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
EasyHotel, terrorism, mobile ordering & other:
A DAY IN THE LIFE:
It must be nearly April because there have been heavy snow showers here in York this week and today there’s frost on the ground.
Not unusual, I hear.
Indeed, it’s more common to have snow at Easter than it is Christmas but it still doesn’t feel right when there’s blossom on the trees, the sap is rising and the birds, the bees and the local foxes amongst other vermin are conducting their love life on the front lawn.
Time to put the thermals on and take the dog for a walk.
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PUB, RESTAURANT & DRINK PRODUCERS:
• Tesco has removed Heineken beers and ciders from its stores as the two companies row over pricing. Heineken have already raised the price of their pints on-trade by 6p a pint, blaming the Budget and rising costs caused by Brexit. Tesco have stated that the change was part of a normal range review that better reflected consumer demand.
o Inflation is pass the parcel. Who pays the final bill depends on balance of power between producers, retailers & the consumer
o Inflation may just be a ‘shoe leather’ (i.e. botheration) issue but it’s a total, total waste of effort fighting as to see who gets what
o Inflation: Fixed income bods, pensioners & the like have typically been victims. This time the Triple Lock may mean pensioners – and there are a large number of them these days – are one of the few groups that doesn’t suffer
• Yum! Brands, the owner of Pizza Hut International, has restructured its European business with the ambition of accelerating growth across the region. Pizza Hut UK & Ireland will merge with Pizza Hut Europe. Neil Manhas, formerly CFO of Pizza Hut UK & Ireland, who is to become the new general manager of Pizza Hut Delivery said the restructuring ‘strengthened the business’s capabilities in brand strategy, growth and customer experience and will enable Pizza Hut to invest further in digital technologies across the European region.’
• MCA reports that Eclectic Bars Group has further work to do with regards to possible re-branding of sites and the introduction of new concepts, in an interview with Luke Johnson. Brighton Pier Group, the parent company of Eclectic, reported in its interim results this week that six Eclectic sites had been sold, taking the estate to 14.
• Alan Clarke of Scotiabank, a leading economist, has told the MCA that consumer confidence is slowing faster and earlier than anticipated. He stated that economists had expected a decline in customer confidence to come in the second half of this year, however, with the recent slump in retail sales a more abrupt slowdown could be install.
o Getting news rather than opinions is harder these days than ever. Brexit supporters say Feb’s retail numbers were good. Remainers say that the 3mth numbers to the end of that month were poor. Both are correct.
• Coffee chain pre-ordering app Swoope has gone live in Birmingham and is working with both independent bars and larger chains such as Costa Coffee. Users will be able to gain loyalty rewards on the platform, as well as communicate instantly with venues and make use of a table-service feature.
o Mobile ordering is becoming a big thing. Starbucks should be up to double-digit percentage of sales ordered before the customer hits the store before long and there is little reason to think that the same will not happen in the UK.
o Major operators, Starbucks, McDonald’s, JD Wetherspoon etc. will develop – and have developed – their own apps.
o But there will be a limit to the number of icons that the average punter wants on his or her phone meaning that, in our opinion, there is room for one or two aggregators.
o Think Hotels.com or Bookings.com rather than having a separate icon for 50-100 different hotel companies
• BBPA chief executive Brigid Simmonds has recommended that pubs monitor advice from the police and brief staff accordingly in the wake of the recent attack in London.
• Mitchells & Butlers has revealed its latest brand, Son of Steak, in Nottingham earlier this week as part of its investment in new concept development and innovation.
• Beef burgers have overtaken sausages as Britain’s favourite barbecue meat, according to data from Kantar Worldpanel. Burgers have benefitted from a ‘premiumisation’ trend in recent years, which has been reflected in the produce found in supermarkets, and now have a better reputation in terms of health and quality.
• Somerset-based brewer Wild Beer Co has smashed its target to raise £1m via crowdfunding for a new brewery, with more than 1,500 people contributing to the campaign.
• Workers currently under 30 may not be able to draw the state pension until they are 70yrs old reports Dept. for Work & Pensions. Separately, a report by John Cridland, suggests that those under 45 could have to wait until they are 68yrs old to draw their benefits.
• Optimistic US restaurant operators continue to expand and upgrade their estates despite weak same-store sales and concerns about rising labour costs. Respondents to Nation’s Restaurant News’ latest Operators Survey believe their traffic has hit rock bottom and will soon pick up and 51% of the 319 operators asked expect to add more locations in 2017, while 20% plan to close locations.
EASY HOTEL TRADING UPDATE:
• Easy Hotel has updated on trading for the 5mths to end-Feb saying that this has been ‘slightly above the Board's expectations’
• The group says ‘owned hotels once again materially outperformed their competitive set…during the period, whilst the overall UK hotel market improved year on year.’
