Fulham Shore, footfall, discounts, students etc.:

A DAY IN THE LIFE:

We had to put climate change, homelessness, trade tensions and the prospect of global recessions to one side over the weekend because we had a crisis of our own as one of the guinea pigs ate a foam rubber Nerf gun bullet.

Now what our daughter and her cousins were doing shooting at the guinea pigs with a Nerf gun is a good question. The rodents were either collateral damage as the younger children picked on one of our older sons or the hapless animals were being forced to dance as the bullets ricocheted around their feet in some sort of spaghetti western routine.

But either way, it was unsurprising that they retaliated by biting something and I wasn’t about to call out the vet, far less ring the police.

No, I think it would be safer, cheaper and less controversial all around if we simply waited for nature to take its course and, to that end, we’re expecting purple and orange flecked droppings to emerge from the non-mouth end of the little beast any moment now. On to the news:

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FULHAM SHORE FULL YEAR NUMBERS: The Fulham Shore, which owns the Franco Manca and Real Greek chains of restaurants, has reported full year numbers to end-March. 16 July 2019: See Premium Email. 

A FEW WORDS ON HIGH STREET FOOTFALL: Some restaurants and bars are a draw in themselves but many others benefit from the footfall driven by traditional retailers. Think destination restaurant versus generic coffee shop. 16 July 2019: See Premium Email.

Introduction:

• Some F&B units are a destination in themselves whilst others, e.g. grab ‘n go food shops or coffee shops, are dependent upon the office workers or the shoppers who are drawn to an area for another reason, in this case either to work or to shop.

• Retail parks will self-evidently be dependent to a large extent on retail footfall whilst bars around major office complexes (e.g. Canary Wharf) will be dependent on employment levels in the buildings around (or above them).

• Country pubs next to the village church and opposite the duck pond will have an altogether different raison d’etre.

Footfall:

• Footfall figures for the UK’s high streets have been in decline, BRC-Springboard report UK retail footfall declined by 3.5% in May and a 2.9% decline in June

• This is intuitively understandable as the march of Amazon (and Boohoo, Ocado, Deliveroo etc.) continues

• Nonetheless, less footfall => less sales for high street retailers => more vacancies as uncompetitive companies leave the high street

• This may become a vicious circle as vacancies put off visitors. Vacancies => lower footfall, and so the cycle continues

So why has this happened?

• From bricks to clicks. The rise of online consumerism has seen a lot of retail demand move from ‘bricks to clicks’ – that is from in-store to online.

• This has impacted in-store revenue, whereas costs are more sticky. Landlords have their own problems. They will not happily cut rents if they have demands on their cash flow

• In the real world, rents, rates and labour tend to move upwards only

• This has led to more vacant retail units on the high street

Recent data:

• The LDC reports the 2018 retail vacancy rate increased by 0.3% to 12.7%

• This is being confounded by the sticky nature of rents. They are usually contractually upward only. But even in the case of new leases, landlords are reluctant to cut rents as it sets a precedent

• So, we are left with an unappetising high street pockmarked with vacant units, it is no wonder punters are voting with their feet

• Male grooming shops, tattoo parlours, nail-bars, cash for gold shops, payday loan outlets and charity shops will not raise an area’s appeal

What does the future hold?

• We need to disaggregate, if possible, the secular from the cyclical. Here the signs are not helpful.

• The high street is facing plenty of problems. On one hand physical retail is being supplanted by online and on the other the casual dining sector is suffering from overcapacity

• Landlords will ultimately have to take the hit and lower rents if these trends continue, and it looks like they will for the foreseeable future

• The government is taking action by setting up the ‘High Street Task Force’ – led by Manchester Metropolitan University’s Institute of Place Management (IPM) and set to be fully operational by July 2020

• This may be cosmetic. If the changes are permanent and structural, then there is arguably little to be gained from trying to push water uphill

GENERAL NEWS – PUBS & RESTAURANTS:

• The Fulham Shore reports full year revenues up 17% at £64.0m with headline EBITDA of £7.8m (2018: £7.4m). See premium email.

