Langton Capital – 2015-11-16 – Daily Wrap: Terrorism & leisure travel, costs, Sterling & 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:
Terrorism & leisure travel:
• We consider it an awful shame that we have to comment again that terrorism is not good for leisure travel.
• I mean how could it be?
• Paris, specifically, is a short-break market but events such as those of Friday night are likely to dissuade a number of would-be travellers against taking leisure breaks of any description.
• And terrorism can lead to a wider malaise.
• The reaction of markets in Europe today would suggest that there is little fear that the attacks could trigger a recession but, it should be said, anything (such as a closely-fought election or a terrorist incident) that leads to people sitting in front of a TV and not spending runs the risk of dampening consumption.
• Indeed many scholars now consider Alan Greenspan’s series of cuts that brought the Fed Funds rate down to 1% in the wake of the 9-11 attacks 1) headed off a recession but 2) fuelled the resulting housing boom.
• We will have a number of hopefully informed and informative updates on the travel market over the next few weeks. EasyJet updates tomorrow and Dart Group (Jet2) reports on Thursday. Thomas Cook then reports full year numbers on 25 Nov and TUI follows suit on 10 Dec.
• The Sharm disruption is likely to cause many if not most airlines extra costs easily into seven figures and comments as to the would-be traveller’s mood post the Paris atrocities would be helpful.
Random information, hopefully not all of it useless (re most leisure operators etc.):
• Commodity costs all lower – except El Nino impacted softs such as sugar, cocoa and orange juice.
• Sterling up against the US$ over Friday & up against the Euro today. Helpful for importers, commodity users & holidaymakers etc.
• Markets last week pretty tough. Miners & oils down more than 7% across both sectors. Supermarkets down on back of Sainsbury numbers. SBRY finished the week down 12%, OCDO down 11%, MRW down 10% and TSCO, he of the ‘lethal cocktail of costs’ fame, ‘outperforming’ at down 9%.
• The poor performances of share prices across the UK food retailing market last week puts Premier Foods’ performance in an even more favourable light.
• Friday saw a bit of a dead cat bounce across stocks with dreadful short & medium term performance. Anglo American, Pearson & Drax amongst the one-day winners but all down materially over last 6mths or so.
• Let’s not take our eyes off the reporting schedule. There are a number of profit warnings out there. The market may, just may, be a little too optimistic on earnings. Not too surprising, really, as Japan is back in recession and Eurozone growth is weak. Even cheerful Vince (Cable) is suggesting that we could have something of a rocky road ahead.
• The advent of Amazon Pantry suggests that the gas is being turned up further on the delivery market. Some are playing the very long game. I will be interesting to see who, if any, operators can make money in the short term.
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. Shareholder Piedmont has notified M+B that it wishes to nominate Josh Levy as a representative director on the company main board
2. Marston’s is to speed up the rollout of its Generous George concept reports M+C. it aims to take the fledgling brand to 10 sites
3. KFC to offer delivery service on trial basis in Los Angeles + San Francisco. If successful, the offer will be extended to other territories
a. YUM Brands has reported better than anticipated LfL sales growth of 5% in china for October. It expects zero to 4% for Q4 as a whole
4. Giggling Squid has confirmed that it has raised additional funds amounting to c£6.4m from the British Growth Fund
5. Majestic Wines’ H1 adjusted PBT (ex-Naked Wines acquisition) for 26 weeks to 28 Sep fell by 1% to £8.4m. PBT halved to £4.3m
a. MJW. Warning re current year, post review sees ‘profit for the current year is expected to be impacted by the increased investment’
6. Foreign + Commonwealth Office has said that UK tourists should “exercise caution in public places” in Paris following attacks.
7. Travelodge looks set to change hands for up to £1.5bn as owners Avenue Capital + Golden Tree are soliciting bids.
8. EasyJet reports full year numbers tomorrow. The group will update on Sharm costs with implications for tour operators TUI and Thomas Cook
a. Monarch has cancelled its programme to Sharm El Sheikh until 19 December. Repatriation flights should end by Wednesday
9. Economic growth slowed to 0.3% (Q-o-Q) across the Eurozone in Q3. Compares with 0.4% in Q2 + suggests rates won’t rise in short term
a. Euro likely to suffer because of the above + uncertainty surrounding economic response (travel etc.) to terrorism in France
b. Japan has fallen into recession again after its economy shrank 0.8% on an annualised basis in Q3.
c. UK service exports are hitting all-time highs. Country is second only to US in move that will help balance of payments overall