Langton Capital – 2016-09-02 – Consumer spending, Tim Horton’s, Brakspear & other:
A Day in the Life:
So whilst we’re down to zero chickens at the moment – fox activity, don’t ask – we seem to be up to around 20 Cayuga ducks courtesy of a burst of breeding that took place when we forgot to collect the eggs for a week and subsequently couldn’t get near them for fear of being attacked by a couple of hissing, spitting, really rather unpleasant would-be mother fowl.
And this is leading to something of a problem as I would swear that the not-so-little blighters now eat more than their own body-weight in corn every day in addition to which they’re wolfing down table scraps like there’s no tomorrow.
All of which is upsetting the dog who, quite naturally, believes that anything remaining on the table after the humans have left belongs to him and who hates, with a passionate vengeance, to see food go to any four-legged or feathered animal other than himself.
Hence, Crispy I, II and II, Fried I, II and III, Roast I, II and III etc. may be finding out shortly whey they were so-named as I’ve been told we have to have ‘fewer ducks’. And, whilst I’m not too keen on the few minutes that come between the duck pond and the oven, the dog is and influential family members are egging me on and I should keep it in perspective. I’ll be much less bothered about it than they will be.
Duck for tea, anyone? On to the news:
PUB, RESTAURANT & DRINKS PRODUCERS:
• Asda income tracker reports families have seen a 1.9% increase in earnings since July 2015. It says disposable income has reached an average of £202 per week
• Asda says ‘growth in spending power has slowed as essential item inflation increased to 0.1%’. It adds the ‘highest-earning households took home 10 times more than the lowest income households in July 2016’ saying ‘the wealthiest household’s earnings have grown almost eight times faster than that of lower income households.’
• Asda says ‘UK families had £10 more disposable income in their pocket compared to the same time last year.’ It says ‘the average disposable income for UK households reached £202 a week, an increase of 5.4% compared to July 2015.’ The group concludes ‘while the latest figures mark the 21st consecutive month of a double-digit rise in spending power, the data indicates that growth has slowed to its lowest rate since October 2014. This decline has been driven by a rise in essential item inflation (0.1%) and a slowdown in wage growth.’
• Canadian coffee shop chain Tim Hortons has signalled that it wishes to expand into the UK. The group has now established a master franchise joint venture in this country. Restaurant Brands International quotes the company as saying ‘this deal is part of our growth plan to take the iconic Tim Hortons brand around the world. Great Britain is an attractive market with a strong and growing coffee culture so it is a natural fit for the brand.’ Gurprit Dhaliwal, the CEO of the joint venture company, says ‘we are thrilled to introduce the iconic Tim Hortons brand and Canada’s favourite coffee to Great Britain. Our guests in England, Scotland and Wales are sure to be delighted with our focus on delivering great products and an exceptional guest experience.’
• Punch is to extend its trial with Just Eat per the MCA.
• Brakspear has reported ‘strong results for 2015’ saying that turnover for the year to end-Dec rose by around 13% to £22.4m.
• Brakspear reports operating profit +6.9% at £6.9m and PBT up by 26% pre-exceptionals to £5.3m.
• Brakspear reports growth in its managed house business (turnover up around 58%) and 2% growth in its tenanted & leased units. Chief executive Tom Davies said, ‘2015 really was a fantastic year for Brakspear. Investment in the managed division’s people and infrastructure enabled us to make a big step forward with this side of our business, adding two sites, each with rooms, and transferring across a previously tenanted site.’ He goes on to report ‘at the same time, we continued to see a step change in the quality of our tenanted and leased pubs and the operators who make them successful, as a result of our investment in design, marketing, training and tenant recruitment over recent years.’ Mr Davies concludes ‘our results for 2015 demonstrate that considered investment in acquisitions and pub development and refurbishment benefits the Brakspear
• Stonegate boss Simon Longbottom is reported by Propel as saying that his company could add ‘hundreds’ more sites in a fragmented market. He says ‘TCG is an interesting case study – there wasn’t really any competition to buy the business. This is still a very fragmented part of the sector and there are plenty of opportunities – there is an opportunity to grow by hundreds of sites. We look carefully at every potential acquisition and there are constantly four or five things (under consideration).’
