Langton Capital – 2015-08-18 – Daily Wrap: Commodities, chefs, TUI, Thailand & other:
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:
The price of pigs (re on-trade retailers, the consumer etc.):
• Pig prices on the slide, good news for operators as 1) pig & chicken prices tend to track each other, 2) white meat influences the price of red and 3) if the price of beef/lamb doesn’t move in sympathy, at least there is a protein alternative.
• Lower pork prices helpful therefore for the consumer directly & for leisure retailers as some of the margin enhancement may stick with them.
Chart in earlier email.
• Good (on balance) for pork retailers such as Cranswick as price increases are Teflon (you pass them on quickly) and price reductions have something of the feel of Velcro about them.
Too few chefs (re licensed retailers):
• There are more class actions from kitchen staff in the US and union Unite is trying to marshal burger-flippers into throwing down their aprons.
• But, though the Living Wage will play a role, when costs rise, it may well be old-fashioned supply and demand that’s to blame because, if we need another 11k chefs, then we may well have to pay up to get them – see earlier email.
Tour operators, terrorism, Thailand etc. (re tour operators, TUI, TCG):
• Bombs in Thailand are clearly a negative for the industry.
• Tourists were involved with ‘at least 8 foreign nationals killed’ per BBC.
• Thailand may not be a mass-market for the packaged tour industry but it is a major winter destination from the Nordic region and both TCG and TUI have material businesses in the north.
• The UK Foreign Office has not (yet) issued any guidance re travel to Thailand.
• TCG and TUI will therefore be left to judge demand for themselves and to reschedule destinations when or if necessary.
• This will incur additional, as yet unquantified, costs and cannot be seen as anything other than negative news.
Random information, hopefully not all of it useless (re most leisure operators etc.):
• Commodity prices remain very low. Oil < $50 per barrel. Miners near 6yr lows & price of foodstuffs also lower. Cocoa down after a strong start to the year, recent rallies in soybean, wheat, corn now distant memories.
Chart in earlier email.
• IPO market gone to sleep and, with AO World for example trading at 125p (IPO last year 285p, peak price c325p) perhaps that’s no surprise.
• Cash in the consumer’s pocket. Rail fares may be rising ahead of inflation but the negative impact here is dwarfed by the positive effect of lower food and energy costs.
• TUI to spin off peripheral assets; are we talking about Hapag Lloyd? It would appear so. Perhaps Late Rooms as well.
• ASDA will update on trading (as a part of the Walmart trading statement) at lunchtime today.
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. Competition + Markets Authority blocks plans for Original Bowling Co + Bowlplex to merge. Says would lead to less competition in the sector
2. Hospitality industry will need to recruit an additional 11,000 chefs by 2022, according to workforce charity People 1st.
3. Alan Miller, chairman of the Night-time Industries Association, has said red tape is to blame for failing nightclubs
4. Rail fares have risen 3x faster than wages (25% v 9%) over last 5yrs points out the BBC, referring to a TUC study
5. Booming craft beer industry is thought to be behind a 12% hike in the number of trade mark applications for beers to 1,485 in 2014.
6. Healthy food chain Abokado has secured £2.6m of new funding following ‘another year of strong growth’ with sales up 33%.
7. The Wall St Journal reports that more class action law suits over pay are being launched by employees in US restaurants
8. A report from Canadean finds coffee was China’s fastest-growing hot beverage in both volume and value terms from 2014 to 2019
9. TUI shares strong after Times reports co is considering spinning off non-mainstream assets
10. A study by PwC, Tui and the Travel Foundation has found that tourism’s impact on a destination is generally positive
11. A bomb exploded close to the Erawan Shrine in central Bangkok yesterday, killing at least 27 people and injuring around 80
12. German Finance Minister Wolfgang Schaeuble said yesterday that he was prepared to go ahead with the proposed Greek bailout
13. Greek government likely to call confidence vote following rebellion against country’s new bailout deal
14. Germany’s central bank has said the country’s economic growth in the second half is set to be ‘solid’ after reporting 0.4% growth in Q2