Leisure Wrap & Other:

So the trading day is grinding to a close. We’re another day older but are we any wiser? After a day of intensive head-scratching, pen flipping and gossip, we have been considering the following. As always, contact us if you’d like further details:

Evolution in eating out. You can’t keep it out of the news (re all operators etc.):

• Just this morning, further headlines suggesting that change remains the only constant and that standing still in leisure retailing is not an option:

o McDonald’s is to shrink the size of its US estate, apparently for the first time in at least 45yrs.

o English vineyards could have a bumper year.

o Billions of breweries are springing up in the UK every week.

o ABV is polarising. Craft beers can be 6.5% plus and stronger session drinks have slipped back from 5.2% to 5.0% to 4.8%.

o Reports that half pint glasses are becoming more widespread than full pint glasses.

• OK so there are more important ‘evolutionary’ trends in place. Food, family, female customers etc., the grey-market and so on.

• And pubs are moving into coffee & breakfasts, sandwich shops are staying open in the evening and food-to-go operators are flirting with alcohol.

• But the serious point remains that sitting on one’s laurels is not really an option.

• Perhaps this hasn’t escaped those legions of seemingly limitlessly-funded Private Equity houses out there. They seem to need to buy in their expertise as, whilst running businesses may be what they are good at, they arguably don’t shine when it comes to innovation.

Tube strikes & the London market (re most operators):

• So the various rail unions are going to ruin four days’ trade at the cost of only two days’ lost pay?

• The next two strikes will impact Tuesday 25th (evening), Wednesday 26th (all day), Thursday 27th (evening) and Friday 28th (all day).

• The strikers can then put their feet up for the three-day Bank Holiday weekend.

• Pretty ruinous for London trade, befuddling for tourists and annoying for those Langton employees dragging their way back from Vegas on the 28th.

• It may lead to concerted calls to put the army in as it doesn’t seem fair that a relatively small number of highly paid workers sitting atop billions of pounds worth of centuries old taxpayer-funded capital spending can hold London to ransom.

• But it is what it is.

• We had feedback suggesting that strike days coincided with c15% falls in trade in Zones 1 and 2 and this seems reasonable though a bit light, if anything.

• Suburban pubs may benefit but, overall, the strikes are bad news for the Capital where, in the hotel industry at least, the market is already past its best.

Consumer spending & the weather (re all operators):

• Barclaycard reports that consumer spending rose by 4.6% in July.

• But it was a month of two halves thanks to the weather

• High temperatures early in July filled shops & beer gardens (though it may have hurt cinemas & indoor attractions, Cineworld updates tomorrow but it is likely to tell us that Jurassic World dragged the punters in) whilst less good weather later in the month did little to help

• That said, wallet-fatigue would have set in at some point anyway as there is only so much spending that a man can do

• Online shopping picked up some of the slack in the second half of the month. Anything that persuades people to stay on the couch is borderline unhelpful

• Barclaycard reports that spending on leisure and entertainment was up 12.8% in July. Spending in pubs was up 15.5% (very weather-sensitive) and the credit card company reports that spending on takeaway food was up by more than 60% for some periods of the second half of the month

• So overall, July was good though it should be noted that trends towards plastic & away from cash may flatter these numbers somewhat

• Nonetheless, Chris Wood, managing director at Barclaycard, said ‘July was a prime example of how the weather impacts the way consumers spend their money. The heat wave that dominated the start of the month provided a lift to the high street – especially clothing and department stores – as consumers took to the shops to update their wardrobes. But as the weather deteriorated, winners emerged in different categories including cinema, which was also bolstered by summer blockbusters, and takeaways which consumers turned to avoid the damp and blustery conditions.’ He goes on to say ‘overall, the rise in discretionary spending in July echoes a six-month trend where consumers, supported by significant tailwinds such as zero inflation, rising wages and clear guidance on interest rates, feel more comfortable splashing out on the nice-to-haves.’

Random information, hopefully not all of it useless (re most leisure operators etc.):

• Oil well below $50 & miners (non-precious metals) weak. Low oil price good for consumer (and pretty immediate) but also very helpful, albeit over time, for the tour operators.

• Sterling rallying a little. Also good for tour operators. TUI updates tomorrow morning.

• It’s worth a look at the cocoa chart. The price has been very high. This has contrasted with a weak coffee price but the price of the former has now come off the top a little.

• All markets now weak on this China devaluation. If it’s not one thing, it’s another.

• SCS furniture tells us that trading has picked up recently. It may be that spending on big-ticket items is still running ahead of that on affordable treats.

• Senior staff exit M&S. Is it just us or does M&S seem like rather a political environment? As in ancient Rome, a turned back attracts knives.

We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):

1. Enterprise is ‘on track’ for 30 managed pubs by 30 September, the Morning Advertiser reports. Aims for 800 in time.

2. McDonald’s US plans to end the year with 59 fewer locations in home market than it started with, first shrinkage in 45yrs.

3. A new brewery opens in the UK roughly every two days according to a report, with ministers hailing the nation’s ‘brewing powerhouse’

a. Research by Mintel shows that the number of beers launched globally with an abv of 6.5% or more rose 280% between 2011-14

4. English winemakers are ‘cautiously optimistic for a great vintage’ following a frost-free spring and a summer heatwave.

5. London Underground workers will stage two more strikes on the 26 and 28 August due to continuing disputes over night tube plans

6. UK food sales fell for the first time this year in July according to latest data from BRC-KPMG Retail sales monitor.

7. Barclaycard reports consumer spending growth of 4.6% in July year-on-year. Weather impacted first half of month positively

8. Luton airport volumes +16% y-o-y in July, carries 1.3m passengers. Increase marks 16 consecutive months of growth

9. Holiday Co Mark Warner has reported PBT down some 80% on back of ongoing uncertainty in Greece

10. Treasury minister David Gauke has suggested that airport shops should pass on lower prices when not charging VAT.

11. Cineworld H1 tomorrow, shares at all-time highs after declines post departure of CFO Philip Bowcock. Summer trading should have been good

a. Cineworld: film schedule for rest of year + 2016 looks good but rating high, trades at 19.3x this year’s income

12. Homeowners are re-mortgaging in greater numbers reports BBC. Rate rise fears prompting 30% pick up in re-mortgaging numbers

13. Oil price firmly below $50 at $48.75 per barrel of Brent crude