Langton Capital – 2016-01-19 – Daily Wrap: Damned lies & statistics, holiday sales, retail news & 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: Scottish drink drive rule changes: • Drink driving is indefensible. • Having said that, it’s interesting to look at the STLA stats that we ran with this morning when some 40% of venues in Scotland suggested that sales had declined over Xmas & New Year Lies, damned lies and statistics: • Some 40% of rural pubs surveyed by the STLA showed a decline in revenues at Xmas & New Year. • The reduced drink-drive limit is the unspoken suspect. • But the SLTA also reports some 39% of respondents in general in growth with a further 16% report their business as stable. • Take 100% less 39% less 16% = 45% and you have the proportion of respondents who were presumably in decline (or who didn’t know whether they were in decline or, indeed, what day it was) • Indeed if 40% of rural pubs are in decline, then presumably 60% are not • Viewed at from the latter angle and the drink drive changes looks somewhat more benign Revolution trading update: • Group opens three new units during H1 (to 26 Dec), sees LfL sales +2.7% but total sales up by only 1.9%; how does that work? North African holidays: • We report in our earlier email that terrorism (Tunisia, Egypt) was responsible for an 8% decline in tourism to North Africa in 2015. • But surely the more remarkable fact is that 92% of people presumably still travelled to a region where tourists had recently been singled out and murdered? • And, labelled a ‘dramatic slump’, isn’t an 8% reduction actually far lower than might have been expected? • The United Nations World Tourism Organisation goes on to say that tourism to Africa in general was down by only 3% • Is this a statistical quirk, are we missing something or is this a case of the tourist ignoring the ‘fat tail’ risk when he/she decides where to go to sun themselves on a beach. • Certainly the risk of being shot to death in your beachwear is small but, when it happens, it renders any modelling of the risks that you did beforehand totally meaningless. Sterling very weak: • Sterling has been falling both against the US$ and the Euro since about August last year. • US$ strength is consistent with the US Fed sitting in pole position when it comes to putting interest rates up • Though here, there’s now markedly less of a consensus when it comes to the assumption that the US will jack rates 4x this year. Some saying it may only happen once. • But Sterling’s weakness vs the Euro is a little more difficult to explain. • Keen to avoid backward-rationalising a move, we’ll just say that it is what it is and mention that a downward move against both currencies will put margin pressure on suppliers (perhaps particularly the holiday providers) and take money out of consumers’ pockets – both via the raised cost of imports at home and the higher Euro cost of holidays when abroad. Random information, hopefully not all of it useless: • Interesting to see furniture company ScS Group come in with a positive comment this morning. It suggests that big ticket spending is alive and well. It says LfL order intake for the 25 weeks to 16 January is +8.8% and adds ‘this is a pleasing result against tough comparatives in the previous year. As a result the Group expects to report profits significantly ahead of current market expectations for the year ending July 2016’. • Rally attempted across most markets as UK indices bounced from levels below to August 2015 lows. • Oil price off the bottom but still flat with Iran coming back on the scene. Last trades around $29.30. Short term chart gives a degree more comfort than does any longer term picture. The rise is invisible over the longer term. • Gold rally, did you see it? Did you see it? It’s over now so no biggie – and the commodity is down by 16% over the last 12mths in any case • Soft commodities. Most prices lower. Outliers seem to be Soybean Meal (down 19% over the last year) and White Sugar, at plus 8%. Further retail comment – Nick Bubb:
