Langton Capital – 2016-10-07 – Cheap booze, Asahi, Chipotle, Ruby Tuesday & other:
Cheap booze, Asahi, Chipotle, Ruby Tuesday & other:
A DAY IN THE LIFE:
So yesterday evening I was going to prep this email and get a bit of reading done but, instead, I put The Apprentice on and that was an hour of my life I won’t be getting back.
Because I couldn’t turn it off.
I was sitting there, along with probably 10m or so other Brits, hoping against hope that Sir Alan would break with tradition and sack the lot of them on Task One.
This because the candidates seemed at first glance to be useless with their only redeeming feature being that they were also horrible. And I know that the researchers will be prompting them to say crass, nasty and often plain wrong things and they will be editing down hours of tape to a few comments but they don’t have to be like that, do they?
Anyway, it’s on for another 11 weeks so that’s Thursday evenings sorted. On to the news:
PUB, RESTAURANT & DRINKS PRODUCERS:
• The Alcoholic Health Alliance has said in a report that ‘cheap booze can be found on every street corner’ for ‘pocket money’ prices and is calling for minimum unit pricing. The report, which looks at the cheapest booze sold at retail locations in four areas of the UK, proposes a tax on all drinks in proportion to their strengths.
• It also criticised Chancellor George Osborne for halting the duty escalator on beer, cider and spirits, adding ‘It seems that the stronger bargaining power of supermarkets enables them to pass on those cuts to customers more readily than pubs’. However, a spokesperson for the Scotch Whisky Association countered: ‘We believe that minimum unit pricing (MUP) of alcohol would be ineffective as it wouldn’t target harmful and hazardous drinkers. Evidence shows that most hazardous and harmful drinkers are among the wealthier parts of the population, are the least sensitive to price and do not tend to opt for the cheapest alcohol.’
• Ruby Tuesday reports Q1 numbers, says total revenue down 8.2% to $256.7m as a result of 109 company owned stores reduction
• Ruby Tuesday says US restaurant market ‘remains highly competitive & challenging’. Reveals LfL sales decline.
• Ruby Tuesday Q1: Fresh Start initiative hits revenues, LfL sales also lower, down 2.7% in Q1 after 0.6% drop in Q1 last year
• Ruby Tuesday says closure & Impairment costs of $30.2m were ‘primarily due to the previously-announced 95 restaurant closures, compared to $2.7 million in the first quarter of the prior fiscal year.’
• Ruby Tuesday makes Q1 net loss of $39.7m or 66c per share. Restaurant margin lower by 200bps at 13.9%. Interim President & Chief Executive Officer Lane Cardwell reports ‘while the casual dining environment remains highly competitive and challenging as evidenced by our negative quarterly same-restaurant sales, our trend improved sequentially during the first quarter as we made investments in highlighting value aimed at building guest counts. In fact, we generated positive traffic in August through a successful 3 Course Meal offer for $12.99.’
• Ruby Tuesday says ‘our underlying goal is to drive traffic through the key strategies of our Fresh Start initiatives that we are launching in the coming months.’ Despite what look like poor Q1 numbers, it comments ‘our team has never been more excited and focused on the plan ahead. We are moving with greater urgency to change the trajectory of our business through a renewed focus on our guests.’ The co says it ‘plans to accelerate the execution of its Fresh Start Initiatives under new leadership to better address the challenges currently facing the business, and as a result is discontinuing providing guidance so that it can focus on long-term strategic objectives.’
• Candy maker Mars has said it will take full control of its Wrigley chewing gum business by acquiring Berkshire Hathaway’s stake.
• Walmart has guided to flat earnings this year. It is to slow its rate of store openings. Group shares fell by around 2% on the news.
• Japan’s Asahi is to bid 500bn yen (£3.8bn) for SABMiller’s Eastern and Central European beers once the latter completes its merger with AB InBev next week. SABMiller’s beer businesses in the Czech Republic, Poland, Slovakia, Romania and Hungary include beer brands such as Pilsner Urquell and Lech.
• Mastercard will roll out Identity Check Mobile fingerprint and facial recognition technology in 12 European countries, eliminating the need for passwords.
• Italian chef Gino D’Acampo will accelerate the pace of new openings in 2017, beginning with the launch of a Fantastico site in Leeds city centre this year. The two-storey restaurant will consist of an open kitchen, lower ground cocktail & wine bar and an eat-at deli bar.
• World food prices rose in September, due in large part to the rising cost of sugar, according to the Food and Agriculture Organisation’s food price index. The index found prices had risen by 10% year on year in September and by 2.9% from August, although prices remain ‘relatively low’ and the outlook for the global food market remained ‘stable’. Meat, dairy and vegetable oil prices also increased, but cereal prices fell slightly.