• Headline operating profit is £3.5m (2017: £3.7m) with a PBT of £1.4m against a £100k loss last year

• FUL reports its ‘increases in revenue and Headline EBITDA, together with the improved PBT performance by the Group, were achieved against a backdrop of political uncertainty impacting consumer sentiment and the well-publicised issues being faced by other UK restaurant businesses.’

• Group has increased revenues, EBITDA, profit & store numbers whilst reducing debt and considering a dividend. There are winners out there. See premium email.

• AG Barr estimates H1 revenue to be down around 10% to £123m with profit for the full year expected to decline by up to 20% yoy. CEO Roger White said ‘Weather comparatives and trading, particularly in the impulse on-the-go market, have been even tougher than expected which, along with some brand specific challenges, have led to a short-term impact on our financial performance.’ 

• Plenty of discounts still available. 40% off mains at Prezzo & Bella Italia. 33% off food at Beefeater & 30% off mains at Café Rouge. 25% off food at Pizza Express.

• Whistle Punks, the urban axe throwing group, is set to open two new sites in Q4 2019 following £1.5m investment from Edition Capital. 

• HGEM reports that the student market remains an important one for the F&B industry. It opines that the student market is more diverse than may first be thought but says that it does provide customers who will spend mid-week and often during day parts that are otherwise hard to fill.

• HGEM says that, in addition to a pleasant and safe environment and good products, students like Wifi, ‘accessible’ pricing and the option of socialising in large groups.

• The FT suggests that AB InBev pulled the IPO of its Asian business because of a gap in the perception of value. This may often be the case but the FT says AB Inbev believed that it was ‘pitching a premium brewer with fast-growing prospects that deserved a correspondingly frothy price.’

• The FT says ‘one banker involved in the deal, speaking on condition of anonymity, said it was clear from early market feedback that AB InBev’s target range was probably higher than investors would accept.’ Another says buyers were not obliged to buy and they chose not to.

• Dishoom is to expand its Covent Garden restaurant after securing the lease on the former Jamie’s Italian site next door.

• Nirvana Brewing is launching a beer tasting this month in an effort to improve consumers’ perception of low alcohol beer.

• Amazon warehouse workers have begun a strike as the global online retailer launches its Prime Day sales promotion. Amazon workers are demanding fairer working conditions.

• Punch completes a £620,000 refurbishment of The Devonshire Arms in Buxton, reopening the pub.

• In the US, Luby’s reports Q3 same-store sales down 4% with guest traffic down 1.2% at its cafeteria units and 8.7% down at its Fuddruckers sites. Chris Pappas, CEO and president, said ‘While our same-store sales have not yet achieved the improvement we are striving for, we do see a number of positive developments based on our recent efforts and initiatives aimed at growing guest traffic.’

• A US coalition of McDonald’s franchisees have drafted a list of menu initiatives they claim are hurting operators. The franchisees would like to see the inclusion of a premium chicken sandwich and claim that the new global favourites promotion doesn’t work.

• Starbucks opens its first Starbucks Now in Beijing, China. The express café will focus on mobile order and pay and delivery customers, featuring secure ‘pickup portals’ along the wall of the café.

• The Telegraph is starting a weekly series in which Rosa Silverman charts the fate of the UK high street, visiting struggling town centres across the country.

• The John Walker Tavern in Stockton on Tees reopens following a £342,000 refurbishment financed by Punch.

HOLIDAYS & LEISURE TRAVEL:

• Thomas Cook’s shares fell another 4% yesterday to 5.2p as the market awaited details of the company’s proposed debt for equity swap. There are fears that existing shareholders could be virtually wiped out.

• New research shows resort prices have fallen in more than half of 15 leading European holiday destinations, with Bulgaria and Turkey emerging as the best value for families. Over the course of a week, families can expect to spend around £225 in Sunny Beach, Bulgaria.

• STR reports London hotel occupancy up 4% in June, with ADR up 11.3% to £178.20 and RevPAR up 15.7% to £159.90. STR said ‘The ADR and RevPAR levels are the highest for a June in STR’s London database’ with demand driven by multiple events during the month.