• From the property owners’ point of view, L&G has reported that it now has 5 new Five Guys restaurants across its estate
• An improved performance in the USA and Spain helped grow Pernod Ricard’s annual sales by 2% to €8.68bn, in what the group labelled a ‘solid and encouraging year’. A 9% fall in China held back sales across Asia, although this was mediated by strong increases in India (+12%), Africa, the Middle East, Japan, and Australia. Brazil also performed well, with sales up 5% despite the country’s current political and economic turmoil, while net sales in Europe, which accounts for about a third of the group’s total sales, fell 1% to €2.71bn.
• CGA Strategy and MatchPint data shows that 80% of publicans think Premier League games shown on Sky have a very positive effect on sales.
• Kornicis will launch its new brand, We Are Bar, at the end of September with the conversion of Jamie’s wine bar on Bishopsgate the first of at least five. Speaking to MCA, Richard Stringer revealed that the next two conversions are expected in early 2017 at which point the 16-strong group will look to buy new sites.
• South Africa-based Famous Brands has bought the 75-strong Gourmet Burger Kitchen and intends to double the burger chain’s footprint within the next five years. GBK chief executive Alasdair Murdoch said of the change: ‘GBK has grown rapidly, and has had continuous like for like sales growth, but at its heart GBK is much more than that. It’s based on fantastic restaurant teams and critically, a continuous journey towards excellence in our food. We like to call it real burger obsession! Our aims remain the same; to continue opening 10-15 restaurants a year in the UK’.
• The Drinks Industry Group of Ireland has called for the reduction of duty on beer, which is currently around ten times higher than the likes of Spain and Germany.
• Carlsberg UK is increasing its investment in Poretti (4.8% ABV), the Italian lager brand brewed in Varese on the outskirts of Milan.
• China is on the cusp of surpassing the US for imports of Australian wine, which is gaining popularity across a growing middle class in the country. According to IBISWorld analyst Andrew Ledovskikh China is now expected to account for a quarter of all Australian wine, and figures released by industry body Wine Australia support this, showing that exports to mainland China grew by 50% to AUS$419m in 2015/16 thanks to a free-trade agreement between China and Australia.
• Walmart is planning to cut 7,000 back office and accounting jobs in its US stores as part of its plan to get more workers front of store to interact with customers.
LEISURE TRAVEL & HOTELS:
• All Leisure Holidays has sold specialist operator Discover Egypt as part of a management buyout.
• Younger Brits are ‘more likely to consult a travel agent’, according to a survey of 1,300 UK adults by consumer research firm TNS for Travel Weekly.
• British Airways is reducing the number of business-only London City to New York flights by half from next month.
• Google has launched a new ride sharing service via Waze app to connect riders but it is not competing directly with Uber and Lyft.
• Australian gym operator F45 Training is aiming to open 50 studios across the UK this year following the success of its debut UK branch at London Bridge. ‘Given the rapid growth we’ve experienced around the world, we expect the franchise to perform exceptionally well in the UK too,’ said Luke Armstrong, global franchise director at F45. ‘People are time-poor, but they still want to have a great workout with support and encouragement from a fitness professional. This is F45 Training’s point of difference.’
FINANCE & MARKETS:
• Job-finding company Hays has said that the UK job market weakened “significantly” around the 23 June Brexit vote. It says, however, that it is too early to conclude the long-term impact of the vote.
• Sterling jumped yesterday on the back of strong manufacturing data.
• August manufacturing PMI rose from 48.3 to 53.3. Lower Sterling is thought to have boosted activity. Costs, which will be partly denominated in Euros and US$s, may also be rising.
• US Labor Dept has reported that unit labour costs rose by 4.3% in the country suggesting that productivity is slipping
• The number of Americans filing for unemployment benefits rose by 2,000 to 263,000 in the last week
• US non-farm payroll numbers are to be reported later today
• US carmakers have reported a fall in sales during August after a strong July.
YESTERDAY IN A NUTSHELL – SELECTION OF TWEETS, LIVE TWEETS ON WEBSITE:
• Punch is testing out its new Village Pub & Kitchen concept in its Falcon division, which helps to create village-based community pubs
• Steinhoff has warned that the drop in the pound since the Brexit vote could result in an ‘unfavourable effect when translating our businesses’ earnings reported in euro’
• Boss of 888 has ruled out a tie-up with Rank Group in the wake of its failed £3.4bn bid for William Hill
• Paper in scientific journal suggests that moderate drinking can help combat inflammation, cardiovascular diseases and frailty.