• Easy Hotel comments ‘this performance was mainly driven by strong owned hotel like-for-like revenue growth of 19% for the five months to 28 February 2017 compared with the same period last year, as the Group continues to benefit from the revenue strategy announced in December 2015.’
• Re new openings, Easy Hotel comments ‘three "new look" hotels opened during the first five months of the financial year - Brussels, Amsterdam Arena and Birmingham - and all have traded exceptionally strongly and are expected to reach maturity ahead of budget.’
• The group has a number of hotel projects under construction & it says these are progressing well. It adds ‘the Board continues to evaluate further acquisitions.’
• Easy Hotel adds re its Old Street site ‘the appeal for the retrospective planning permission relating to 78 of the 162 rooms at the Group's Old Street Hotel (80 Old Street, London) was heard on 21 March 2017. A decision is expected shortly.’
• CEO Guy Parsons comments ‘trading in the first five months of financial year 2016/17 was slightly ahead of the Board's expectations, with like for like revenue growth of 19%, as owned hotels continued to benefit from our revenue management strategy.’
• He adds ‘we remain on track to open eight new hotels, four owned and four franchised, in the current year. We are actively evaluating a number of interesting opportunities which potentially meet our site criteria of location and returns.’
• Mr Parsons concludes ‘the Board remains confident that it shall secure properties in major and regional UK cities as well as key European gateway cities whilst leveraging the strong brand to increase easyHotel's presence in the growing branded super budget hotel segment.’
HOLIDAYS, LEISURE TRAVEL & HOTEL
• The domestic UK tourism industry is waiting anxiously to determine the impact of Wednesday’s terrorist attack reports Travel Weekly. Shares across operators, MERL, WTB, EZH etc., have been sanguine to date. Tourists died whilst others were stuck on the London Eye for 2hrs, Westminster Tube station was closed and travel plans have been disrupted.
• Safety is ‘at the forefront of Britons’ minds’ when planning holidays this year and a majority expect ‘some negative impact’ on EU travel post- Brexit, according to a study of 1,000 UK adults by BDRC Continental. Nevertheless, the group identified ‘a bullish holiday outlook’, with nine of ten respondents confirming they have a trip planned this year.
• NYC & Company - the destination marketing company for the 5 boroughs of New York - announced at the ITB Berlin travel show that they believe the ‘Trump effect’ will cause arrivals to drop by c300,000, this follows a record 60.7 million visitors in 2016.
• STR data has found that the US hotel industry had mixed results in its three key performance metrics for the week 12-18 March 2017. Occupancy was down 0.6% to 70%; Average daily rates increased 1.3% to $129.93 and RevPAR rose 0.7% to $90.99.
• The newly released Jet2CityBreaks 2017 brochure offers its largest New York programme yet, as well as adding Girona as a destination. Seven of the cities in the brochure by Jet2 rank among Tripadvisor’s Top 25 Destinations in the World.
• Figures in the travel industry have hit out at the UK and US ban on large electronic devices as ‘nonsensical’ and ‘unworkable’. The Business Travel Coalition (BTC) said it was ‘intolerable’ for business travellers and the Association of Corporate Travel Executives (ACTE) claimed the ban ‘made no sense’.
• Since September, Instagram has doubled the number of advertisers using the platform to one million.
FINANCE & MARKETS:
• Brent down 29c or so at $50.70
• Sterling a little down against the US$ but a little up against the Euro at 124.77c and 115.86c respectively.
• UK 10yr bond yields bounced back to 1.24% from 1.18% yesterday
• World markets: UK & Europe higher yesterday but US market down. Dow recorded 6th consecutive fall. Far East mostly down in Friday trade
• Later tweets: Tesco pulls some Heineken beers, including Amstel, Sol & Kingfisher, in row over who should take the Brexit hit to margin
• Heineken points to duty rises & Sterling weakness as reason behind price increases. Tesco delists products as a result
• Consumers lack confidence as 58% now expect an interest rate rise in next 12mths. Undue ‘pessimism’ or the Wisdom of Crowds?
• Starbucks has ‘reinforced its long-term commitment to driving performance through the lens of humanity.’ Hum…
• Consumers in OMG moment. We can’t have Brexit, weak Sterling, rising costs and also low interest rates…cake, eat it, blah, blah
• Theresa’s new haircut & soft-focus photo shoot to see us through Brexit. Add strident voice, pictures of flag & it’s job done innit?
• Retail sales volumes down 1.4% in 3mths to Feb per ONS, worst since Labour were in power
• ONS says Q1 GDP could stumble on back of poor retail numbers unless March is a corker.
• Just Eat robots. How’s that gonna get past ten emptying pubs on a Friday night without being molested? Or thrown in a skip / canal?
• Just Eat robots. Find solution, invent problem? How about that flight of stairs? Massive catapult may deliver better, n’est pas?
• Dog Think. Expend 15 calories begging, looking soulful. Get hair-covered cold chip. With gravy stain. Contains 25 calories. Winner…WINNER!