• The TSSA union will seek an ‘urgent meeting’ with Thomas Cook in order to demand guarantees on jobs. The demand comes as TCG revealed it was in ‘advanced discussions’ with banks and Chinese investment firm Fosun to buy its tour operation for £750 million.

OTHER LEISURE:

• Everyman updates that it has performed in line with expectations in its H1, with the group opening a three-screen venue in Horsham and a four-screen venue in Newcastle during the period, bringing the group to 28 cinemas. Everyman said it is on track to open five more new venues in 2019 and has legal commitments to open a further nine sites through 2020 and 2021 with more in advanced stages of negotiation.

• The Florida Department of Health in Orange County has issued a rabies alert for an area covering a small part of the Walt Disney World Resort. That may not be particularly good for business.

• UK Facebook users will have a new tool to report fake adverts posted by scammers. The tool is a result of Martin Lewis’, founder of the MoneySavingExpert website, legal action over his name and photo being used on fake Facebook adverts.  

FINANCE & ECONOMICS:

• It’s more than 10yrs since the last recession. The Telegraph reports that ‘the UK’s recession-fighting tools are already almost exhausted leaving the economy ill-prepared to battle the next slump if and when it arrives.’

• Sometimes weather forecasters look out of the window to tell you that it’s raining. In the same vein, the Telegraph quotes the Resolution Foundation as saying that interest rates are already too low to be cut significantly if the economy slows.

• The government is heavily indebted and couldn’t easily borrow more whilst at the same time the need to pay benefits would rise and HMG’s revenue base will decline in the event of a recession.

• Theresa May is getting in on the act and promising money all over the shop in an attempt to secure some sort of legacy. Cars would bee the beneficiary.

• The OECD has said that Europe is not well enough prepared for an economic shock. It says Europe has a ‘crying need’ to step up public spending.

• Sterling lower at $1.2512 and €1.1112. Oil little changed at $66.51. UK 10yr gilt yield down 4bps at 0.80%. World markets higher yesterday with Far East mixed in Tuesday trade.

• Brexit & politics:

o FT says Mrs May’s 2017 general election gamble has left the UK ‘even more polarised than during the UK’s 2016 referendum campaign’.

o Likely EU Commission president Ursula von der Leyen has said she would support giving Britain more time to negotiate its exit if it were to ask for it

START THE DAY WITH A SONG:

Yesterday’s song was Higher and Higher by Jackie Wilson. Today, who sang:

I heard, that your dreams came true,

I guess she gave you things

I didn’t give to you

RETAIL WITH NICK BUBB:

• Burberry: Today’s Q1 update from Burberry is upbeat, with 4% Retail LFL sales growth and the company trumpets the news in its inimitable manner: “This was the first quarter where the proportion of new product in our stores was meaningful and the response from consumers was very promising…Consumers responded positively to the new aesthetic and house codes…We also continued to drive brand heat and shift consumer perceptions. We surprised and excited consumers with our monthly B-Series drops and product capsules…More widely, on social media our traction across Instagram and WeChat continued to improve…In addition, key influencers continued to organically endorse Burberry product and editorial press coverage remained strong”.

• Sports Direct: As we flagged yesterday, investors ran for cover after the news that the embattled Sports Direct has had to postpone its final results because of problems with the House of Fraser acquisition, with the shares tumbling by 9%, despite modest support from the continuing “close season” share buyback programme (Sports Direct was able to pick up c60,000, rather than their usual c50,000 shares, at c239p).  The more interesting news came after hours, via the announcement that Coltrane Asset Management, the aggressive activist US investor, has built up a c3.3% stake. But if Coltrane want to break the company up and dump the useless CEO they may have forgotten that #MadMike has a controlling stake in the business…

• News Flow This Week: Tomorrow brings the Watches of Switzerland finals and the Koovs finals, plus the Hotel Chocolat update and the Burberry AGM. Thursday brings the AO.com Q1/AGM and the ONS Retail Sales figures for June. The British Land AGM is then on Friday.