Langton Capital – 2015-10-28 – Consumer spending, profit warnings, the weather & 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:
• GNK’s Tracker shows leisure spending flat year on year and down September on August.
• Within the mix, eating and drinking out spend is down whilst spending on ‘other leisure’ services is up.
• The above can be influenced by the weather, the Rugby etc. but, overall, it would appear that spending is somewhat anaemic.
• Indeed GNK says it was a ‘mixed month’ and it adds ‘while the recovery continues at national level there is a lag effect on consumer experience at household level.’
• It also points to cars & big-ticket spending which, by implication, is less impacted by the above-referenced lag.
• It is hard to disagree with the comment that ‘this month’s figures show how volatile the economic recovery continues to be for UK consumers’.
• Indeed retail giant Next today refers to uncertainty caused by “the continued volatility of consumer demand.
• We would suggest that the bigger question relates to spending habits over the medium term as, if the consumer really is chastened after his/her 2002-2008 excess, spending inclinations (if not ability) may continue to be muted.
• Rents, especially in London, seem to be in denial.
• It perhaps wouldn’t do to be too alarmist but, with the above in mind, the amount of capacity going on, particularly in casual dining, may be somewhat worrisome.
Corporate news somewhat underwhelming:
• Ratings may expand but, ultimately, stock market valuations are impacted (if not actually generated) by earnings.
• Here there have been a number of profit warnings & cautious statements.
• HOME was downbeat, similarly PSON and, in the US, even Twitter has managed to disappoint.
• Perhaps with interest rates at historic lows and ‘as likely to go down as up’ per some central bankers, it wouldn’t do to call the top of the market.
• However low interest rates, whilst they do depress the yields on rival assets, are finite and can only be temporary and, over time, earnings matter.
• The Met Office has returned data for July through September showing that temperatures were below average.
• September was markedly cool, but it was dry.
• Interestingly today we have sluggish Q3 GDP numbers blamed on lower construction volumes in a wet August and Next saying that Q3 was impacted by “the unusually warm weather” in October.
• Perhaps the warm weather passed us by but, if anything, the above does highlight just how prone to being influenced by the weather, UK consumer spending actually is.
• Indeed link here suggests averages to date, in London at least, are below average for October to date.
Random information, hopefully not all of it useless (re most leisure operators etc.):
• Oil price below $47. Any further slippage & the price at the pump will be coming down again. Good for consumer spending power but less good for government in its battle with deflation.
• Soft commodities, with the exception of cocoa, pretty much all lower. Precious metals also off the top. Inflation, where art thou?
• Heineken looks good. Another case of a € company turning in good numbers whilst $ companies continue to struggle with translation negatives?
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. Whitbread Costa boss Chris Rogers has sold 24,000 shares in the company at £49.36 yielding some £1.2m
2. Greene King Sept tracker: says was ‘mixed month for leisure spending among British households.’
a. GNK Tracker: Spend on eating + drinking out fell by 3% in each case. Says big days holding up but denies Halloween is popular
b. GNK highlights ‘while the recovery continues at national level there is a lag effect on consumer experience at household level.’
c. GNK Oct details. Households spent £208 on leisure in Sept, no change y-o-y and down £14 or 6% on August
d. GNK alludes to big-ticket spending, points out car sales in Sept strongest on record + non-food outperformed food
3. C+C reports 6mth numbers, revenues down 2.6% at €358.6m, EBITDA down 10.4% at €72.6m with EPS down 6.9% at 14.8c
a. C+C sees ‘challenging period in core markets of Ireland and Scotland’ but has ‘significant growth in Export business’.
b. C+C says ‘US business below expectation’ but ‘actions underway to improve earnings for FY17’. Is cutting costs.
4. Heineken Q3: Consol. revenues +7.5% organically, beer volumes +5.4% organically. Growth in Europe, Americas + Asia-Pacific.
a. Heineken Q3: Sees flat volumes in Africa, Middle East + Eastern Europe. Margin guidance unchanged but forex will hit full year
5. Pizza Express has said Asia remains an ‘exciting’ area of growth. Has 450 units in UK + Ireland, only 27 in Far East
6. AB InBev is reported to have hired advisors to help with sale of US assets. Disposals will be necessary for regulatory approval
7. London-based salad group Chop’d trials delivery service with London taxi company Gett, with customers using Gett’s app to order
8. Over three quarters (80%) of older travellers spend £1,000 on a holiday and more than half would spend over £3,000.
9. Bwin updates on Q3. Clean EBITDA +5% at 9mths. Sports betting down 8% (no World Cup) + cost savings in line
10. UK’s economic growth slowed in the third quarter of 2015, with ONS figures showing gross domestic product fell to 0.5% from 0.7%