paper at least, is the simplest: that less of the stuff is used, and more of what is used is treated better. It is something the private sector is just starting to grapple with. Industries directly affected by water shortages have got a head start. Global mining firms are using desalination plants in Chile. Beer and soft-drinks companies, existentially reliant on clean water, have targets for improving efficiency (Heineken says it uses 2.5 litres of water to make a litre of beer in Mexico, about half the global industry average). In collaboration with the wri, Cargill, an agro-industrial behemoth, recently extended the monitoring of water use from its own operations to the farmers who supply its crops. Fashion retailers, whose suppliers are often heavy users of water and dyes in dry areas, are considering similar moves, to avoid angry flare-ups by local residents who worry about being second in line to the taps.This calls for careful stewardship. When Cape Town was in danger of running out of water in 2017, ab InBev, one of the world’s largest brewers, helped municipal authorities reduce water loss from the network. Ingenuity also helps. In Singapore, NewBrew makes craft beer out of reclaimed sewage. Andre Fourie, head of sustainability at ab InBev, says that in the future many companies will have to treat and reuse water to overcome scarcity. Last ordersThe looming shortages still do not get the attention they deserve. As a heavily subsidised raw material, water is so cheap that many ceos overlook it. A report this year by Planet Tracker and cdp, two ngos, said that about a third of listed banks do not assess water risks in their portfolios. For shareholders, it mostly comes far behind carbon emissions as an environmental, social and governance (esg) concern. It is not a risk that can easily be squeezed into oversimplified esg ratings. It is so dependent on local conditions that it requires myriad approaches. In the words of Will Sarni, a consultant, water is an enigma. “It’s a personal thing. It’s a social issue. It’s got a spiritual dimension.” He hopes new technologies that use solar power to capture moisture from the air could bring creative destruction to the supply of water. Schumpeter, Bohemia in hand, would drink to that. ■Read more from Schumpeter, our columnist on global business:Tencent is a success story bedevilled by the splinternet (Aug 11th)The Spirit deal is a missed opportunity for creative destruction (Jul 28th)Meet Keyence, consultant to the world’s factories (Jul 23rd)For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

Target’s profit plunged as it slashed prices to clear out a glut of unwanted inventory.
The retailer maintained its outlook for the year, however.
“If we hadn’t dealt with our excess inventory head on, we could have avoided some short-term pain on the profit line, but that would have hampered our longer-term potential,” Target’s CFO said.

FILE PHOTO: Shoppers exit a Target store during Black Friday sales in Brooklyn, New York, U.S., November 26, 2021. 
Brendan Mcdermid | Reuters

Target on Wednesday said its quarterly profit fell nearly 90% from a year ago, as the retailer followed through on its warning that steep markdowns on unwanted merchandise would weigh on its bottom line.
The big-box retailer missed Wall Street’s expectations by a wide margin, even after the company itself lowered guidance twice.

Yet the company reiterated its full-year forecast, saying it is now positioned for a rebound. It said it expects full-year revenue growth in the low to mid single digits. Target also said its operating margin rate will be in a range around 6% in the second half of the year. That would represent a jump from its operating margin rate of 1.2% in the fiscal second quarter. 
Shares of Target fell more than 2% in premarket trading.
Chief Financial Officer Michael Fiddelke defended Target’s aggressive inventory efforts. He said the retailer had to move swiftly, so it could clear the clutter, gear up for the holidays and navigate an economic backdrop clouded by inflation.
“If we hadn’t dealt with our excess inventory head on, we could have avoided some short-term pain on the profit line, but that would have hampered our longer-term potential,” he said on a call with reporters. “While our quarterly profit took a meaningful step down, our future path is brighter.”
Here’s how Target did for the three-month period ended July 30, compared with Refinitiv consensus estimates:

Earnings per share: 39 cents vs. 72 cents expected
Revenue: $26.04 billion vs. $26.04 billion expected

