Langton Capital – 2016-11-21 – Price rises, Sterling, holidays, Parkdean & other:
Price rises, Sterling, holidays, Parkdean & other:
A DAY IN THE LIFE:
So, I’m now firm in my resolve to make a conscious effort not to spend a penny on anything on 25th, the day that this year will be called Black Friday.
I’ll avoid the shops. Not a chore but I’ll even buy my sandwiches a day early, put a couple of bottles of beer in the fridge and avoid buying a newspaper because I don’t want to be lectured to by retailers and forced to spend money (never pleasant) on goods that I don’t want (or don’t want to give away) on a day of the year of their choosing.
Call me a churlish killjoy or say I’m just making a fruitless protest but, in post-Brexit Britain, I thought that was our duty.
Anyway, it’s time for the news but if you would like to come off this email list please simply hit the unsubscribe button above. Similarly, if you are getting it forwarded and would like to go on directly or if you would like to recommend it to one of your colleagues, please just hit the subscribe button and/or suggest that your colleague does too. On to the news:
PUB, RESTAURANT & DRINKS PRODUCERS:
• A group of cross-party MPs have called on the government to provide more practical support for the UK wine industry to raise its profile globally. The MPs cited the high rate of duty on wines, export and planning constraints, the UK’s 2005 withdrawal from membership of the International Organisation of Vine and Wine (OIV), and the need to promote English and Welsh wine internationally as key areas of concern.
• Fuller’s has said that a “storm” of factors may force it to raise prices next year. CEO Simon Emeny points out that 2017 is ‘the second year of the national living wage, with government levies and an increase in business rates, particularly in London and the South East’. He says ‘this increase could not be coming at a worse time for the hospitality industry. We’ll weather the storms but will review our pricing.’
• Alan Yau’s Busaba Eathai has reported a 6% rise in turnover to £27.7m as group EBITDA grew 21% to £2m, although the group remains loss-making. The Thai chain said in its full year accounts to 28 May that it opened two new openings in Manchester and Liverpool as part of its stated aim to double the size of its estate, while new sites were also added in London and St. Albans in October, with another four openings scheduled for the current financial year.
• easyCoffee is eyeing expansion in London and beyond after the budget coffee chain, backed by Sir Stelios Haji-Ioannou, received around 200 approaches from potential franchisees. Sir Stelios started easyCoffee earlier this year and the concept has grown to two sites in London and one in Southend-on-Sea. It aims to undercut incumbent rivals such as Starbucks and Costa by selling cups of coffee for £1.
• ALMR’s Kate Nicholls says the introduction of additional Night Tube services ‘has cemented London’s reputation as a truly 24-hour city.’
• Sales of own-brand yeast extract have shot up by 25% in the aftermath of Unilever and Tesco’s skirmish over marmite prices.
• JD Wetherspoons has reached an out-of-court settlement with a group of travellers who were refused entry to the Coronet in north London last year. Chairman Tim Martin said: ‘This is the first time in our 37-year history that a case of discrimination for refusal of entry to a Wetherspoon pub has gone to court. I apologise to those who were not allowed in the Coronet pub and we have put in place improved training and management systems to prevent a recurrence.’
• Chinese takeaway and delivery chain Hotcha has opened its first store in Exeter and its twelfth in the UK. James Liang, Co-Founder and CEO of Hotcha commented: ‘Our ambition is to become the first national Chinese takeaway chain in the UK and we feel opening our 12th store here in Exeter is a natural step as we continue our rapid growth from our beginnings in Bristol five years ago. Following our recent £7.5 million funding round, we are well positioned to deliver our pipeline of a further 20 stores openings across the UK in 2017.’
LEISURE TRAVEL & HOTELS:
• Press likely given heads up, says Thomas Cook will refer at its finals on Wednesday to 2016 being one of most difficult years ever.
• Parkdean Resorts’ up for sale in what Sunday Times calls a ‘bid frenzy’. It says Onex, Advent & Centerbridge are in talks to buy. The enlarged business is said to be worth up to £1.4bn. The collapse in Sterling & growth in the staycation market is thought to have boosted business. Parkdean owners Electra & Alchemy are reported to have hired Rothschild to sell the operation, which earned about £90m last year.
