Aug Tracker has spend up but picture mixed…

A DAY IN THE LIFE:

So I know it’s hot but, just as the sun’s making its first appearance, it has to be said that it feels like autumn out there.

Firstly, it’s not light yet and then there’s the mist rolling in from the fields and the vague smell of rotten fruit, unpicked plums and the like in the air and we’re only a fortnight from Michaelmas, the day that St Michael is meant to have fallen into a bramble bush after which he spat at it and cursed it and caused brambles (and all soft fruit, really) to wither and die so there’s a feeling of inevitability about it, winter is coming.

Let’s just hope it doesn’t spread to the wider economy because there, with the Coffer Peach Tracker saying everything’s on track because LfL sales are still rising at 0.6%, we need all the help that we can get. On to the news:

RECENT WEBSITE ARTICLES:

• Summer trading – here

• Over-expansion issues – here

• Email, tweets etc. – here

PUB, RESTAURANT & DRINKS PRODUCERS:

• Coffer Peach Tracker suggests ‘Britain enjoys the summer by still eating and drinking out’. Says ‘overall LfL sales were +0.6% on Aug 15.

• Tracker says good weather saw pubs (+1.2%) out-performing restaurants (down 0.4%) during August.

• Tracker: Says UK ‘is not giving up on going out to eat and drink in the wake of the Brexit vote.’ Peach’s Peter Martin reports ‘pub groups had the best of the month’s trading, with like-for-likes up 1.2% against a 0.4% decline among casual dining chains, with drink-led businesses doing best of all.’ This was largely down to the weather, suggests Martin.

• Tracker: Says ‘the reassuring thing is that overall business was marginally up on last year at a time when consumer confidence was expected to be fragile in the wake of the referendum.’

• Tracker has London at +2.9% but provinces down 0.1%. It reports ‘tourism will have helped the capital and the market will remain cautious as we move into the pre-Christmas period.’

• Tracker. Total sales +4.2% whilst LfL sales were +0.6% showing continued impact of new capacity.

• Tracker suggests ‘overall, the results are considerably more positive than some might have expected. Business and consumer confidence in the autumn season for the time being, looks as though it is likely to remain positive in the run up to the key Christmas period.’

• Punch Taverns has announced that non-executive director and former CEO Ian Dyson is to step down from the board next January. Ian Dyson joined Punch as Chief Executive in September 2010 and, following the demerger of Spirit, he has been a non-executive director since August 2011. Chairman Stephen Billingham reports ‘on behalf of the Board, I would like to thank Ian for his significant contribution to Punch, first in delivering the demerger of Spirit and returning value to shareholders, and as a non-executive supporting the company during its successful financial restructuring in 2014 and the subsequent strategic review.’

• Cracker Barrel reports Q4 numbers, LfL sales +3.2% and diluted EPS +7.6% at $2.12. CEO Sandra Cochran reports ‘we believe the strategic programs we implemented during the fiscal year successfully drove our continued positive results. While we anticipate ongoing challenges in the industry during fiscal 2017, our management team and employees remain focused on delivering continued growth in our business and driving long-term shareholder value.’

• Analysis from CBRE suggests retailers in 11 out of 14 UK cities will see their average rateable values decrease in the 2017 business rates review. Leeds, Bristol, and Cardiff will all see their average values fall by over 30% from current values set in 2010, while Manchester, Edinburgh, Glasgow, Newcastle, Reading, Cambridge, and Southampton will also see their rates decrease.

• London-based healthy food delivery start-up Pronto is closing down after running out of money, according to The Times and The Truth About Equity Crowdfunding blog. The group struggled to raise a new round of funding in the last week, having initially raised $1.6m (£1.2m) last August and a further £800,000 on crowdfunding platform Seedrs in June, but is now ceasing operations.

• Heineken intends to boost its market share in South Africa and better compete against SABMiller by introducing some of its premium and core brands.

• The UK soft drinks industry has reiterated its call on the government to abandon plans for a soft drinks tax, citing declining consumption trends. New official figures from government body Public Health England point to a 23% drop in children’s consumption of sugary soft drinks over the past six years. Gavin Partington, director general of the British Soft Drinks Association said: ‘Soft drinks companies have taken significant action to help their consumers reduce their sugar intake since the data was collected over two years ago… It seems odd to punish progress with a tax which risks job losses and higher prices for consumers when our efforts are clearly having an impact. Surely a review of this policy must now be undertaken.’

• Electronic cigarettes helped as many as 22,000 people in England give up smoking in 2015, boosting the success rate of those who reported a quit attempt from 10.6% in Q1 2006 to 18.6% in Q1 2015. Some 2.8 million people in the UK now use e-cigs.