Target has had a sharp reversal of fortunes over the past two quarters. After posting quarter after quarter of eye-popping sales numbers during the Covid pandemic, it has seen clothing, coffee makers, lamps and more linger on the shelf – and then get kicked to the clearance rack. Some of that excess merchandise is the same stuff that sold out during earlier parts of the pandemic, when shoppers snapped up home decor and loungewear.
The turnabout forced the big-box retailer to cut its profit outlook twice, once in May and then again in June, and to pledge to move quickly to get its inventory level to a healthier place.
Inventory was still high, though: $15.32 billion at the end of the second quarter, compared with $15.08 billion at the end of the first. 
But CEO Brian Cornell said on the call with reporters that it is a more favorable mix, as Target leans into high-frequency categories like food and household essentials along with popular categories like seasonal merchandise. It canceled more than $1.5 billion in orders for discretionary categories with lower demand.
Fiddelke said the inventory number is larger because of cost inflation and receiving inventory earlier to make sure Target is ready for the holidays.
In the second quarter, the company’s net income fell to $183 million, or 39 cents per share, from $1.82 billion, or $3.65 per share, a year earlier. 
Total revenue rose to $26.04 billion from $25.16 billion a year ago, driven partially by higher prices due to inflation.
Quarterly profits got squeezed in many different ways. Sales of a lot of merchandise became less profitable as it got marked down. Freight, transportation and shipping costs rose, as fuel prices increased. And the company had to add head count and cover more compensation in  distribution centers as it dealt with a glut of extra stuff.

A cautious approach

Big-box rival Walmart said Tuesday that it had seen a marked shift in consumer behavior, as even wealthier households sought deals on groceries and essentials. The company told CNBC that about three-quarters of its market share gains in food came from households with an annual income of $100,000 or more. 
Target, on the other hand, said it is not seeing as much inflation-fueled change. Sales by unit grew in all five of its major merchandise categories, with particular strength in two categories: food and beverage, and beauty and household essentials.
Even as profits fell, comparable sales and traffic rose. 
Comparable sales, a key metric that tracks sales online and at stores open at least 13 months, grew 2.6% in the second quarter, on top of an increase of 8.9% last year. That fell just short of estimates, which anticipated a 2.8% rise, according to StreetAccount. At Target’s stores and on its website, traffic increased 2.7% year over year.
Fiddelke, the CFO, said the traffic growth is proof that shoppers still have spending power and will help Target deliver on its rosier profit outlook for the back half of the year.
“The resilience of that strong guest response positions us well, even if I can’t predict every curveball that might come at us in the fall season,” he said on the call with reporters.
Food and beverage was Target’s strongest category in the three-month period, with comparable sales growth in the low double digits, the company said. Beauty grew in the high single digits, as Target adds Ulta Beauty shops inside of more stores. And essentials grew in the mid single digits, fueled by pet supplies and health-care items.
Comparable sales in discretionary merchandise categories noticeably softened, but added up to nearly $3.5 billion or more than 35% higher than the same period in 2019. Sales of hardlines, a category that include electronics, were down slightly year over year. Home declined by low single digits. And apparel dropped by the low single digits, despite sales growth of women’s fashion-forward clothing.
Fiddelke said consumers vary by geography and income level, and they seek value in different ways. For example, some are buying bigger packs to save more per unit or trying one of Target’s lower-priced private labels instead of a national brand.
Cornell said Target is watching consumer spending closely. He said it is stocking up on popular items and ordering fewer of goods that shoppers may skip over.
“We’re going to take a very balanced approach,” he said, making sure to “plan cautiously” in discretionary categories where the company has seen shifts in behavior.
On a call with analysts on Wednesday, Target’s chief growth officer, Christina Hennington, said the retailer has spoken with customers to get a better sense of their mindset. As they feel inflation, they are stretching the budget by taking advantage of promotions and consolidating store trips, she said. It found that Target shoppers still have spending power, but that “confidence in their personal finances continues to wane.”
As of Tuesday’s close, Target’s shares are down about 22% so far this year. The stock closed Tuesday at $180.19, rising nearly 5% that day after Walmart beat earnings expectations.

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Best Buy will begin selling over-the-counter hearing devices this fall.
The push comes after the FDA established a category of over-the-counter hearing aids.
The agency said the OTC devices could be available to purchase from retailers as early as mid-October when its new rule goes into effect.

