I would like to say how much I enjoy the e-mails from Langton Capital on a daily basis. I use the newsletter as an ideal way of keeping me up to date with what is going on financially in the drinks industry.
Tenanted pub company
Carlsberg, retail sales, job losses, Wendy’s, McD & other:
A DAY IN THE LIFE:
It’s feeling a little autumnal in the mornings now, what with the sun not putting in such an early appearance and there being something of a chill in the damp air.
But that’s rather inevitable and, as we’re leaving behind the misty forests of Germany today to travel up through Belgium to check out Maastricht & probably pop over to revisit Aachen, there’s a feeling of change in the air.
After Maastricht, the Langton Euro Charm Tour (six countries excluding the UK, more than any single Cabinet minister managed in their half-hearted, post Chequers, love-quest) will be drawing to a close as it’s up to Europoort and the ferry back to Hull.
Hopefully we can get all of the bags, which seem to have multiplied somehow while we’ve been away, into the car & we’ve got our fingers crossed for a calm crossing. On to the news:
PUBS & RESTAURANTS:
• Loungers’ restaurant and bar chain brand Lounges is set to expand across the UK, with up to 25 sites scheduled to open in the next year, the Morning Advertiser has reported. Whilst many talk about it, Loungers would appear to have found a genuinely scalable concept.
• Carlsberg has reported a 0.7% fall in its half-year revenue to $4.7bn, however, profit before tax rose 5.1% to $612m. The stated that premium brands experienced a ‘very good performance’ in the UK with double digit growth, whereas the Carlsberg brand lost market share, resulting in total volume decline of 5% in the country.
• Australian wine group, Treasury Wine Estates has reported net profits up 34% to AU$360.4m in its 2018 FY results. The group’s sales have been boosted by exports to Asia, with a 37% growth in EBITS to AU$205.2m.
• Hamburger chain Wendy’s has ended its ties with Arby’s, selling its 12.3% stake in the sandwich chain’s parent for $450m on Thursday.
• Ei Publican Partnerships now has more than 250 pubs operating under its managed tenancy model, Beacon. Tenants at the newest member, The Black Horse, commented: ‘The Beacon model has been pivotal in providing us with the support, knowledge and operational knowhow we need to drive the business forward. Trading is going extremely well and we are exploring opportunities to extend our lease at the site and renovate an upstairs function room; whilst also looking at taking on further sites under the model.’
• Mcdonald’s will be modernising restaurants in certain US states by adding self-order kiosks and curbside pickup locations. ‘Continuing to reinvest in the brand and keep it relevant for customers today is what it's all about,’ said Steve Easterbrook, McDonald’s CEO and president, in July’s second-quarter earnings call. ‘It’s a competitive marketplace,’ Easterbrook said. ‘We want to differentiate ourselves from the competition, and we believe we have some initiatives in place that will help broaden the gap between us and the others.’
• American diners increased their spending in restaurants in July, capping a three-month period marking the fastest sales growth in more than 25 years, according to Commerce Department data. Sales at foodservice and drinking establishments overall rose a seasonally adjusted 1.3% in July, compared with the prior month, to $61.6bn, bringing the three-month annualized gain to 25.3%, the fastest pace in figures going back to 1992.
• Retail sales have been stronger than expected in July up 0.7%, due to the record hot summer and the World Cup. The sometimes derided ONS report suggests that retail sales rose by 3.5% in the year to July saying ‘many consumers stayed away from some High Street stores in July, but online sales were very strong, supported by several retailers launching promotions. Food sales remained robust as people continued to enjoy the World Cup and the sunshine.’
• House of Fraser has said that it will cancel all online orders and refund customers. The group is in dispute with its warehouse operator
• Debenhams is reported set to cut 90 jobs. The company says ‘we announced our intention to restructure our organisation…[and] our work to create a simplified and consistent structure across these units, reducing complexity and driving efficiency in order to deliver our Debenhams Redesigned strategy, is continuing.’
HOLIDAYS & LEISURE TRAVEL
• Holiday companies in Northern Europe still impacted by warmer weather in home markets.
• Expedia has increased its stake in AAE Travel by 25% for $60m, bringing it under Expedia’s control and growing its presence in the £485bn Asian travel market.
• The number of drunken and violent airline passengers is on the rise, leading the Civil Aviation Authority to encourage airlines and enforcement agencies to clamp down on such incidents.
• Edinburgh airport had its busiest ever month in July, with more than 1.5 million passengers handled, up 6.3% year-on-year.
• Sadiq Khan is seeking powers to limit the number of Uber drivers in London due to increased congestion, pollution and economic pressure on other taxi drivers. He said the number of private hire drivers in London has almost doubled from 60,000 in 2011 to 110,000. This follows similar moves in New York.