• Airbnb is expanding beyond accommodation for the first time with its ‘Trips’ element as part of its intention to become a full-service travel company. The strategy will see Airbnb, which has already been valued at $30bn and is looking to IPO ‘as soon as possible’, come up against other giants of the online travel sector such as Expedia. With Trips, Airbnb aims to make it easy with one app to book most travel needs.
• Airbnb is aiming to secure 700 tax agreements in cities that generate more than 90% of its revenue by the end of the year, with the group facing regulatory battles in key markets such as New York and San Francisco. Speaking to the FT, CEO Brian Chesky said the company has 200 existing tax agreements, which allow the company to collect and remit hotel taxes to local governments, and is looking to boost the number by another 500.
• Cross-party group of MPs the Big Infrastructure Group (BIG) has called for a 50% cut in air passenger duty before scrapping it completely. In 2014 George Osborne announced an over-haul of APD, abolishing the two highest bands of tax and eliminating the highest rates for travellers visiting destinations more than 4,000 miles from Britain, such as China, India, Brazil. However, 132 countries still have cheaper air travel taxes than the UK. The SNP has already vowed to reduce the tax from April 2018 before abolishing it entirely.
• New Abta figures show almost a third of people (29%) plan to take a break this winter, with bookings up 16% year-on-year. Of the 1,962 consumers questioned, 45% said they would not be taking a winter break this year, however, while a further 27% were undecided. Winter bookings appear to be following a broadly similar pattern to the summer, when terrorist events in destinations like Tunisia and Egypt and subsequent revisions to FCO travel advice drove a growth in popularity mainly to the western Mediterranean.
• Transport fares for Londoners will be frozen at current levels until 2020, confirming one of Sadiq Khan’s main campaign pledges.
• Businesses are increasingly concerned over security risks to their travellers and are set to boost spend on safety over the next year. An Ipsos MORI survey of more than one thousand travellers commissioned by International SOS, found that 72% believed travelling has become more dangerous and 57% said it will become ‘even more perilous over the next 12 months’.
• Facebook is set to buy back $6bn of its own stock. It has said that it will create 500 extra jobs in the UK. The group reports ‘the UK remains one of the best places to be a tech company and is an important part of Facebook’s story. We came to London in 2007 with just a handful of people; by the end of next year we will have opened a new HQ and plan to employ 1,500 people.’
• Telegraph reports that a ‘looming government crackdown on high-stakes gambling machines’ could reduce bookies’ earnings by a quarter. Revenues from betting terminals makes up around 60% of UK revenues. MPs have become concerned that such machines are encouraging problem gambling. The Daily Mail says that the government may double its tax take from online gambling to around £600m.
• Fantasy sports co DraftKings is to merge with rival FanDuel
• England’s Premier League has agreed a record $700m three-year television rights deal with Chinese digital broadcaster PPTV beginning in the 2019-20 season. China has pushed to become a major player in the global football business and has been busy building a stake in English football; last year, a consortium of Chinese investors paid $400m for a 13% stake in Manchester City. Aston Villa, West Bromwich Albion and Wolverhampton Wanderers have all been acquired by Chinese owners in the past few months.
FINANCE & MARKETS:
• Autumn Statement due on Wednesday. Debt levels said to make any potential for giveaway “eye-wateringly” tight. Chancellor Hammond tells BBC ‘over the next couple of years we are going to face some uncertainty over the economy. But then we will have a whole raft of opportunities and we need to get the country ready to be able to seize those.’
• Hammond reports that Britain faces “sharp” challenges ahead of Brexit.
• World markets: UK mixed on Friday with Europe down. US up but Far East mostly better in Monday trade
• Brent up a bit at around $47.40 per barrel
• Sterling down against US$ at $1.234. Still c116c vs Euro. US dollar now at highest in trade-weighted terms since 2003
• Global interest rates still firm ahead of expected US rate rise in Dec. US 30yr bonds at 3.01%.