Black Friday shoppers leave a Best Buy store in Washington, DC, on November 26, 20221.
Nicholas Kamm | AFP | Getty Images

Best Buy said Wednesday that it will offer an expanded collection of hearing products and services this fall after federal regulators said they would begin allowing sales of over-the-counter hearing devices.
By fall, the Minneapolis-based company said 300 of its more than 1,000 stores will have hearing solutions displays with about 10 hearing devices available at each. The electronic products retailer said it has already started offering an online hearing assessment tool.

The push by Best Buy comes after the U.S. Food and Drug Administration this week greenlit sales of over-the-counter hearing devices, which the agency said will let people with mild to moderate hearing loss buy devices from retailers without needing a medical exam, prescription, or fitting adjustment. The FDA will still regulate the quality of the OTC devices, which it said could be available as early as mid-October when the rule takes effect.
Hearing aids that are intended for severe hearing impairment or for people younger than 18 still require prescriptions.
The FDA said the new rule is expected to lower the cost of hearing aids. Nearly 30 million adults in the U.S. could benefit from hearing aids, according the agency.
Best Buy has sold hearing devices including personal sound amplification products, TV amplifiers and hearing protection devices, but the new category of OTC devices opens the door for new products. 
Customers will be able to use health savings accounts and flexible spending accounts to purchase devices. Best Buy recommends checking with insurance providers to confirm the devices are covered.

“Our expansion of the hearing collection and new store experience will let customers easily find a hearing loss solution from brands they trust,” said Frank Bedo, category officer at Best Buy, in a statement.
Best Buy was down around 2% in pre-market trading. 

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“The driest July since 1885, the hottest temperatures on record, and the River Thames reaching its lowest level since 2005 have led to a drop in reservoir levels in the Thames Valley and London,” Thames Water says.
The announcement of the hosepipe ban comes at a time when many water companies are facing criticism related to leaks from their pipes.
Thames Water says it has 440 teams focused on locating and fixing more than 1,100 leaks per week.

A man walks in Greenwich Park, London, on August 14, 2022. On August 17, Thames Water said a Temporary Use Ban covering London and the Thames Valley would begin next week.
Dominic Lipinski | PA Images | Getty Images

LONDON — Britain’s Thames Water said Wednesday that a Temporary Use Ban covering London and the Thames Valley would begin next week, citing “unprecedented weather conditions.”
The ban is set to come into effect from Aug. 24. “Domestic customers should not use hosepipes for cleaning cars, watering gardens or allotments, filling paddling pools and swimming pools and cleaning windows,” the utility said.

Explaining its decision, the company — one of several in England and Wales to have announced water usage limits in recent weeks — said extreme temperatures and this summer’s heatwave had resulted in the highest demand for water in more than 25 years.
“The driest July since 1885, the hottest temperatures on record, and the River Thames reaching its lowest level since 2005 have led to a drop in reservoir levels in the Thames Valley and London,” it said.

More from CNBC Climate:

The TUB does not apply to businesses, although Thames Water said it was asking those within its area “to be mindful of the drought and to use water wisely.”
This could involve companies switching off water features on their premises and not washing their vehicles, it suggested.
“Implementing a Temporary Use Ban for our customers has been a very difficult decision to make and one which we have not taken lightly,” Sarah Bentley, the Thames Water CEO, said.

“After months of below average rainfall and the recent extreme temperatures in July and August, water resources in our region are depleted,” Bentley added.
The announcement of the ban comes at a time when many water companies are facing criticism related to leaks from their pipes. For its part, Thames Water said it had teams focused on locating and fixing more than 1,100 leaks per week.
When it comes to enforcement of the ban, the firm said it hoped and expected customers to continue using water wisely.
“If we become aware of customers ignoring the restrictions, we’ll contact them to make sure they’re aware of the rules and how to use water responsibly and wisely,” it added.
“There are criminal offences for those that repeatedly ignore requests to comply with the ban.”

Heat and drought

Last month saw temperatures in the U.K. surge, with highs of over 40 degrees Celsius (104 degrees Fahrenheit) recorded for the first time ever.
On Aug. 12, the U.K.’s Environment Agency announced that parts of England had moved into drought status.
“In drought affected areas the public and businesses should be very mindful of the pressures on water resources and should use water wisely,” authorities said.
They added that government expected water firms “to act to reduce leakage and fix leaking pipes as quickly as possible and take wider action alongside government policy.”
The U.K. is not alone when it comes to drought-related issues. On July 18, the European Commission’s Joint Research Centre published a report looking at drought in Europe.
“The severe drought affecting several regions of Europe since the beginning of the year continues expanding and worsening,” it said.
“Dry conditions are related to a wide and persistent lack of precipitation combined with early heatwaves in May and June.”