• Booker Group’s trading update for the 12 weeks to 9 September shows like-for-like non tobacco sales grew by 0.9%.  Tobacco sales continued to be hit by the ban on small stores displaying tobacco products, with like-for-likes down 3.5%. The acquisitions of Budgens and Londis helped drive a 15.2% year-on-year increase in group sales, with non-tobacco sales up 15.5%. The wholesaler has net cash of £105m.

• Q2 LFL sales ex-fuel/ex-VAT grew by 2% at Morrisons, the third consecutive positive quarter, meaning H1 LFL sales ex-fuel/ex-VAT rose by 1.4% for the six months to 31 July. Underlying profit before tax was up 11% to £157m and underlying EPS jumped by 35% to 5.04p as the food grocer credited its ‘continuous listening programmes and delivery of the six priorities’ for helping to stabilise LfLs. Free cash flow remained strong, at £558m (H1 15: £479m), and £477m of debt was paid off during the period, reducing Morrisons’ debt figure to £1.27bn.

• The supermarket group updated its financial targets and is aiming for £1bn of cost savings by the end of the financial year and less than £1bn of net debt by the year after. Its £2bn free cash flow target has been reached six months ahead of plan and £5m of the £50m-£100m incremental PBT target was delivered in the first six months.

• David Potts, Chief Executive, said: ‘We are pleased with positive like-for-like sales and 11% underlying profit growth in the first half. Our priorities are unchanged. We have made improvements to the shopping trip for customers and we plan to do more. I would like to thank the entire Morrisons team of food makers and shopkeepers who are working very hard to Fix, Rebuild and Grow Morrisons. This turnaround opportunity is in our own hands and I am confident we will succeed.’& HOTELS:

LEISURE TRAVEL

• Preliminary STR data for August in London reinforces the trend of supply (+2.6%) outstripping demand (+1.8%), resulting in falling occupancy (-0.8% to 84.7%). Average daily rate dropped by 1.1% to £140.14 and revenue per available room declined by 1.9% to £118.69, but this was nevertheless enough to mark the third-highest August RevPAR figure on record for the capital.

• Only 20% of all UK rail ticket purchases in 2015 were made online despite surging growth, according to a report from rail tech company Silverrail. In France and Spain, over 40% of rail tickets are bought online and in Sweden it’s as high as 90%, suggesting there is much more space for train operators to ‘capitalise on this opportunity’.

• Monarch has launched three new destinations for summer 2017, adding Stockholm, Porto, and Zagreb to its network.

• Kings Park Capital has taken a significant equity stake in Just Go! Holidays alongside the Company’s CEO, Luis Arteaga. JGH is an independent tour operator providing group holidays to the over 50s demographic.

• BA & Ryanair have cancelled flights as French traffic controllers start their fourteenth bout of industrial action this year.

OTHER LEISURE:

• Cinema chain Everyman Media reports H1 numbers. Revenues +49% at £12.1m, EBITDA +91% at £1.4m. Group opened one new cinema in the period. Overall loss after tax of £670k compared with a loss of £430k in H1 last year. Re current trading, the group reports ‘since the period-end, trading has been in line with expectations continuing a reasonable overall summer in the cinema market.’ It concludes ‘we believe that it is a good period for film-making, with increasing confidence in the quality and quantity of film content over the coming years.’

• Budget UK fitness chain Pure Gym Group is floating on the London Stock Exchange in a deal to raise a potential £190m, following rival The Gym Group, which IPO’d in November 2014. Tony Ball, chairman of Pure Gym, said: ‘Pure Gym’s growth from a start-up company in 2008 to undisputed market leader today is a story of disruption and shows how entrepreneurial vision can build real business success. When the company was founded the traditional gym market was moribund. It did not cater for modern gym users who are tech-savvy, want to be able to exercise at any time of day or night and want gyms they actually use, all without being locked into an expensive 12-month contract.’

• Planned reforms to European copyright laws mean that video hosting sites such as YouTube will have to pay more to musicians and record companies. Jean-Claude Juncker, president of the European Commission, said on Wednesday: ‘I want journalists, publishers and authors to be paid fairly for their work, whether it is made in studios or living rooms, whether it is disseminated offline or online, whether it is published via a copying machine or hyperlinked on the web.’

FINANCE & MARKETS:

• UK unemployment fell slightly to 1.63m in the 3mth period to July. Rate of unemployment now 4.9% vs 5.5% a year ago.

• Mortgage lending fell by 13% m-o-m (and 12% y-o-y)  in July per the Council of Mortgage Lenders.

• US treasury yield curve is steepest in 2mths. Not a long time period but shows nervousness re rate rises

• World markets: UK mixed yesterday, Europe & US down. Far East mixed in Thursday trading.

• Oil price bouncing a little but down over 24hrs. Brent Crude trading around $46 per barrel.

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

• Latest CGA Peach AlixPartners survey says that the sub-sector ‘continued to see strong growth’ in 12mths to June

• Monitor says unit numbers rising at c10x rate of inflation or 5x current rate of GDP growth. Branded restaurant sites +5.6% y-o-y.