• Next: Embarrassingly, Next has had to issue an announcement today to flag that it has “identified a procedural oversight in respect of the company’s processes for the payment of the special dividends…which have resulted in a technical infringement of the Companies Act 2006”. The footling issue appears to relate to a failure to file interim Accounts at Companies House, but Next is having to hold an EGM on Feb 10th to rectify the matter. Importantly, Next says that it “has no impact on the company’s intentions or ability to continue returning its surplus cash flow to shareholders via future Special Dividends or Share Buybacks. The company’s past Accounts will not need to be restated and no dividends are expected to be repaid”. The only remaining mystery is why the much-respected “Mr Share Buyback Man” has been sitting on his hands over the last • MySale: As major shareholders in this Australian-based Online “flash Sales” business, Philip Green and his friend Mike Ashley will be interested to see the reassuring MySale trading update today, flagging that, as expected, EBITDA swung back into a small profit in the first half (the 6 months to Dec 31st), after suffering a significant loss a year ago. The recovery is driven by the operations in South-East Asia, but MySale also highlight the improvement in the UK where “following a refinement to our operations, we are seeing the first signs of encouraging growth and performance”. Carl Jackson, the CEO, says that ”We carry strong momentum into the second half of the year in all areas of our business…The Board is confident the Group is on track to meet its expectations for the financial year as a whole and we will continue to invest to drive growth”. • British Land: Supermarket property investors will be interested to hear what British Land have to say in their Q3 update today, given their big involvement in the sector. But the only reference is under the heading of “Retail Recycling”, noting the disposal of £94m of superstores in the quarter, including Sainsbury’s in Islington. In terms of its Retail portfolio of shopping centres and retail parks, Chris Grigg, the CEO, says “Our operational performance was good, with outperformance on footfall particularly of note”, flagging that Retail footfall was up by 2.0% (+650bps versus the market) with Meadowhall +4.0% and that “Retailer same store sales” were up by 0.9%. • Today’s Press and News: The main focus today in the papers is on the news that Home Retail has confirmed that it has formally agreed to sell Homebase to Wesfarmers and it is widely noted that Wesfarmers is bullish about the UK DIY market and intends to change the name of the chain to Bunnings. The other main news is that Asda has launched a programme of big job cuts at its HQ in Leeds. The Times flags that Holland & Barrett has been accused of squeezing small businesses after it sent a letter to suppliers demanding contributions to its investment plan. And the lead story in the Daily Mail market report is that Amazon is considering launching a takeover bid for Ocado… We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance): 1. Revolution Bars updates on trading for 26wks to 26 Dec, says made ‘good progress with three new sites opened’. a. Revolution update: Says ‘trading results are expected to be in line with market expectations’. Says ‘we remain positive for the future’. b. Revolution reports LfL sales up 2.7% in 26wks to 26 Dec. Says total sales up 1.9% at £59.1m. Opens 3 bars in period. c. Revolution CEO McQuater reports ‘our new sites at Milton Keynes, Leeds and Nottingham have all started trading well.’ 2. Scottish Licensed Trade Association reports on Xmas. Survey of 600 outlets shows 39% in growth vs 25% growing in the summertime a. SLTA says 77% of outlets with accommodation, either grew their room occupancy or remained stable over Xmas / NY. b. SLTA reports countryside venues under pressure, says over 40% showed a decline at Xmas & New Year. 3. Fleurets has reported its take on 2015 saying that the year was one in which the recovery reached all parts of the UK as a whole a. Fleurets says ‘international security will undoubtedly continue to place a dark cloud across the wider UK economic + investment sentiment’ 4. Canadean’s latest Global Beer Trends report finds that Asia continues to record the highest consumption level, while Africa is grows fastest 5. Islamic State group-related attacks have led to an 8% fall in tourism to N Africa, despite an international growth trend of 4.4%. 6. The Hyatt hotel chain has admitted a number of UK hotels have been attacked by malware which stole guest credit card details last year 7. PE firm Equistone has taken a majority stake in 17-strong the Gaucho group believed to be worth north of £100m 8. Supermarket alcohol sales have tumbled in the UK this month as the ‘Dry January’ trend continues to gain traction with consumers 9. NHS chief exec Simon Stevens reports a sugar tax is set to be imposed in hospital shops, cafés and vending machines across England 10. Smashburger has secured its first UK site in Milton Keynes, set to open this Spring, has plans for 35. 11. China growth (at 6.9%) is now officially the slowest for 25yrs. China government has therefore marginally undershot its 7% target |
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