Read more about energy from CNBC Pro

In an interview with CNBC earlier this week, Bill Hare, CEO and senior scientist at research non-profit Climate Analytics, explained how the current conditions were having wide-ranging effects.
“On the water supply, it’s clear that in the U.K. and other parts of Europe, we’re seeing already very significant water stress that’s beginning to affect … ordinary urban residents, not just farmers,” he said.
“We’re seeing the lack of availability for cooling water for thermal, nuclear or coal power stations, which is causing curtailment of power,” Hare, who was speaking to CNBC’s Joumanna Bercetche, said.
“This is a problem we’re seeing all over the world,” he added. “We’re seeing, also, issues for example in Germany, now in the Danube region, with low water flow, meaning you can’t carry cargo anymore.”  
This was in turn, “having big implications not just for the transport of energy, but for agriculture, all manner of industrial commodities and so on.” More

Lowe’s on Wednesday reported mixed second-quarter earnings Wednesday.
The company said improved operations offset lower-than-expected sales that were hurt by a shortened spring.
Lowe’s saw an increase in sales to professionals such as contractors and electricians.

A customer pushes a shopping cart towards the entrance of a Lowe’s store in Concord, California, on Tuesday, Feb. 23, 2021.
David Paul Morris | Bloomberg | Getty Images

Lowe’s on Wednesday reported second-quarter earnings that beat analysts’ expectations as the company said improved operations offset lower-than-expected sales that were hurt by a shortened spring.
The home improvement retailer said sales to do-it-yourself customers were also hurt by lower demand for certain discretionary items, specifically in seasonal products like patio furniture and grills and some popular pandemic products such as freezers.

Transaction volume was down 6% over the quarter, but average ticket rose 6.5% partially due to inflation. CEO Marvin Ellison said despite rising costs, the consumer looks healthy.
“Rather than the DIY consumer trading down like you hear from some retailers, in many cases we were seeing the opposite,” Ellison told CNBC. “The customer’s actually trading up to innovation and trading up for new.”
Comparable sales fell 0.3% overall, though home improvement in the U.S. saw a slight growth of 0.2% versus the same quarter last year.
Lowe’s saw an increase in sales to professionals such as contractors and electricians. Ellison said the company’s new loyalty programs are attracting more professional contractors and driving repeat visits. Professionals who were enrolled in the program spent three times more than those not enrolled, he said.
Though homebuilder sentiment turned negative this month, Ellison remains optimistic about the state of home improvement. He noted the age of homes, the level of disposable income, and housing price appreciation all suggest continued strength in Lowe’s home improvement business.

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

Earnings per share: $4.67 cents, adjusted, vs. $4.58 expected
Revenue: $27.48 billion vs. $28.12 billion expected

Lowe’s said it now expects total and comparable sales for the year toward the bottom of its outlook range. It had forecast sales of $97 billion to $99 billion and comparable sales to be down 1% to up 1%. Operating income and earnings are expected to be toward the top end of its previous forecast.
“We expect our DIY customer and demand to improve in the back half of the year,” Ellison told CNBC. “We also expect to continue to have accelerated growth with the pro customer.”
Shares of the company were up around 3% in pre-market trading.
For the three month period ended July 29, Lowe’s reported a net income of $2.99 billion, down from $3.02 billion last year. Net sales slipped to $27.48 billion, from $27.57 billion a year ago.
The results come after Home Depot on Tuesday reported better-than-expected earnings and revenue for the second quarter, and stood by its forecast. Many people took up home improvement projects as they hunkered down during the pandemic, and investors have been watching to see whether that spending is holding up
Lowe’s has a different customer mix than Home Depot, which tends to get more of its sales from home professionals. Lowe relies more heavily on do-it-yourself customers, which makes it more vulnerable to shifts in demand.
“Our results in the first half were disproportionately impacted by our 75% DIY customer mix, which was partially offset by our double-digit Pro growth for the ninth consecutive quarter,” Ellison said in a statement.
This is breaking news. Please check back for updates.