• Brown-Forman Q1 like-for-like net sales excluding excise taxes rose 2% and operating profit grew 6% on an underlying basis
• Drake & Morgan will convert two Corney & Barrow sites to its own brands by the end of the year, writes MCA
• Fast-growing US-based MOD Pizza expects to open another four sites in the UK this year after opening its first in Leeds in May
• GfK’s Consumer Confidence Survey shows consumer confidence improved in August by five points to -7, although consumer saving fell
• Cox and Kings has posted an 11% increase in revenues to £79.5m and a 9% rise in EBITDA to £40.5m for Q1 to end-June
• Gala Coral yesterday released its results for the 12wks to 2 July saying that net revenue rose by 10% to £264m
• Search for yield leads to property bubbles. Nationwide has reported a “slight pick-up” in house price growth in August
• Eurozone inflation came in below expectations at 0.2% for the year to July, unchanged on the year to June
• Outgoing US president Barack Obama is to urge world leaders to use fiscal policy to boost their respective economies
• Other Tweets: Oil down, copper down, oils & miners down. No surprise. Weak soft commodities continue to signal low/negative inflation
• Restaurant Group. Anaemic bounce after 2dy 12% drop. Shares moving from the ‘tell me’ to the ‘show me’ phase re intended recovery
• Recent director buys at RTN met with share price fall. Shows both a) insider support but also b) some concerns re turnaround execution
• Pendragon to leave FTSE250 as big-ticket spending trends seem to differ between houses versus motor cars. Former buoyed by search for yield?
• Punch testing new concepts, not least full-on managed. Debt down, gets a B+, more work to do but direction of travel inspires some hope
• Search for yield, property bubbles, Nationwide prices up despite economic fears…Tell me, what happens when rates go up…?
RETAIL NEWS WITH NICK BUBB:
• ASOS: When we saw the headline of the surprise announcement this morning that “ASOS settles trade mark disputes”, we thought this was something that had gone in ASOS’s favour, but it is actually the other way round and the settlement cost is not insubstantial, at £20.2m in cash. We must confess that we hadn’t heard of the trade mark infringement disputes with the high-performance cycle wear manufacturer Assos of Switzerland (“Assos”) and the German menswear retailer, Anson’s (“Anson’s”) and the fact that management are holding a conference call at 8am implies that a few other analysts were in the dark as well…
• BDO High Street Sales Tracker: We flagged on Wednesday that the Fashion component of the BDO index of weekly non-food sales in small/medium-sized chains was rumoured to be pretty dire for last week and so it was, with LFL Store sales down by as much as 9.6% in w/e Aug 28th (despite a weak comp), with the hot weather stifling footfall and interest in autumn fashions. Online Fashion sales were also weak, with total Non-Store sales only up by 12.6% overall.
• News Flow Next Week: The pace of news flow picks up next week, beginning with the Topps Tiles pre-close update on Monday. The BRC-KPMG Retail Sales for August are then out first thing on Tuesday, followed by the Halfords update. On Wednesday, the Joules finals are going to be massively overshadowed by the Sports Direct AGM/Open Day and the Poundland AGM/EGM on the Steinhoff bid. Thursday then brings the Dixons Carphone Q1.
• Trade Press: It’s the turn of Retail Week magazine not to be published today, after the Bank Holiday, but Drapers magazine has stepped up to the plate and its front cover is a photo of the boss of the Danish indie brand favourite Masai. And Drapers’ mystery shoppers put the High Street’s “click-and-collect” fashion delivery services to the test, in a special version of its renowned “Hit or Miss” surveys, with House of Fraser coming top with an excellent score of 9.5 out of 10, whilst John Lewis scored 8 and Debenhams scored 7.5 (M&S and Next both got 7 marks). In terms of news stories, Drapers led with the news that the August Bank Holiday weekend fell flat for fashion multiples, as warm weather and flash promotions across the High Street failed to tempt shoppers into stores.