A Day in the Life:

Langton has been bumping around Northern Arizona. It’s just checked out Bearizona and very good it was too. A shortened email will be going out for a little while. On to the news:

The News:

MARSTON’S – Q3 TRADING UPDATE:

• Marston’s has updated on Q3 and 43wk trading for the period to 23 July 2016.

• The group says ‘we have continued to make progress in line with our expectations.’

• Marston’s sees Destination and Premium LfL sales growth for the 42wks +2.5%

• In the most recent 16wks, LfL sales were +1.8% ‘despite the anticipated adverse impact of the Euro 2016 football tournament on these predominantly food-led pubs’

• Group says ‘we remain on track to meet our growth targets for 22 pub restaurants and bars in the current financial year in addition to six lodges.’

• In Taverns, MARS has seen LfL sales for the 42 week period +2.8% with the last 16wks +2.5%. The group says ‘Euro 2016 has contributed to this continuing strong performance and helped to offset mixed weather.’

• In leased units, profits for the 42wk period are +2%

• In brewing, own-brewed beer volumes were up +14% compared to last year.

• The group says ‘net debt and cash flow are in line with expectations.’

• Group CEO Ralph Findlay reports ‘we continue to be encouraged by our performance. As expected, Euro 2016 was broadly neutral for the Group as a whole and we have continued to maintain our market outperformance by focusing on offering our customers great experiences and value in modern pubs and bars.  In Brewing, we are growing in an attractive market, demonstrating the effectiveness of our new product development and the appeal of our brand portfolio, underpinned by industry-leading service.’

• Mr Findlay concludes ‘although much has been written about the potential effect of Brexit on consumer confidence, we have not seen any discernible impact on trading to date. We believe that our focus on value and affordable treats is appropriate for current market conditions, and while we remain ever mindful of the risks to long term business confidence, it continues to be our intention to develop and implement our proven growth strategy.’

MITCHELLS & BUTLERS – Q3 TRADING UPDATE:

• M&B has updated on Q3 trading saying ‘sales since the half year have been more encouraging.’

• M&B says ‘poor weather in June and Euro 2016 have had an expected adverse impact but we are pleased to see an improving trend, supported by our accelerated investment strategy. Recently invested sites continue to grow sales in excess of 10% in the year post-investment.’

• The group has seen total sales in the first 43wks of the current year fall by 1.3%.

• LfL sales are down by 1.3% in the 43wks to 23 July with a fall of 0.7% in the 15wks to 23 July

• M&B says ‘as previously highlighted, margins in the second half are expected to be lower than last year, due particularly to the introduction of the National Living Wage in April.’

• Regarding re-branding and investment, M&B comments ‘so far this financial year we have converted or remodelled 232 sites, and opened 5 new sites. We expect to have increased our investment programme to complete around 250 conversions and remodels in the full year.’

• Phil Urban, CEO, comments ‘underlying trading has improved in recent months, particularly when taking into account the negative impact of Euro 2016 and the wet weather seen in June.’

• Mr Urban continues ‘this reflects the good progress we are making across our three priority areas: to rebalance the business, to instil a commercial culture and to increase the pace of execution and innovation.’

• Concluding, Mr Urban says ‘clearly there is some economic uncertainty ahead following the result of the EU referendum last month, with potential implications for consumer demand.’ He says ‘we are monitoring developments closely, but remain confident that our previously outlined strategy, based on a strong freehold estate and brand portfolio, remains appropriate to deliver long-term sustainable shareholder value.’

PUB, RESTAURANT & DRINKS PRODUCERS:

• McDonald’s misses estimates. Shares of rival restaurant operators fall on slowdown fears.

• McDonald’s Corp has announced Q2 numbers saying ‘our second quarter performance, which marks our fourth consecutive quarter of positive comparable sales across all business segments, provides a clear indication that customers are responding to the steps we’re taking to deliver the menu and value options they want at the convenience of McDonald’s.’

• McDonald’s boss Steve Eaterbrook reports ‘we’re making steady progress on transforming our business to satisfy the needs of our customers around the world, despite a challenging environment in several key markets.’

• McDonald’s Q2 LfL sales rose by 3.1%. It reports ‘due to the impact of refranchising, consolidated revenues decreased 4%’. The fall was only 1% in constant currencies.

• McDonald’s US sales rose by 1.8% LfL in Q2 ‘with continued contributions from All Day Breakfast and McPick despite softening industry growth during the quarter.’ Internationally, the UK, Canada & Australia performed strongly.

• Domino’s Pizza is to open a number of sit-down restaurants in the UK. The group was granted planning permission to open in Maidstone in April & has now put in applications for similar units in Hull and Dundee

• Greene King is reported set to rollout out a new concept called Beer & Meat across a number of sites in its Locals division.

• AB InBev has revised its offer for SABMiller up by £1 a share, raising the deal’s value from £70bn to £79bn, in response to the drop in value of sterling.

• The Famous Grouse owner Edrington has posted a £7m fall in profit for the year to 31 March to £72.7m due to difficult trading conditions. The spirits producer attributed a 13.2% fall in pre-tax profit to the ‘adverse impact of both currency and intense competitor activity in Taiwan and the UK’ and ‘continued political and economic volatility’.

• Fever-Tree has posted a 72% rise in adjusted EBITDA to £12.4m on revenue of £40.6m for the first half to 30 June, with diluted EPS up 83% to 8.12p.

• Castle Rock Brewery profit before tax for the year to end March rose 38.4% to £319,722, although competition remains ‘fierce’.

• BrewDog has announced the launch of a new ‘live’ key-keg version of its Dead Pony Club ale.