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Bed Bath & Beyond has already seen five days in August with moves greater than 20%, and ended Tuesday up nearly 300% for the month.
The volume of trading in Bed Bath & Beyond has also been abnormally high. On Tuesday, more than 395 million shares traded hands, according to FactSet.
The meme trade had gone largely quiet this year as the broader markets struggled, but with the S&P 500 up sharply from its June lows, retail traders appear to have growing confidence.

Pedestrians walk past a Bed Bath & Beyond Inc. store in New York.
Mark Kauzlarich | Bloomberg | Getty Images

The wild trading in Bed Bath & Beyond showed no signs of slowing down on Wednesday, as the retail stock spiked on heavy volume while social media users cheered on the meme stock.
Shares of the challenged retailer surged 29% in premarket trading, building on its enormous gains for August. Bed Bath & Beyond has already seen five days in August with moves greater than 20%, and ended Tuesday up nearly 300% for the month.

The volume of trading in Bed Bath & Beyond has also been abnormally high. On Tuesday, more than 395 million shares traded hands, according to FactSet.
For comparison, no day in July had a single day with even 20 million in trading volume.

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The massive swings appear to be a continuation of the meme trading craze that gripped Wall Street last year. Retail investors other traders focus on bidding up stocks that have high short interest, in hopes of creating a squeeze situation where hedge funds who have bet against the stock are forced to close out their positions and push shares even higher.
The nexus of phenomenon again appears to be the Reddit page Wall Street Bets. Data from Quiver Quantitative shows that Bed Bath & Beyond has been the most mentioned stock on WSB over the past week by far, with roughly five times the post volume of GameStop, the main meme stock in the 2021 craze.
“OG WSB is back,” said one post on the Reddit from user SurrogateHair.

The meme trade had gone largely quiet this year as the broader markets struggled, but the S&P 500 up sharply from its June lows, retail traders appear to have growing confidence.
“I think everybody got the bug again. There’s a big demand for speculation, and it’s back. It may be short-lived, but it’s back,” Tastytrade founder Tom Sosnoff said on “Squawk Box.”
Bed Bath & Beyond is connected to GameStop through Ryan Cohen, the billionaire who serves as GameStop’s chairman. On Monday, a regulatory filing from Cohen’s venture capital firm RC Ventures showed that he had bought distant out-of-the-money call options on Bed Bath & Beyond. The options serve as bets that the stock will rise significantly before January, allowing Cohen to then buy shares at a discount.
Cohen has built a large stake in Bed Bath & Beyond and owned roughly 12% of the stock as of late March, according to FactSet.
After he revealed his position earlier this year, Bed Bath & Beyond agreed to add three board members of Cohen’s choosing. The company also replaced pushed out its CEO Mark Triton in June, with independent direction Sue Grove taking the reins on an interim basis.
— CNBC’s Yun Li and Lauren Thomas contributed to this report.

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The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) decreased to 5.45% last week from 5.47% the previous week.
Applications for a mortgage to purchase a home dropped 1% for the week and were 18% lower than the same week one year ago.

A For Sale sign is posted in front of a property in Monterey Park, California on August 16, 2022.
Frederic J. Brown | AFP | Getty Images

Mortgage rates fell slightly last week, but not enough to fuel any kind of recovery in consumer demand for home loans.
Total mortgage application volume fell 2% from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Demand stands at the lowest level since 2000. It hit a similar low in July.

Applications for a mortgage to purchase a home dropped 1% for the week and were 18% lower than the same week one year ago. Potential homebuyers are not only grappling with higher interest rates but with inflation in the overall economy and concern that home values will start to fall.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) decreased to 5.45% last week from 5.47% the previous week, with points decreasing to 0.57 from 0.80 (including the origination fee) for loans with a 20% down payment. The rate was just over 3% a year ago.
While mortgage rates have come down slightly from their recent highs, there are precious few borrowers who can benefit from a refinance. Those applications dropped 5% for the week and were 82% lower than the same week one year ago.
Mortgage rates haven’t moved much to start this week, but new economic data expected Wednesday could change that. The Federal Reserve is slated to release the minutes from its last meeting, offering more insight into its thinking, but investors are likely more interested in the monthly retail sales report, also set for release Wednesday.
“This one report wouldn’t be enough to change the narrative, but if it’s significantly stronger or weaker than expected, rates could be on the move well before the Fed Minutes come out at 2 p.m. ET,” said Matthew Graham, chief operating officer of Mortgage News Daily.

