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:

Coffer Peach Tracker:

• The numbers are in line with recent trends but there are a couple of red flags.

• First, the Tracker provides data that suggests new capacity could be a bit of a threat to LfL sales – and to margins.

• It says total sales for casual diners were up 10.6% in the Provinces with LfL sales (admittedly for restaurants as a whole including London) were only +2.8%.

• This suggests that capacity to the tune of perhaps 7% to 8% has been added in the year to end-September.

• Even if developments such as Trinity (Leeds), West Quay (Southampton), Spinningfields (Manchester) and Broad Street (Birmingham) have been responsible for the bulk of the expansion, it’s still fair to say that neither the population nor spending power in the provinces has risen at anything like this rate.

• Second, David Coffer of Coffer Group reports ‘tall trees can’t grow to the sky and there surely will be a point where rentals, premiums and menu pricing in central London become untenable. It will be interesting to see whether these trends continue.’

• Operators have become increasingly vocal over recent months re occupancy costs, particularly in London.

• This has led to some eschewing new sites in some areas but, given that rents paid by new entrants will be used to rebase the rents of existing tenants, the greater fool principle may, over time, mean that conservative operators face rent increases that negatively impact their profitability.

• Effectively PE houses paying too much for sites may burn more than just their own money.

• Interestingly Paul Newman, head of leisure and hospitality at Baker Tilly, says ‘after some pretty atrocious weather in August, early autumn sunshine brought like-for-like September trading figures back up towards their long term trend.’

• This would appear to be correct despite the fact that, overall, temperatures in September were some 0.8 degrees below the long term average.

• More worryingly, Mr Newman goes on to say ‘favourable economic conditions and a benign political climate [are] fuelling competition within the banking sector to support the more successful operators.’

• Being a little cynical, this is as it should be. Banks are to be expected to lose a mountain of cash at certain stages in the economic cycle.

• Bank behaviour suggests that the cash bonfire referred to above could burn for some while yet.

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

• UK market higher today but little help from earnings releases in the UK, which have been rather lacklustre. Glory stock Netflix a little short of glory & shares down sharply overnight on missed Q3 numbers. Ultimately, share price advances cannot be maintained by ratings expansion alone.

• Interest rates: Various data coming out of the US (in addition to the above earnings misses) suggest that rate rise has been kicked well into 2016. Betting soon may be that it will slip into Q2 rather than Q1.

• Oil price seems fairly settled below $50 (at least at the time of writing), trading at around $49.30. Inflation, where art thou?

• Coffee: Arabica prices well off their recent lows but still down nearly 30% over the last 12mths:

• Interesting to see WH Smith say that High Street sales were boosted over the summer by “some favourable publishing in books”.

• Walmart woopsie. FT opines ‘everyone saw that the trend was bad. Few anticipated how bad and now that the scope of Walmart’s problems is clear, the company has presented a plan that will reassure no one’.

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

1. Sept Coffer Peach Tracker has LfL sales +1.2% on same month last year. Restaurant operators outperform pubs.

a. Tracker: ‘This year has generally been one of ‘steady-as-she-goes’ for the eating and drinking out market’ says Peter Martin

b. Tracker: ‘Numbers show that drink-led pubs performed strongly in last weeks of month, coinciding with start of Rugby World Cup’.

c. Tracker: Restaurants +2.8% LfL in Sept with pubs +0.4% and wet-led operators helped by sunshine (but cooler weather).

d. Tracker cautions competition across restaurants is ‘heating up, driven especially by ambitious brand rollouts by casual dining chains’.

e. Tracker :Total sales +4.6% (+5.5% y-t-d) so new capacity is >3% across the sector. Restaurant total growth 7.5%, 10.6% outside M25

f. Tracker: ‘London had a slightly worse month than the rest of the UK with LfL up 0.9% against 1.3% for the rest of the country.’

2. Big ticket spending. Interesting to see UK automotive retailer Vertu report sales +14% and record £16.4m pre-tax profit for H1 to end-Aug.

3. Thomas Cook UK managing director Chris Mottershead has said the group is seeing signs of recovery following a ‘torrid period’

4. A survey of over 1,000 UK adults by Travelzoo has found that UK hotels offer the best customer service in Europe

5. PwC partner David Trunkfield has said the growth in the sharing economy will see a dramatic surge in the peer-to-peer business sector

6. Rank Group Q1. Seen 8% increase in LfL revenues for 15wks to 11 Oct. Grosvenor +12% (total +12%), Mecca +3% (total +1%).

a. Rank Q1: CEO Henry Birch says ‘the Group has had a good start to the financial year’. Digital is particularly strong.

b. Rank sees ‘improving admissions trend in our Mecca venues combined with good growth in Mecca’s digital business.’

c. Rank re outlook: Says ‘Board is encouraged that all of the Group’s businesses continue to make progress in line with management’s expectations

7. Britain’s unemployment rate fell to 5.4% in the three months to August, down from 5.5% in the previous quarter, according to ONS

8. Average earnings increased by 3% in the year to August, 0.1% up on the previous month and the highest since May.