Langton Capital – 2016-07-25 – William Hill, Starbucks, post Brexit pessimism & other:
A Day in the Life:
Having just visited Las Vegas for the second time, Langton has decided that there won’t be a third because a more venal or soullessly commercial place it would be hard to imagine.
That’s not perhaps a shock to readers as Vegas is what it is. But not putting coffee making facilities in the room was the final straw after which the bill-padding and 47-degree-heat only served to confirm opinions already formed.
Anyway, on to Arizona, New Mexico to come.
For the record, Langton is currently on holiday so a shortened email will be going out for a little while. On to the news:
PUB, RESTAURANT & DRINKS PRODUCERS:
• JD Wetherspoon has announced that during its closed period, it will continue to repurchase and cancel its ordinary shares.
• Starbuck’s chairman and CEO, Howard Schultz, has blamed the coffee company’s Q3 earnings miss on a ‘profound weakening in consumer confidence’. US comparable sales growth fell from 8% in the same quarter last year to 4%, with Schultz citing a perfect storm of negative factors for the underperformance including uncertainty surrounding the presidential election, civil unrest and racial tensions, and concerns relating to terrorism.
• A survey of 800 restaurant and bar owners and directors by CGA Peach has described a feeling of pessimism in the industry following the EU referendum. The study finds that just 15% of owners are optimistic about the next six months compared to 75% at the start of the year, with many concerned about having to cut back on investment if consumers decide to eat out less. The result could also potentially lead to staffing problems in the hospitality industry, which relies on immigrants.
• The government’s housing survey shows a sharp increase in the number of first-time home buyers relying on their parents to get on the property ladder. Last year, 27% of first-time buyers relied on friends or family for help with a deposit, compared to 21% two decades ago. The total number of people buying has also fallen by a third in the last ten years, despite government programmes like Help to Buy.
• Figures from the Office for National Statistics show High Street spending fell by 0.9% month-on-month in June as wet weather took its toll. The data marks the sharpest drop in six months, and some analysts expect spending to drop further in the months ahead as consumer confidence is hit by the referendum result.
• Hydes Brewery has posted a 5.8% rise in Q1 like-for-like sales as the group builds on the strong momentum seen in a ‘transformational’ year to March 2016.
LEISURE TRAVEL & HOTELS:
• First Choice has revealed a more than 10,000 increase in the amount of web searches for all-inclusive holidays in the week following the Brexit vote. The poll of 1,416 people found that 60% of people feel a holiday is due following a high-tempered referendum debate, while more than 40% intend to avoid any news from home when on holiday.
• EasyJet passenger numbers rose 5.8% to 20.2 million in the three months to 30 June despite a ‘difficult and uncertain’ operating environment. Total revenue per seat fell by 7.7% to £54.54, while the airline’s revenue in the quarter dropped by 2.6% to £1.2bn.
• 888 Holdings and Rank Group are partnering up to make a bid for William Hill, although no formal offer has yet been put to the latter’s board. ‘The Consortium sees significant industrial logic in the combination, through consolidation of their complementary online and land-based operations, delivery of substantial revenue and cost synergies and from the anticipated benefits of economies of scale,’ 888 and Rank said in a joint statement.
FINANCE & MARKETS:
• The UK government borrowed £25.6bn in the three months to the end of June — £2.3bn less than last year and the lowest amount since 2008.
• New Chancellor of the Exchequer Philip Hammond has said that he may use the Autumn Statement to ‘reset’ the UK economy. Budget balancing had previously been a priority.
• Markit points to “dramatic deterioration” in economic activity in the UK post the Brexit vote. PMI fell to 47.7 implying a material contraction in activity.
• China, which exports grillions of pounds worth of product to the UK, has said that it would not wish to see tariffs imposed.
• The above story is being spun as a victory in ensuring open trade with a major world economic power
• Chancellor Philip Hmmond has said that the UK needs to “get on with” the process of leaving the EU. It is not clear who should be doing what. Despite pre-emptive statements such as that above, Mr Hammond is not due to update markets on his policies until after his holidays.
• On a brighter note, the Brexit-favouring Daily Telegraph has suggested that it remains ‘business as usual’ for most Britons
RETAIL NEWS WITH NICK BUBB:
• Saturday Press: Apart from the shocking massacre in a Munich shopping centre on Friday evening and the very weak PMI survey warning of a “dramatic deterioration” in the UK economy this month, the main focus in the Saturday papers was on the welcome news that the Cabinet Office is now officially reviewing whether Philip Green should keep his knighthood (“Now Sir Shifty’s one step closer to being stripped of his knighthood” trumpeted the headline in the Daily Mail). The FT, however, at the start of a detailed preview of Monday’s Select Committee report into the collapse of BHS, said that the MPs behind the report will pull back from calling for Philip Green to lose his knighthood, despite admonishing him for his role in the failure of BHS. The Business editorial in the Times compared Philip Green to the infamous Robert Maxwell, in terms of the impact
• Sunday Press: Tomorrow’s highly critical Select Committee report into the collapse of BHS was the big topic in the Sunday papers and the Sunday Times had a front-page exclusive story flagging that Philip Green will be “lashed” by MPs for using BHS to boost his personal fortune, together with a Business section lead story highlighting that the MPs will say that Philip Green damaged the reputation of British business with his BHS deal. The Sunday Telegraph also noted that the 110 page report is “highly damming” and the Sunday Express flagged that “no one is spared” in the report, with Philip Green’s advisers and Dominic Chappell’s Retail Acquisitions (RAL) consortium also coming in for heavy criticism. The Mail on Sunday highlighted that Philip Green has threatened RAL with legal action over the alleged misuse of £12m of BHS company
• Grocer Watch: The widely followed Grocer “33” weekly supermarket pricing survey in Saturday’s magazine saw Asda win for the third week in a row, but it was a closely run thing, with just 4p separating them from Tesco. Asda’s £59.86 basket was also only 2.6% cheaper than Sainsbury’s and 4% cheaper than Morrison’s, although they were 17% cheaper than poor old Waitrose…There was less good news for Asda in the separate Grocer “Mystery Shopper” weekly survey on Store Service and Availability, as its store in affluent Clayton-le-Woods in Lancashire came bottom of the survey, with a score of only 62 out of 100, thanks to poor stock availability. The 35,00 sq ft Morrisons store in Bedford topped the rankings, with a score of 84.
• News Flow This Week: The last week in July has seen the Property sector reporting season continue with the Hammerson interims and tomorrow brings the Capital and Counties (CapCo) interims, with the Intu Properties interims on Thursday. Tomorrow morning also brings the latest Kantar/Nielsen monthly grocery market share data, whilst the Apple Q3 will be out in the US tomorrow evening. On Wednesday we get the McColl’s interims and the CBI Distributive Trades Survey for “July”, then Thursday brings the Inchcape interims, with the widely-followed GFK Consumer Confidence Index following first thing on Friday.