• Higher supply of units meets lower demand. Result? Tough LfLs. Monitor adds hopefully that there are fewer indie units.

• Over-expansion bites? Ruby Tuesday says poor LfL numbers exclude performance of 95 units now closed under rationalisation plan

• The latest Wilson Drinks Report shows a mixed of performance, with total sales value down 3% for Q to 26 March 2016

• WSTA warns members that wine industry must act now to work out ‘model’ trade agreements rather than waiting for Brexit

• ECB should hold off on fresh stimulus measures says board member Sabine Lautenschlaeger

• Other Tweets: Soft commodities, divergence very plain. Basics down, sweets up. Hog prices down 21% on 12mths, OJ +81% & sugar +75%

• Wall Street down by >1% yesterday. Third 1% move on the trot after 43dys of going sideways.

• BAML survey suggests fund managers not confident re asset prices. It’s the cost of inflating a bubble by low interest rates

• UK input prices +7.6% but CPI < expectations. There must be some inflation out there but for the life of us, we can’t see it

• Back to school week very good per John Lewis. Waitrose not too shabby either. Trading lumpy but certainly not awful

• Is Ocado workable? Been slogging away, burning capex for 16yrs. Trouble is, it went into food distribution rather than restaurant delivery

• Compare Ocado with Just Eat. Look at the margins, growth rates etc. Would rather be in one market than the other. Amazon maybe agrees

RETAIL NEWS WITH NICK BUBB:

• Next: The interims today from Next (for the 26 weeks to July 30th) show that PBT of £342m was 1.5% down, slightly disappointingly, but the key focus will be on what that great guru, CEO Simon Wolfson, thinks about the outlook. And, not surprisingly, he remains cautious: “As expected, it has been a challenging year so far, with economic and cyclical factors working against us, and it looks set to remain that way until mid-October at the earliest”, dismissing talk of “a Retail bounce” in July and noting that “trading since July, which to some extent may have been affected by the Sale, has remained challenging and volatile”. But ahead of the Q3 update on Nov 2nd there is no change to full-year sales or profit guidance.

• John Lewis Partnership: We flagged yesterday that the trading update statement from John Lewis Partnership with their interims should have reported a steady start to H2, and so it has (with Waitrose up by 1.4% LFL over the last 6 weeks and John Lewis up by 0.7% LFL). But we also thought it would not be surprising to hear some caution about the outlook and that is also the case: “While we expect to trade well compared to the market, the structural changes in retail will not ease. Our PBT before exceptional items was down 14.7% in the first half as we respond to the changes in the retail market. Our commitment to competitive pricing, excellent service, increasing pay and investing for the long term have held back profits. We expect the trading pressures to continue through this year and next. The EU referendum result has had little quantifiable impact on sales in the first half,
but the uncertainty of leaving the EU will remain and the full impact of this change is yet to become clear”. We expected H1 PBT to be slightly up at £100m pre-exceptionals, so the £82m outcome is disappointing and there is an eye-grabbing exceptional charge of £25.0m at Waitrose “for the write-down of property assets no longer intended to be developed and related costs, following a strategic review re-prioritising future investment spend towards existing stores”.

• Morrisons: We haven’t had much time to look at today’s interims from Morrison’s (for the 26 weeks to July 30th), but they look quite pleasing and CEO Dave Potts says:” We are pleased with positive like-for-like sales and 11% underlying profit growth in the first half. Our priorities are unchanged. We have made improvements to the shopping trip for customers and we plan to do more.”

• Today’s Press and News: The main focus is on the results from Dunelm yesterday. Lombard column in the FT makes a rather laboured comparison between Dunelm CEO John Browett and the TV comedy sales assistant Mrs Slocombe, noting that, although Dunelm is relaxed about dollar-related input costs, “Dunelm is as exposed to a consumer slowdown as any other retailer” and that the forward PE is demanding. The Telegraph runs with “Dunelm toasts a decade of profit rises despite sweating the Indian Summer”. The other big story in the Telegraph is that MPs are to debate the role of Philip Green in the collapse of BHS next month and weigh up whether he should keep his knighthood. The Daily Mail looks at the reasons for Lidl UK boss Ronny Gottschlich’s sudden departure and considers whether the same aggressive expansion will continue at the same pace under new
boss Christian Härtnagel. Finally, the FT market report leads on the slump in Ocado (“Ocado slides on concerns over foreign licensing potential”) and also notes that Burberry faded yesterday after results from peers, Richemont and Hermès, failed to impress.

• News Flow This Week: The Booker Q2 update is also out today, but we haven’t had time to look at it as we have a plane to catch (back to London from sunny Sardinia!). ONS Retail Sales figures for August (aka “Life on the Planet ONS”) are out at 9.30am today and then we get the latest MPC interest rate announcement at midday.