A Day in the Life:

So was it a good summer?

The sport and bad weather disrupted bits of June & July but August, according to the Met people, was warmer than average, particularly the second half of the month.

And that should have led to increased demand to use the hospitality industry’s beer gardens (in addition to helping the general retailers shift summer stock – see Nick Bubb yesterday) but it will have been less helpful for the country’s restaurants and indoor attractions. See our comments on the latest BRC stats below.

We’ll have to wait until the 20s of the month to see the Coffer Peach Tracker for August (the Bank Holiday weekend stats should make interesting reading – it was tipping it down for part of the time up north but good overall) but we’re hearing from JD Wetherspoon on Friday (full year numbers) and Greene King hosts its AGM on the same day.

As we didn’t have anything remotely like a good summer last year, comps should be soft. August should look good but, as we mentioned at the time of the Brexit vote in June, September could be the first ‘normal’ month for some time. It might give us a better idea as to how things are settling down (if indeed they are). On to the news:

The News:

PUB, RESTAURANT & DRINKS PRODUCERS:

• BRC reports sluggish spending in August slackened on the High Street but concedes it maybe remained strong for pubs & restaurants. The latest British Retail Consortium/KPMG sales data suggests that High Street spending fell by 0.9% in August compared with a year ago saying that women’s clothing did particularly badly. It says that food spending held up well as did demand for picnic and BBQ supplies.

• BRC says the warm weather & Olympics directed spending ‘towards leisure and outdoor activities rather than shopping’. KPMG, however, reports that the August data paints a ‘disappointing picture given previous signs of encouragement’. It may be September until we get some sort of idea as to what is really going on.

• Tasty has today reported H1 numbers for the 27wks to 3 July. Sales +28% at £21.8m, adj. PBT +17.5% at £1.6m but reported loss of £2.3m on impairment charges for 5 sites.

• Tasty: Reports has opened 4 sites in H1 with 3 more open since period end. Total sites now 55 units. Chairman Keith Lassman reports ‘the Group has successfully implemented its programme of operational improvements during the period.’ He adds that it has ‘undertaken a comprehensive review of its estate during the period and has recognised impairment charges against five sites.’ However, ‘aside from these units, trade remains in line with expectations across the wider estate and the Group is benefitting from a number of cost savings which are offsetting pressures on direct input costs.’

• Tasty on current trading. Says ‘the Group continues to expand its operations through new openings. Actions are regularly taken to improve profitability at all sites, increasing sales through updated menus and improving food and labour margins.’ Tasty will continue ‘evaluate new sites for further acquisitions.’

• The Markit/CIPS purchasing managers’ index (PMI) shows UK services rebounded from 47.4 to 52.9 in August, posting its strongest month-on-month gain in the survey’s history. The jump takes services, which accounts for nearly 80% of the UK’s economy, back to pre-referendum levels and adds to the hope (alongside a recovery in manufacturing and construction data) that the country will avoid a technical recession.

• ‘A record rise in the services PMI adds to the encouraging news seen in the manufacturing and construction sectors in August to suggest that an imminent recession will be avoided,’ Markit chief economist Chris Williamson said, but added that while ‘many companies are seeing business return to normal, either simply by customer confidence rising or a stoic determination to “Buck Brexit” and carry on regardless, it is still too early to call the “start of a sustained post-shock recovery.”’

• Inflation post Brexit vote? Markit reports that the latest PMI data ‘signalled rising inflationary pressure linked to the weak pound.’

• Markit reports ‘new business growth was weaker than the long-run survey trend, but sufficiently strong to generate a rise in outstanding work at service providers for the first time in five months. Job creation in the service sector resumed in August following a pause in July. That said, the rate of workforce growth was weak.’

• Markit reports ‘input price inflation accelerated to a 33-month record in August, linked to the weak pound and  rising fuel and labour costs. Subsequently, service providers raised their own prices at the sharpest rate since January 2014.’