• The Global Business Travel Association (GBTA) released its annual forecast at its Convention in San Diego yesterday, predicting a 7.1% increase in business travel spend in 2018. Michael McCormick, executive director and COO of the GBTA, commented: ‘This pick-up in growth could signify an end to the ‘Era of Uncertainty’ in global business travel, but rising protectionism is coming at precisely the wrong time. The direction of trade policy is far and away the biggest wild card that could impact our forecast for global business, creating uncertainty that could derail the recovery.’
• Marriott is seeking unprecedented growth across all segments in Europe by strengthening its dominant position in luxury and growing its presence in midscale and budget. Over the next three years, it plans the addition of 50 new Moxy Hotels in 40 destinations, accelerating its presence in existing markets like Germany and the United Kingdom.
• STR data for the week to 11 August shows US hotel industry occupancy up 2% to 75.2%, average daily rate up 3% to $132.02 and RevPAR up 5.1% to $99.22.
• Telegraph reports that the future of Towcester racecourse is in doubt after its owners prepared to call in administrators. After “experiencing trading difficulties”, Towcester’s directors “have concluded that they have no alternative in the short term but to seek court protection”. Planned dog races meetings for Friday and over the weekend have been cancelled. The next horse racing event was to have been 10 October.
• Apple will launch an AR headset and an Apple Car by 2025 according to Ming-Chi Kuo, an Apple analyst for TF International Securities. Apple is rumoured to be working on a self-driving car programme named Project Titan.
• Asda reports LfL sales up 0.4% in Q2, its fifth successive quarter of growth boosted by an expanded vegan range and premium gins. CEO Roger Burnley said it was the first time the chain had outperformed the market in four years.
FINANCE & ECONOMICS:
• Sterling unchanged vs dollar at $1.2721 but down vs Euro at €1.1179
• Oil down at $71.35
• UK 10yr gilt yield unchanged at 1.23%
• World markets all higher yesterday. Far East up in Friday trade
START THE DAY WITH A SONG:
Yesterday’s song was perennial favourite, Take On Me, by A-ha. Capping off the week, who sang:
Oh, four, five, six c'mon and get your kicks,
Now you don't need that money
When you look like that, do ya honey
RETAIL NEWS WITH NICK BUBB:
Today’s Press and News: There was plenty going on in the sector yesterday, but the row about the Sports Direct takeover of the bankrupt House of Fraser continues in today’s papers, with the Guardian, inter alia, flagging that the HoF website has had to be suspended and orders cancelled because of the warehouse dispute. Given the general row about excessive executive pay this week, Lombard column in the fT notes that “Mike Ashley shows marmalade-dropping restraint on pay”. There are lots of headlines about job cuts at the Debenhams HQ as part of a cost-cutting exercise, ranging from “100” in the Telegraph to “200” in the Guardian and “hundreds” in the Daily Mail. The better than expected ONS Retail Sales figures for July get plenty of uncritical coverage, focused on the impact of the heatwave and often linked with the mixed Kingfisher Q2 trading update (which is mocked by the Business editorial in the Times: “Boss’s DIY project has hit a snag”). The good Asda Q2 update gets highlighted by the FT (“Asda in solid shape for Sainsbury tie-up after sales rise for fifth straight quarter”).
Trade Press: Retail Week has not been published today, but Drapers magazine is out and is focused on Footwear and Accessories this week. There is plenty, however, on the fast-moving House of Fraser situation and in her column the Editor notes that, following Mike Ashley’s purchase of House of Fraser through a pre-pack administration last Friday, the Drapers team has been inundated with calls from suppliers who are upset and outraged at the news that they will not be paid for June and July…and thunders that “Suppliers need protection for the industry to survive”. The main News story is headlined “House of Fraser supplier crisis as administrator halts payment”, although Drapers also flag the Sports Direct spin that they will try and keep as many stores open as possible and highlight that the landlords in the CVA legal challenge agreed to accept a £1m “sweetheart” deal with HoF to drop their case (although only £100,000 was paid before the business went bust…). Drapers also flag that Debenhams is to open its first in-store gym shortly, in the Sutton store.
BDO High Street Sales Tracker: We flagged on Wednesday that sales at John Lewis wilted yet again last week, despite the shift in the hot weather mid-week, and today’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains for last week, w/e Sunday Aug 12th, is also surprisingly weak, despite its relatively low exposure to “indoor”/household goods. The BDO figures are, it should be noted, unweighted…but, for what it’s worth, BDO Fashion Store LFL sales were 2.8% down and, including Lifestyle and weak Homewares sales, Total Store LFL sales were down by 3.0%. Overall Online sales (which are separately reported by BDO) were up by only 10.0%, but Online Fashion sales alone were up by 18%.
News Flow Next Week: Things are very quiet next week, leading up to the Bank Holiday weekend, and the only real scheduled news is the latest monthly Kantar/Nielsen grocery market share figures on Tuesday, although no doubt the Sports Direct/House of Fraser situation will still fill some column inches.