• ECB says Eurozone now in surplus with rest of world to tune of €29.8bn in Sept
• AltFi has reported that it is looking to raise £250k on Crowdcube valuing the crowd funding commentator at £3.25m. The group is forecast to record sales of around £520k this year. Valuation therefore around 6.25x forecast sales. Group is growing rapidly.
YESTERDAY IN A NUTSHELL – SELECTION OF TWEETS, LIVE TWEETS ON WEBSITE:
• Fuller says it has turned in ‘a good performance in changing times’ w. adj. EPS +6% at 32.4p & H1 dividend +5% at 7.25p
• FSTA H1: Group reports adj. PBT +6% at £22.8m with EBITDA +9% at £36.3m. Debt is 3.0x EBITDA (2015: 3.0x)
• FSTA H1: Managed LfLs +3.4% with operating profits +6%. Tenanted LfL EBITDA was down 2%.
• FSTA H1: Current LfL sales (to w33) are +2.6% implying a recent slowdown. LfL profits at tenanted pubs down 2%. Total beer sales are still +5%.
• Majestic Wines is ready to raise prices in 2017 if necessary to combat the weak sterling and a potential duty rise.
• The VAT Campaign, BBPA and ALMR all agree that Brexit could free UK up to reduce unfair levels of VAT faced by the hospitality industry.
• McDonald’s is to roll out in-store mobile ordering as well as extending its table-service offer to boost growth
• Tesco boss Dave Lewis has warned suppliers not to try to push through ‘illegitimate price increases’.
• Fed chair Janet Yellen has indicated the US Fed could raise interest rates “relatively soon”.
• Mortgage lending in October rose month on month but fell year-on-year to £20.6bn for the month
• Dancer and former MP Ed Balls has said that the Bank of England should no longer be independent due to growing ‘popular discontent’
• Later Tweets: Commodity price rises abating just a little – at least in US$ terms. Milk, on the other hand, priced in Sterling, is off the bottom
• Strong Oct retail sales numbers owe a lot to the sharp shift in weather from Sept (which included the hottest day of 2016) to Oct
• ASDA looks to be performing really rather badly. Wouldn’t do to provoke it as it might slash prices (rather than just talk about doing so)
• Fuller’s numbers show LfL managed sales, tenanted profits and beer volumes all in decline in H2 to date. Partly down to Rugby W Cup
• Fuller’s comps tough in H2 but, so far, everything going backwards. Says economy ‘facing significant challenges’
• Fuller’s joins London hoteliers & Coffer Peach in saying The Capital is having a tough time of it (against challenging comps) a.t.m.
RETAIL NEWS WITH NICK BUBB:
• Saturday Press: The bullish Jimmy Choo trading update on Friday provided lots of photo opportunities for the Saturday papers and there were several previews of the new Chancellor’s upcoming Autumn Statement. There were also several previews of Black Friday, eg a useful overview in the Guardian Money section said that consumers should not buy products just because they look cheap (“If you don’t need it, don’t really want it or can’t afford it, it’s a waste of money”), whilst the FT had a good overview of the Black Friday P&L issues (““Smoke and mirrors” tarnish Black Friday bargains”), including some interesting anonymous quotes from leading retailers. The Guardian also had an interesting article about Donald Trump’s dislike of Jeff Bezos and Amazon (“Is Trump Amazon’s biggest challenge?”). The Telegraph stockmarket report noted that Next fell on Friday after gloomy comments about
• Christmas TV Ad Watch: The Daily Mail had a double-page spread review of all the festive TV adverts from retailers and awarded them a score out of ten. Controversially, Heathrow Airport’s touching ‘Teddy Bears Go Home’ scored best with 9/10, whilst House of Fraser’s ‘Funky Dancers’ advert got just 1/10…Marks & Spencer’s “Mrs Claus’s Secret Mission” got 8/10, the John Lewis “Bouncing Animals” got 7/10, as did “Kevin the Carrot” for Aldi, whilst “A Robin’s Journey” from Waitrose got 6/10 and “Dave the Singing Dad” from Sainsbury got only 5/10.