• Amazon is partnering with the British government to speed up the process for allowing small drones to deliver packages.

LEISURE TRAVEL & HOTELS:

• On the Beach has updated on trading saying it is ‘on track to achieve profitability for the financial year in line with the Board’s expectations.’ The group says, however, ‘since the Group’s Interim Results on 19 May 2016, there have been a number of external events affecting consumer confidence.’ It names terrorism, administrations of competitors and uncertainty.

• On the Beach expects a weaker Lates market. It says ‘we are now expect a weaker outcome in this segment, resulting in significantly fewer consumers travelling this year.’ The group says ‘additionally the supply / demand imbalance has led to widespread discounting of seat only and packages by some market participants, in many cases below cost, and this has driven short term share gains for those with distressed capacity.’ CEO Simon Cooper says ‘whilst revenue growth will be below our original plans as a result of market conditions, we have continued to outperform the market, stealing significant share. Our focus on profitable sales and cash margins will deliver a PBT outcome in line with the Board’s expectations at the beginning of the financial year, which represents very strong double digit growth over last year.’

• EasyHotel has reported that a new franchise hotel is under development in Bernkastel-Kues, Germany. This will add a further 100 rooms to the estate by the end of December 2017. Guy Parsons, Chief Executive Officer, reports ‘we are delighted to be working with a new partner to increase the easyHotel network and enhance brand awareness.’ He says ‘we continue to believe there is significant opportunity for further franchise hotels expansion in Europe and the Middle East, enabling us to leverage our brand presence without direct capital investment.’

• The owner of London’s Luton airport, Spanish operator Aena, has said that it expects that the 23 June Brexit vote will have only a limited and short-term impact on demand from UK passengers.

• A survey shows around 86% of Americans are concerned about terrorist attacks occurring while on holiday in certain regions around the world.

• Research from the European trade association of hotels, based on responses from 2,000 hoteliers, shows nearly one in four bookings are now generated through an OTA.

• European hotels had a positive second quarter.

• Begbies Traynor says the UK’s inbound travel industry could be one of the first areas of the economy to benefit from leaving the European Union.

OTHER LEISURE:

• Ladbrokes and Gala Coral must sell between 350 and 400 shops if their £2.3bn merger is to be cleared by the Competition and Markets Authority.

• Twitter has reported revenues in Q2 up by 20%, its slowest rate of growth in 3yrs. The group’s shares fell over 9% in after-hours trading.

FINANCE & MARKETS:

• The oil price has bounced from 3mth lows of around $43.10 per barrel. The fall was on the back of oversupply concerns. Brent crude is currently trading around $44.80 per barrel

• John Vincent, co-founder of Leon Restaurants, has told The Mail on Sunday that he had a ‘very demoralised team who think they are not welcome in Britain any more’ post the 23 June Brexit vote.

RETAIL NEWS WITH NICK BUBB:

• CapCo: Having noted yesterday, in passing, that Capital and Counties (CapCo) had reported in its interim results that its big Earls Court housing development had fallen in value at June 30th, we were asked what was behind the fall and the answer is “At Earls Court, the downward move in property valuations reflects the valuers’ assessment of the weakened sentiment in the central London residential market following the EU Referendum”, mainly through reducing sales values. The valuation of Earls Court Properties is now £1.2 billion, a hefty decrease of 14.3% since Dec 31st. The shares fell by 5.3% on the news…

• Grocery Market Share Watch: We noted yesterday that the City is always much more interested in the last 4 weeks sales figures from Kantar (rather than the 12 week cumulative data), even though the 4 week figures are not statistically as robust. And, interestingly, Kantar were not as gloomy as their great rival  Nielsen about the impact of the wet and cool weather on industry sales during the four weeks ended 16 July: Nielsen said sales were down by 2.4% year-on-year ago in that period, but Kantar said that in the 4 weeks to 17 July sales declined by only 0.7%. Kantar also noted that the growth of the discounters continued to slow, with the combined growth of Aldi and Lidl below 10% (at 9.7%), for the first time since 2010. In terms of the “Big 4”, Asda remained very weak, with sales down by as much as 7.1%, whilst Sainsbury was a bit disappointing, with sales falling
back by 3.0% and Tesco (down 1.8%) and Morrisons (down 1.4%) were much as expected. The recent heatwave will have got the next 4 week period, to August 14th, off to a great start for everybody in the industry, if Waitrose is any guide (see below)…

• John Lewis Partnership Sales Watch: As we flagged last week, no doubt some bright spark will see the 4.3% fall in sales (over 6% down LFL) at the great Retail bellwether John Lewis last week (w/e July 23rd) as the first sign of a post-Brexit slump, but the truth is that it was simply caused by the impact of the very hot weather on store footfall. Interestingly, Electricals sales finished the week up by 6.4% in gross terms, thanks to over 3000% growth in sales of home cooling products such as fans and air conditioning units! The Pokémon GO phenomenon also bolstered the category, with sales of portable mobile chargers up by 86% as players sought a way to combat the app’s high battery usage! The heatwave had a bigger impact on the Fashion and Home departments, which finished down by 7.0% and 11.2% respectively, as customers chose to make the most of the British summer. Over the
last 25 weeks John Lewis sales are now running up by 4.8% (a bit over 3% up LFL), with Electricals up by 8.3%. But the warm weather was a boon for John Lewis’s sister company, Waitrose, which saw gross sales up by 7.2% (c5% up LFL), “as customers stocked up on products to help them cool off in the heat”, with bumper sales of icecream and Pimms! Waitrose sales over the last 25 weeks are up by 2.5% gross (broadly flat LFL).