• The Coaching Inn Group is benefitting from the introduction of its new central reservations system, which has helped to drive a 60% increase in operating profit. Accommodation sales have risen by 10% in the first six months, and like-for-likes were up by 14% in July and 22% in August.

• Marston’s premium division, Revere pub company, is to open its third Lost & Found bar in Knutsford on the 29 September, following on from openings in Birmingham and Leeds.

• BBPA calls for ‘period of stability’ concerning review of 2003 Licensing Act. A House of Lords Select Committee is looking into the Act, may propose changes. The BBPA is proposing ‘a moratorium on further legislative change during the current Parliament’ and it highlights ‘the scale and number of changes to the Act since its introduction, and calls for a period of greater stability.’

• The inclination to tinker in such a high profile industry, one that touches the lives of many people (a.k.a. voters) is almost irresistible to politicians. Nonetheless, BBPA CEO Brigid Simmonds comments ‘pubs sustain over 800,000 jobs, and the sector is constantly adapting to changing consumer tastes, and playing a vital role in local communities and in the high street. Yet the sector is very heavily regulated, adding greatly to the cost of doing business. The Act has been very far from the free-for-all, 24-hour drinking that we often read about. In reality we have seen a declining number of pubs, and a greater need that ever to tackle the high cost of tax and regulation, to keep pubs thriving. We now need a period of stability in the licensing regime, and a focus on reducing the cost and burden of enforcement.’

• The ALMR has said that it too will give evidence before a House of Lords Select Committee inquiry into the Licensed Act 2003 on 18 October. CEO Kate Nicholls said ‘the 2003 Licensing Act has been a powerful catalyst for innovation across the licensed hospitality sector. The Act sought to provide freedom and flexibility for pubs and bars and it has allowed businesses to present a food and drink offer which attracts a broader range of the public at different times during the day, evening and into the night.’ She concludes ‘however, successive reforms since its implementation have added new controls and powers which are in danger of undermining the original objectives of the Act and ignoring the benefits of the successful partnerships we have built with communities.’

• Licensing solicitors Poppleston Allen have suggested that the Cheltenham Late Night Levy may be scrapped. It was introduced in 2014 and applies to premises licensed to supply alcohol between midnight & 6am. The proposed date for cessation is 31 March next year.

• Yummy Pub Co has reiterated that it is dog-friendly. Its pubs are registered on dogbuddy.com and it will be taking part in the dog-friendly Pub Awards.

• The British Retail Consortium (BRC) Neilsen Shop Price Index showed food prices fell by a record 1.1% in August, compounding 0.8% falls in the previous two months. Supermarket price wars continue to drive the deflation, although the weakened pound could push prices up in the coming month. The index showed that overall shop prices reported deflation of 2% in August, compared to a 1.6% decline in July.

• London Cocktail Week 2016 will be running from 3-9 October and will include a New Orleans-inspired Southern Comfort Chicken Shop pop-up in Spitalfields. The Buffalo Bourbon Empire pop-up bar returns, located this year at Hackney House, while Langley’s Gin will also be providing £5 cocktails.

LEISURE TRAVEL & HOTELS:

• A blockade of Calais by lorry drivers and farmers in protest against the Jungle migrant camp has led the FCO to warn of ‘significant disruption’.

• IAG group traffic rose by 7.9% in August year-on-year and capacity increased by 9%, while premium traffic grew by 3.4% pro-forma.

• The main runway at Gatwick airport has reopened after being shut as a ‘precautionary measure’ upon the discovery of a hole. Experts have blamed warm weather and an increase in the number of flights over the summer.

FINANCE & MARKETS:

• The pound is at around 7wk highs. However, it gave back some of its gains following the strong Markit PMI data to settle at $1.3329, up 0.2%.

• The drop in the pound post-referendum has led to an influx of foreign investment into London’s property market.

• Oil bounced to around $47.75 per barrel.