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It’s an island that is closer to France than to England — yet it is part of the British Isles. 
It’s home to miles of tunnels built during World War II — but by German rather than British soldiers.

And it has lower taxes than the U.K. and its own financial rules.
The island of Jersey, in the English Channel, is only five miles long and nine miles wide but has plenty for visitors to see, according to Amanda Burns, CEO of tourism agency Visit Jersey.
“We pack quite a big punch,” Burns told CNBC by phone. “What’s really interesting is … the geological uniqueness of the island, through to the history and the heritage,” she said.
Located about 120 miles from England — and 14 from France — Jersey attracts visitors who travel to the island via ferry or a short flight.

Quirky Jersey

Though English is mainly spoken, Jersey has its own language, which isn’t used anywhere else in the world. Jerriais, sometimes known as “Jersey French,” developed over several centuries and is still used on the island.

A recent tourism campaign that highlights Jersey’s quirks has made the island’s mainland European influence a point of attraction.
“Curiously Brit…(ish),” is how the campaign describes the island — “the air of British familiarity gives way to a curiously continental feel,” it continues.
Visitors are also encouraged to explore Jersey’s food, such as the island’s potatoes, called Jersey Royals.
The potatoes can be bought only in Jersey or on mainland Britain. Although there’s no official connection with Britain’s royal family, Jersey Royals had Protected Designation of Origin, or PDO, a label given by the EU to food products that have the strongest links to the place in which they are made. Since Brexit, the potatoes have been placed in a similar U.K. program.

Jersey Royal potatoes are available only in Jersey and the mainland of the United Kingdom.
Source: Visit Jersey

Jersey business owner Marcus Calvani founded a company on the odd-shaped Jersey Royals that don’t pass selling standards — he makes vodka with them, bottled under the name Fluke.
“It takes 11 kilos of Jersey Royals to make one bottle,” Calvani said. “It’s got a beautiful mouthfeel that’s … kind of silky and viscous. And the weird thing you get from it is a slight honeydew melon vanilla on the nose.”
Calvani borrowed the name from the potatoes’ original moniker: Jersey Royal Fluke, named when farmers were experimenting with growing the vegetable in the early 19th century, after the decline of cider orchards. Bottles will be available in the upscale department store Harrods later this year, priced at around £50 ($61) each.

Is Jersey part of the U.K.?

The short answer is no — but it is a “British Crown Dependency.”  

The relationship is explained on the British Royal Family’s website as follows: “There are three island territories within the British Isles that are known as Crown Dependencies; these are the Bailiwicks of Jersey and Guernsey which make up [the] Channel Islands, and the Isle of Man. The Crown Dependencies are not part of the United Kingdom, but are self-governing possessions of the British Crown.”
The Channel Islands formed part of the Duchy of Normandy in the 11th century — Normandy being a region in northern France — ruled by Henry I from 1106. Today, Queen Elizabeth II is referred to as the Duke of Normandy on the islands.
Jersey is self-governing, with its own rules and administrative systems. While it is not part of the United Kingdom, the British government does have responsibility for defending it as well as maintaining international relations.

History and Hogwarts

Jersey became a Crown Dependency in the year 1290, not long after Mont Orgueil Castle, on the island’s east coast, was constructed.
Burns described it as a “Hogwarts kind of castle,” referring to the fictional Hogwarts School of Witchcraft and Wizardry in the Harry Potter franchise. It sits above Gorey Harbour, which Burns called a “spectacular and iconic location.”

The 800-year-old Mont Orgueil Castle in Jersey, with The Moorings (blue building) in the foreground.
Source: The Moorings, Jersey

There are also ancient sites on the island, and in July, the Prince of Wales was named patron of La Cotte de St. Brelade, a settlement in southwest Jersey that was inhabited by Neanderthals up to 250,000 years ago.
More recently, Jersey was occupied by the Germans during World War II — the only part of the British Empire to be taken over by the Nazis — who built underground tunnels that travelers can visit.
The tunnels were created to protect the Germans from Allied air raids, and parts are open to the public between March and October.

