Langton Capital – 2015-12-09 – Daily Wrap: VAT Club, Tesco, online retailers & 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:
VAT and the hospitality industry:
• We have maintained for some time that, despite the fact that VAT is indeed levied at a reduced rate on some leisure services across the EU, it was always going to be politically difficult, if not impossible, to sack nurses in order to give the alcohol industry a break
• Of course that represents an egregious oversimplification of the arguments.
• But nonetheless, politicians were not likely to (and indeed did not) take the chance than any moves in this direction would have been interpreted as above
• Tim Martin at Wetherspoon has been one of the most dedicated campaigners in support of Jacques Borel’s VAT Club but JDW has now withdrawn its support
• It says ‘Jacques Borel has done an amazing job campaigning for a VAT cut over the past five years’ but says ‘I have decided that Wetherspoon can no longer support the VAT Club in its present form and believe there now needs to be an alliance of companies who believe, as I do, that a VAT cut is vital for the future of the hospitality sector.’
• He adds ‘it is a shame that some big companies have not supported the campaign to date’ the sentiment being in line with his comments expressed in the PMA in June 2014 to the effect that Greene King, Enterprise Inns and Mitchells & Butlers were ‘conspicuously absent from the VAT Club and are silent as the grave on tax equality.’
• JDW says that it will continue to campaign for a reduction in VAT and, over time, this may well be forthcoming
• However, such calls are more likely to fall on receptive ears at the top of an economic cycle and it is to be hoped, given just how challenging trading remains, that we are not quite there yet.
Tesco & diversification; just how did that work out for them?
• Well not terribly well.
• Blinkbox, Hudl, Harris & Hoole, Giraffe and now The Guardian highlights losses at the Tesco-owned Dobbies Garden Centres.
• Its business editorial suggests Tesco has “spent a year going sideways” and that may be a little generous.
• And, in terms of diversification disasters, Fresh & Easy in the US was in a league of its own.
Random information, hopefully not all of it useless:
• When do we start declaring Late Night Levies as a stealth tax?
• UK economy looking pretty good per NIESR. Leaves UK, as so often, half way between the US and Europe when it comes to rate rises. Estimate for the US to rise stuck on 16 December (next Wednesday), the UK perhaps end-Q1 2016 (but that’s a bit flaky & subject to review) and Europe possibly 2017.
• Online general retail had a bad day of it yesterday. Ocado down 5%, AO World losing 4%. Home Retail & Poundland also in the top losers but food retailers on the up.
• Sterling stable against Euro and Dollar but a glance at the two year chart shows just how far things have moved (stronger vs Euro, weaker vs Dollar) since around mid-2014:
• Recent (18mth) currency movements would seem to suggest that markets have been anticipating an upward move in US$ rates and perhaps a downward move in Euro interest rates for some considerable time.
• Commodity prices all still extremely weak with the exception of El Nino impacted OJ, sugar and cocoa. Now, however, it looks as though the milk price in the UK may be showing some signs of life.
• Miners extremely weak yesterday. Interesting to see that the top ten risers in the FTSE had to include some seven shares whose price had actually fallen
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. JDW pulls out of VAT Club Jacques Borel. Chairman Tim Martin reports ‘Jacques Borel has done an amazing job’ but no longer supports him.
a. JDW: ‘needs to be an alliance of companies who believe, as I do, that a VAT cut is vital for the future of the hospitality sector.’
2. Revolution Bars Group reaches its 60th site tonight with the opening of its latest Revolucion de Cuba bar in Nottingham
3. Camden councillors have voted to introduce a Late Night Levy which will apply between midnight and 6am from late April 2016
4. ONS reports consumers are spending more on discretionary items (big and small ticket, cars, carpets + pizzas) + less on heating + rent
a. UK household consumption rose in 2014 to highest level since before the global credit crunch per ONS data
5. Richard Caring tells M+C that he will roll out Ivy Café format to 10 or more sites across the country
6. Full year numbers from Easy Hotel. Says ‘performance in line with Board expectations’, sales +15% at £19.95m.
a. Easy Hotel FY numbers: Says PBT +38% at £0.79m, basic EPS 1p (vs 1.2p last year), proposed maiden dividend of 0.33p.
7. Thomas Cook CEO & CFO Peter Fankhauser & Michael Healy crystalise options, sell some shares to pay tax, retain the rest
8. Business travel largely unaffected by Paris murders reports GBTA. It says 47% of buyers reported no change + 26% a small reduction
a. Carlson Wagonlit Travel has said that the average cost of a business trip in the UK fell by 8.5% in Q3 this year.
9. Airbnb is reported to be have raised $1.5bn in new funding this year to date. Recent rounds value the business at c$25bn.
10. NIESR has suggested that the UK economy grew by 0.6% in the 3mths to Nov, unchanged from growth in period to Oct
11. UK house price rises have slowed per Halifax. It says prices rose by 9% in the year to Nov, down from 9.7% a month earlier