RETAIL NEWS WITH NICK BUBB:
• Game Watch: Yesterday evening Game Digital’s US peer GameStop reported its Q4 earnings after the close and sent its share price tumbling by more than 10% in after-hours trading, after warning of lower profits in the new-year. GameStop expects FY17 revenue of -2% to +2% and FY17 EPS of only $3.10 to $3.40, vs the $3.72 consensus and the adjusted $3.77 last year, even though CEO Paul Raines said that “Technology Brands and Collectibles are expected to generate another year of strong growth, and new hardware innovation in the video game category looks promising”.
• Planet ONS Watch: We flagged yesterday that in the real world, February (the 4 weeks to Feb 25th) was a bit better for Food Retailers, but disappointing for Non-Food Retailers, as per the BRC-KPMG Retail Sales survey last week. But we discovered that life was better last month on that bizarre parallel world, the Planet ONS, as the Office of National Statistics Retail Sales figures for February were stronger than expected...After a weak January, City economists, who had pencilled in a modest rise of 0.4% in “seasonally adjusted sales volume” month-on-month, were impressed by the fact that the ONS reported an overall rise of 1.3% (boosting the year-on-year volume growth to 4.1%), but the real story came in the year-on-year movement in “non-seasonally adjusted sales value”. The real reason why the ONS Retail Sales figures picked up in February is that the ONS slipped back into their bad habit of producing implausibly bullish Small Retailers growth estimates (with no explanation)…The January ONS figures have been revised, but they showed broadly similar sales trends between Small Retailers and Large Retailers, which seemed sensible, after a big divergence in Q4. But the ONS now says that by value (non-seasonally adjusted), Large Retailers sales growth went from +1.4% in January to +3.2% in February, but Small Retailers sales growth went from +3.3% in January to as much as +10.5% in February (boosted by big Non-Food, Non-Store sales growth), pulling the overall total growth up from +1.8% in Jan to +4.7% in Feb...
• Ted Baker: We said yesterday that the finals from Ted Baker would be overshadowed by Next and we must confess that we didn’t have time to go to the analysts meeting, but at first glance there had seemed nothing untoward in the outlook statement, so we were surprised to turn to the screen later and see that the Ted Baker share price was over 5% down…If truth be told, the results were perhaps a tad below best hopes, with pre-exceptional PBT only 12% up at £66m (even though the employee performance related bonus fell to nil, from £2.7m in the previous year). And there was an ugly exceptional charge of £4.5m, comprising a provision for lease commitments relating to the group's legacy warehouses of £2.9m, along with £0.7m of other closure costs and £0.9m in respect of closure costs for the concept store in Shoreditch.
• BDO High Street Sales Tracker: We flagged on Wednesday that the comp with the pre-Easter period last year hindered trading at John Lewis last week, but today’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains flags that w/e March 19th was boosted by the warmer weather, with Fashion Store LFL sales up by 1.2% against last year. Including Homewares and Lifestyle chains, total Store LFL sales were up by 1.9%, whilst overall Online sales were up by as much as 18.9% (on top of 24.3% growth a year ago).
• Trade Press (1): In Retail Week magazine today the front cover is a photo of a smiling Angela Spindler, with the quote “Do the right thing ahead of being liked” about her transformation of the home shopping group N Brown, which is the subject of the main feature this week. RW also has articles about the newcomers intent on disrupting furniture retailing and some suggestions on who could bolster French Connection’s Board. In terms of News stories, RW focus on the news that retail parks suffered a steep drop in footfall last month and that House of Fraser is cutting the number of brands it sells as part of a strategic overhaul under its Chinese owners, but RW also flag that Clintons Cards has launched a party-focused store fascia called Party Delights and that the outerwear brand Canada Goose is on the cusp of securing its first UK store on Regent Street.
• Trade Press (2): In Drapers magazine today the main feature is about Toms footwear, one of fashion’s most successful ethical brands, but there is also a big article about the Denim market. In terms of News stories, Drapers focus on the news that retailers and trade bodies are worried that the fashion industry’s priorities and concerns about Brexit have yet to be heard by the Government, the Edinburgh Woollen Mill group is looking to open a second mini-department store (on the Kingston Court Retail Park in Newcastle), buyers are circling the stricken footwear chains Jones Bootmaker and Brantano and Ted Baker’s Spring 17 campaign takes the form of a tongue-in-cheek sitcom called “Keeping Up with The Bakers”. Finally, Drapers have a “Hit or Miss” feature survey on how retailers handle Online returns: John Lewis come top on 9.5/10, Asos get 7/10 (“Well thought out, but a guaranteed postage refund would be a plus”), M&S get 4.5/10 and Next come bottom with 2/10 (“Convoluted and costly, Next seems to actively discourage returns”).
• News Flow Next Week: Tuesday brings the Card Factory finals and the Moss Bros finals. The Game Digital interims are on Wednesday. And the Booker finals and DFS interims are on Thursday.