Langton Capital – 2015-12-11 – Daily Wrap: Evolution, discounting, consumer spending & 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: Evolution continues apace: • Today we have the news that consumers are more likely to drink vodka over Christmas than they are to partake of a sherry or a glass of port. • That’s likely to be true and, though it is probably a generational issue (auntie Gertie is still likely to bring out the sherry bottle), things do move on. • And on-trade operators would be well-advised to take note of such changes. • It maybe doesn’t pay to try to lead consumers in terms of tastes (with the exception perhaps of some sites in Hoxton, Shoreditch etc.), but sites that fail to move with the times are likely to lose business to those that do. • This will be particularly the case with new entrants. • They are largely unencumbered by existing estates or by residual issues or by feelings of nostalgia, loyalty etc. and they are generally free to serve customers meals and drinks that they demand at a price that they are willing to pay. Discounting: • There is still some discounting going on out there, even two weeks before Christmas. • This is not a good sign but there are some grounds to hope that the impact is localised and may be confined to those operators that have become associated with heavy discounting over a period of years or those whose brands have become a bit dated such that they need a bit of shock therapy. • Here we would suggest that Everyday Low Pricing would appear to be the way forward. • It is less confusing to the customer and, over the last few years, it hasn’t done Aldi or Lidl much harm in their battles with the established grocery majors. Is this as good as it gets, should we be worried it doesn’t feel better? • We’re 6yrs or 7yrs from the last recession. We may be nearer the next one than the last one. • Employment levels are high, real wages are in growth, utility costs are lower than they have been in years and Morrison’s has just cut the price of petrol to less than £1 per litre. • In addition, supermarket price wars have put money in customers’ pockets, PPI is rumbling on and taxes haven’t been put up as much as might have been feared. • Yet consumer confidence levels are subdued, corporate confidence is on the wane, Black Friday was a damp squib, general retailers have been moaning, the weather is too warm and a number of on-trade operators have suggested that November trading has been soggy. • Of course the consumer may be marshalling his/her resources for a Christmas blow out. • Or he/she may simply not be mentally inclined (even if able) to splurge in the way that they did before the credit crunch. • It might be as well to hope for the former whilst planning for the latter. • But either way, good operators will prosper whilst lazy, mediocre or entitled operators may find the going tough and they may struggle to survive. Random information, hopefully not all of it useless: • Thomas Cook shares down a little on the Fosun news (see earlier email). We’re a long way from saying that the latter won’t now be buying 5% of Thomas Cook’s shares in the market, let alone suggesting that it may have to place the 5% that it already owns. • Travel stocks better yesterday, IHG, TUI (on numbers) etc. • Volumes likely to dry up over next few days. It’s Christmas of course but also we have the Fed meeting next week with interest rates likely to edge higher Stateside. • Oil price testing 7yr lows at well below $40 per barrel. OPEC turning on the taps, some brokers looking for oil to go considerably lower still • Markets all lower, some betting FTSE100 will end the years <6,000. • Sterling better against the US$, level (kind of) vs the Euro. We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance): 1. Ave. cost for a family dining out at Xmas set to hit £340.57 this year per Net Voucher Codes survey. Seems high? 2. Champagne Taittinger has bought 69 hectares of land in Kent for a vineyard it will call Domaine Evremond 3. Yum Brands to return c$6.2bn to shareholders before splitting off China business and listing it on the NYSE and possibly in Hong Kong 4. On-trade sales of sparkling wine has grown 41% in the last 12 weeks to £84m, outpacing beer, wine and cider. 5. YouGov poll suggests Brits more likely to pick vodka and cider as their Christmas drink rather than old favourite fortified wine. 6. Soho House’s planning application for a Brighton seafront development housing Dirty Burger, Chicken Shop and Pizza East 7. Morrison’s has cut the price of unleaded petrol to 99.9p per litre, the lowest level seen in the UK since 2009 8. Shares in Fosun, owner of Club Med, Cirque du Soleil and a stake in Thomas Cook, have been suspended a. FT reports Fosun International has suspended its shares in wake of reports that its chairman, Guo Guangchang, had gone missing 9. Richard Snow is to take over as Acting CFO of Ladbrokes, with current CFO Ian Bull set to leave his post at the end of Feb 2016. 10. Bank leaves UK interest rates at 0.5% and QE unchanged at £375bn. Votes were 8-1 and 9-0 respectively. a. Bank says ‘MPC intends to set monetary policy to ensure that growth is sufficient to absorb remaining spare capacity’ b. Bank of England will only raise rates ‘gradually’. It says all members see the ‘persistence of the headwinds weighing on the economy’. c. B of England says rates will rise ‘more gradually and to a lower level than in recent cycles.’ 11. Oil price hits new 7yr lows, trading at around $39.50 per barrel. OPEC reports pumped oil at fastest rate in 3yrs in Nov |
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