• Sunday Press: There were plenty of previews of the new Chancellor’s Autumn Statement on Wednesday in the Sunday papers, with the Sunday Telegraph plugging an exclusive column from Philip Hammond, in which he hinted at a £1bn roadworks programme, although the Economics Editor of the Sunday Times thundered that “Hammond has no room for populist giveaways”. The top of the front page of the Business section of the Sunday Telegraph had a story headlined “Tesco Towers: radical new homes plan”, flagging that Tesco is in discussions with property developer Apex Airspace about building homes on top of its stores and car parks. The main Retail story in the Sunday Times was that the Pension Protection Fund is looking into the possibility of bringing misconduct charges against former directors of BHS to claw back funds for creditors. The Sunday Times also flagged that a gloomy update is expected
• Bonmarché: Today’s interims from the struggling Fashion chain Bonmarche (for the 26 weeks to Sept 24th) are pretty poor, with PBT down to just £2.5m on a pre-exceptional basis (from £6.4m in H1 last year), on the back of a 8.6% slump in Store LFL sales. But (in that immortal phrase) they are “in line with the revised expectations”, after the profit warning on Sept 21st, and the interim dividend of 2.5p has been held. And, in a sweeping change, Bonmarché’s internal model “sweetspot” 50+ customer profile has been simplified from four personas (“Susan”, “Linda”, “Margaret” and “Joan”) to one (“Lisa”)! And the company says that “Recent trading has shown an improvement since September, reflecting better ranges and more seasonally appropriate weather, which has supported demand for coats and knitwear in particular. The Board’s view is therefore that, in line with the guidance issued in
• Grocer Watch: The widely followed Grocer “33” weekly supermarket pricing survey in Saturday’s Grocer magazine saw Asda win for the 6th week in a row. The Asda basket of £52.68 was a chunky £4.69 cheaper than second-placed Tesco and Asda was the cheapest on no less than 20 of the 33 items. However, the Asda guarantee to be at least 10% cheaper than its rivals cost it a £1.34 voucher, whilst there was a Tesco instant “Brand Match” discount of £1.61. Morrisons was beaten for fourth place by Sainsbury, whose £57.47 basket was £0.54 cheaper than Morrisons. Poor old Waitrose was way behind, as usual, with a basket costing £63.37…There was much better news for Waitrose in the separate Grocer “Mystery Shopper” weekly survey on Store Service and Availability, as its 29,000 sq ft store at Boughton in Chester topped the rankings, scoring a solid 80 out of 100. The Morrisons store in Workington
• Trade Press: We didn’t have time on Friday to highlight that the front cover of Retail Week magazine was a photo of Selfridges, flagging up a feature on the 10 Best Shops in the World. RW also had a feature on the growth of the Chinese ecommerce giant Alibaba and “Singles Day” on Nov 11th, together with an article about Marks & Spencer’s new Overseas strategy (headlined ”In, out, shake it all about!”). Drapers magazine went with a cover photo of David Reiss, the Lifetime Achievement Winner at last week’s Drapers Awards, which were also featured in a special supplement. The other highlight of Drapers magazine was the third of the excellent “Hit or Miss” reviews of autumn fashion on the High Street, this time on Footwear (JD Sports’ “Size?” chain was judged the best Footwear Specialist and LK Bennett and Next were judged the best Footwear Multiples). And buried in between those two
• BDO High Street Sales Tracker: Having flagged last Wednesday that John Lewis did not do quite so well in the week before last, we also didn’t have time on Friday to note that the BDO High Street Sales Tracker for small/medium-sized Non-Food chains for w/e Nov 13th said that Fashion Store LFL sales were up by 5.8%, helped by very soft comps. Boosted by robust Homewares sales, total Store LFL sales were up by 4.3%. Online sales were up by a decent 18.3% overall.
• News Flow This Week: Tomorrow brings the Kingfisher Q3 and the AO.com interims, whilst out in the US we get the Signet Q3 and the GameStop Q3. On Wednesday we get the Chancellor’s Autumn Statement and, hopefully, the Arcadia finals from the beleaguered Philip Green…Thursday then brings the Mothercare interims and the Pets at Home interims. And then Friday is…BLACK FRIDAY.