Friendly competition

Another quirk of the small island is the good-humored competition between its east and west sides, according to hotelier Iselin Jones, who with her husband Matthew runs The Moorings Hotel and Restaurant, close to Mont Orgueil Castle.

The harbor at St. Aubin, Jersey on the southwest of the island.
Source: Visit Jersey

“The island is very much divided into ‘easties’ and ‘westies,’ so people either love the east or people love the west,” she said. “It’s really the natural environment that’s different. The west is very much [about] the wide-open barren sand dunes … whereas the east is a lot more cliff paths and woodland areas.”
St. Ouen’s Bay, which spans much of the west coast, is popular with surfers, while Plemont Bay, in the north, reveals a sandy beach at low tide.
Jersey, which gets much more sunshine than the mainland, traditionally has attracted families wanting a bucket-and-spade beach vacation and seniors looking for a relaxing stay. But Visit Jersey is also keen to entice “moment makers,” or younger visitors who tend to document their trips on social media, said Burns.

Jersey is known for its seafood, such as lobster and oysters seen here at St. Ouen’s Bay.
Pierre Longnus | The Image Bank | Getty Images

They reach “an aspirational audience,” Burns said. “The size of that audience is much greater, but actually, the competition is more intense as well.”
Fluke’s Calvani, who operates several food and drink outlets in Jersey, said the types of travelers coming to Jersey is changing.
“We’ve seen some younger, short stay, urbanite kind of visitors,” he said. “And I think they’re loving it: they eat well, they go to a spa, play a bit of golf … do two or three nights and then go back to their [city] flat.”

Food and drink

JB’s Brewhouse, a Craft brewery and barbecue smokehouse, is one of Calvani’s restaurants that attracts visitors from further afield, he said.
“The Americans that come into JB’s find it highly entertaining that we’re smoking like Texan cowboys, but eating tiny little cows from Jersey,” he said.

Business owner Marcus Calvani runs JB’s Brewhouse, in St. Helier, Jersey, a bar and restaurant that sells Texas-style barbecue.
Source: Be Served Group

Burns said younger visitors also like to visit Faulkner Fisheries, started by Jersey resident Sean Faulkner in 1980, for summer barbecues with local scallops, lobster and oysters.
On the island’s west coast is The Atlantic Hotel, part of the Small Luxury Hotels of the World collection, whose Chef Will Holland is something of a celebrity, having made appearances on British TV cooking shows.
The Portelet Bay Cafe serves pizza and seasonal dishes to those who make the trek down its cliffside steps. And St. Helier, the largest town on the island, is home to Bohemia Restaurant, which has held a Michelin star for 17 years.

Costs

Jersey is often thought of as a tax haven — residents pay only 20% income tax, compared with up to 45% in the U.K.
The island also has a “high value residency scheme” for those who “comfortably” earn more than £725,000 (about $875,000) a year, according to the Jersey’s government website. For those in the program, income above this level is taxed at 1%.
There is also no business tax payable in many sectors, though exceptions include financial services firms, taxed at 10%, and utility companies, taxed at 20%. That contrasts with the U.K., where corporation tax is currently 19% for all businesses.

Jersey cows are famous for the rich, creamy milk they produce.
Matt Porteous | Digitalvision | Getty Images

The finance industry employs about a quarter of the island’s working population, according to the business agency Locate Jersey.
Still, the cost of living “can be high when compared to other countries,” according to the island’s governmental website. The average price of a home on the island was £660,000 in the first quarter of 2022, compared with a U.K. average of £277,000, according to Statistics Jersey.
Costs are problematic for Calvani, who provides housing for some of his staff members.

The marina at St. Helier, Jersey’s financial center. The island is known for its tax incentives for residents and businesses.
Ian Gethings | Moment Open | Getty Images

“We’ve just brought in three new staff from Kenya,” he said. “These guys have got great education, great years of experience [but] housing them is the major problem.”
After working with the likes of Disney during stints in the United States, he said he views Jersey as being one huge “theme park.”
“You’ve got two entry gates, in the airport and the harbor … bed and breakfasts and hotels, you’ve got a main retail center of St. Helier [and] masses of attractions,” he said. More