• Operating losses at Chipotle Mexican Grill UK have widened from £3.38m to £4.71m, despite turnover growing by 11.8% to £8.19m, in the year to 31 December. The UK arm of Chipotle Mexican Grill now had seven fast-casual units open in the period, the latest of which launched on 8 July 2015, but admits that ‘due to lower familiarity with the Chipotle brand, differences in consumer tastes or spending patterns… sales at restaurants in the UK may take longer to ramp up… and may never do so,’ and cautions that ‘to build brand awareness, we may need to make greater investments in advertising and promotional activity which could negatively impact our profitability.’
• The group has been hit by a £500,000 impairment charge arising from the closure of a Chipotle site in London’s Wimbledon Hall, which takes the group’s total sites down to six, while it also continues ‘to see a negative impact on our Charing Cross location due to construction in the area.’
LEISURE TRAVEL & HOTELS:
• US hotel industry has posted positive results for the week ending 1 October, with occupancy up 1.8% to 70%, ADR rising 1.3% to $126.95, and RevPAR +3.2% to $88.33.
• Twitter shares plunged by 20% on Thursday after a reported lack of takeover interest, with Google, Apple, and Walt Disney all unlikely to bid for the company. Cloud software company Salesforce.com is now considered to be the most likely buyer. The social media site’s user figures have plateaued at c300 million and it has struggled ‘to figure out a way to make money on those 300 million people, so they’ve had lots of swings at it and it hasn’t worked,’ according to Douglas McIntyre, from 24/7 Wall Street in New York.
• Snapchat’s parent, Snap Inc., is working on an IPO that could value the company at some $25bn, up markedly from its valuation of $17.81bn made in just May.
FINANCE & MARKETS:
• Sterling hitting new 31yr lows. Trading at around 124c per dollar. Fell at one point to 118.4c. Was blamed on a ‘flash crash’.
• Chancellor Philip Hammond said yesterday he would like Bank of England governor Mark Carney to serve a full eight-year term at the central bank. Carney had originally planned to leave in 2018.
• ONS figures indicate the UK has only just pushed productivity per hour worked above its pre-crisis levels, with much of the recovery being driven by longer hours and more people working.
• World markets: UK and Europe down yesterday on Hard Brexit considerations. US down & Far East down on Friday trade
• Oil price continues to edge higher. Brent Crude trading at around $52.45 per barrel this morning.
YESTERDAY IN A NUTSHELL – SELECTION OF TWEETS, LIVE TWEETS ON WEBSITE:
• YUM Brands reports Q3 numbers, raises full year core profit forecast to at least growth of 15%.
• YUM Brands Q3 same store sales at KFC +4% with US LfL growth of 6% & system sales +7%. Taco Bell LfL sales +3%
• YUM Brands opened 475 restaurants worldwide in Q3, 78% in emerging markets. Group on track to separate China business 1 Nov.
• JW Lees accounts for year to 31st March 2016 have sales £64.1m (+0.2%), EBITDA £8.9 m (+1.6%) and operating profit £6.6m (+3.8%)
• Vista Retail Support has found that contactless has overtaken chip and pin as the most popular payment method among students
• Fleurets has suggested that operators face getting their fingers burned as record rents set across London
• London hotel revenues are reported by HotStats to be growing at twice the rate of those in the rest of the country over 15yr view
• International Monetary Fund has warned that global financial risks are growing, highlighting specific concerns about Europe, Japan & China
• UK new car sales grew in September by 1.6% to 469,696, according to the Society of Motor Manufacturers and Traders.
• TheCityUK has said that 75k jobs and £38bn could be lost to the UK if it fails to secure access to the single market
• Other Tweets: Sterling said to be seeing some support this morning. Didn’t last long, has dropped another full cent, trading around 126.4 per pound
• Bond proxies clobbered yesterday as interest rates twitched. Talk of ‘tapering’ deemed fearful. Then comes cold turkey, then repayment
• 65% chance of rate rise in US in Dec. Europe may taper QE. When will they, we or the US ever dump any of this stuff back in the markets?
• Fashion High St sales down 0.3% in week to 2 Oct says BDO. Dunelm says soft furnishings down 3.8% on warmer weather
• Contactless payments growth in popularity with young. No surprises there. Need to remain relevant as tastes evolve
• Name & shame foreign worker hirers? That’ll sort it out. Plenty of jobs picking spuds, all welcome.
RETAIL NEWS WITH NICK BUBB:
• DFS: As usual DFS trumpeted “strong progress” in their lengthy final results statement yesterday, even though sales were only up by 7% and EBITDA was only up 6%. There is nothing about current trading, bar the ritual comment about confidence about outperforming the market. The most interesting news is that a 3rd trial small store will open shortly in Crawley and that amother cash return to shareholders is likely next year…
• Dunelm: Yesterday’s Q1 update (for the 13 weeks to Oct 1st) paints a more gloomy picture of recent trading in the furnishings market with LFL sales down by 3.8% because of the impact of the hot weather on store footfall, notwithstanding decent Online sales growth