• World markets: UK mixed but Europe mostly lower yesterday. US closed for Labor Day. Far East higher in Tuesday trade

YESTERDAY IN A NUTSHELL – SELECTION OF TWEETS, LIVE TWEETS ON WEBSITE:

• Alibaba affiliates Primavera Capital and Ant Financial are preparing to buy a $460m stake in Yum China

• Yo! Sushi could change its name as part of a brand overhaul to better represent the breadth of its menu.

• Morrison’s is thought likely to cut prices on 160 everyday essentials this week. This may ‘ignite a price war’

• The price of French wine is expected to rise following 10% fall in this year’s grape production, driven by adverse weather

• Survey of 200 top employers by Association of Graduate Recruiters suggests number of jobs for new graduates down by 8% in a year

• Terrorism, health concerns, and political trouble will affect families’ choice of holiday destination in 2017 per FamilyBreakFinder

• US hotel industry saw occupancy grow 4.3% to 67.5% in the week to 27 August. Rate +4.2% & RevPAR +8.7% to $81.85

• Jet2.com has entered a major recruitment drive to add c1,000 new staff in the UK to fill its pilot, cabin crew & engineering roles

• US jobs growth slowed in August. Official data has 151k jobs created in the month, down from (upwardly revised) 275k in July.

• UK construction industry picked up in August after June & July slowdown. PMI moves to 49.2 from 45.9 a month ago

• UK pension deficits rose by £100bn last month to around £710bn. This on the back of further falls in medium term gilt rates

• Other tweets: Soft commodity prices weak. Corn, wheat, soy prices on the floor. Red meat (feeder cattle) prices down by 33% over last 12mths

• Sluggish US jobs growth means Dec is firm favourite for rate rise. Chance of Sept rise now next to zero. Famous last words?

• UK companies now reporting good numbers courtesy of weak pound export boost. Just in time for the pound to strengthen…

• Planalytics: August 1 degree above average, 2nd half of month 2 degrees warmer. That’s material. Should have helped beer gardens

RETAIL NEWS WITH NICK BUBB:

• Sports Direct: As promised, the so-called “independent” report on working practices at Sports Direct undertaken by the law firm RPC has been published this morning, ahead of tomorrow’s AGM and appears to show that the Board is committed to improving things over the next 12 months: “In light of the Report today, the Board announces that it has requested RPC to lead a further comprehensive review of working practices that will use this Report as a benchmark to identify what further action is required and to monitor steps already undertaken”. The full Report, which apparently contains inside information (!), has been published on the company’s website at: www.sportsdirectplc.com/investor-relations/reports-and-presentations/rp-2016.aspx

• BRC-KPMG Retail Sales for August (4 weeks to Aug 27th): We flagged yesterday that this should have shown weak Non-Food sales and strong Food sales, given the hot weather, and that was certainly the case, but we didn’t expect the overall net outcome to be as bad as -0.9% LFL (from +1.1% in July). The Food Retail category was actually in second position in the sub-sector growth rankings table, its highest place since July 2013, implying decent LFL sales growth, so Non-Food was even more negative than expected, with Clothing and Footwear propping up the sub-sector table. And although Online Non-Food sales growth slowed to only 6.2% overall, disappointingly, that meant that Stores Non-Food LFL sales were heavily down…

• Halfords: Today’s quarterly update from Halfords only covers the last 7 weeks trading, in effect, but the period appears to have gone well, pushing cumulative LFL sales up by 1.2% over the last 20 weeks, with the company flagging “Strong Cycling sales during late July and August, helped by new ranges and a deeper promotion, which more than offset the slower sales earlier in the year” (don’t mention the hot weather!). The new CEO Jill MacDonald expands on this by saying “Good growth in Cycling sales during the peak summer period was supported by new ranges, strong promotional activity, good weather and the success of Halfords’ Olympic cycling heroes” and also trumpets good progress on the customer database initiative (“we can now match 25% of our Retail sales to specific customers compared to only 3% last year”).