Langton Capital – 2016-11-28 – New openings, new closures, current trading & other:
New openings, new closures, current trading & other:
A DAY IN THE LIFE:
So, spending was apparently up on Black Friday but most of the increase was online.
High Streets were ‘calm’ but stuff was shifted via the internet at reduced margins so that might be something of an own-goal.
And, as a firm believer in the idea that Christmas (and Christmas shopping) doesn’t start until you quit work on the 22nd or 23rd or whatever it is, I can’t say I’m altogether sad because Xmas should be what we want it to be not and what the shops tell us. Otherwise there’ll be Easter Eggs crowding the aisles on Boxing Day won’t there?
Anyway, with the Mighty Hull City scraping a point over the weekend, not all is doom and gloom. On to the news:
PUB, RESTAURANT & DRINKS PRODUCERS:
• Remy Cointreau saw H1 operating profit jump 15.9% to €123.9m on the back of a 2.5% increase in net sales to €513.4m thanks to sales in its highest-end products. Results were also flattered by favourable foreign exchange rates.
• Moody’s reports Dr Pepper’s planned $1.7bn purchase of Bai Brands is Credit Negative. It says ‘the planned acquisition, which Dr Pepper expects to close in the first quarter of 2017, is credit negative because it will be funded with debt, which will increase leverage.’ It goes on to say ‘we expect the company to take about three to four years to return adjusted financial leverage to its target range of about 2.25x’ and adds ‘the transaction multiple is high, even after considering the present value of tax benefits of about $400m. The price implies that Dr Pepper expects a continuation of Bai’s rapid growth, recently at over 100% per annum, albeit from a small base.’
• US chain MOD Pizza is ramping up expansion in the UK and is set to open its flagship store in London’s Leicester Square in December. The company’s UK expansion is being backed by Carphone Warehouse founder Sir Charles Dunstone and already has three sites in Leeds, Brighton, and Newcastle. MOD, whose pizzas can be bought for £7.87 in London and £7.47 outside of the capital, expects to create 420 jobs in the coming year.
• Black Friday online retail sales rose by 16% this year, breaking previous sales records for the day. This increase in online sales did not coincide with a sales gains for the high street, which remained relatively quiet.
• Hundreds of long-established restaurant businesses are being put out of business by pop-up experiences as supply in the industry outstrips demand. Last year a record 15,830 restaurants, takeaways and food stalls opened across the country, per data released by the ONS. However, 12,605 venues closed — the second highest figure on record. In London, an unprecedented 200 restaurants opened but a high churn of venues produced 76 closures, an increase of a third, according to Harden’s restaurant guide.
• Peter Backman, managing director of foodservice analyst Horizons warned in The Times ‘The numbers are growing outside London as well, including in Manchester and Edinburgh, Bristol, Leeds and Birmingham. People are asking if the rate of growth is higher than the rate of growth in demand and it has raised the question of over-capacity.
• ‘The number of openings, if you count available seats, seems to be growing a little faster than demand. This churn — especially in the casual dining sector — is speeding up, which would imply businesses are finding things tough as they close and the next generation opens up on the same site.’
• Poundland plans to close up to 80 stores just over two months after being acquired by Steinhoff International.
• Richoux Group has closed three Dean’s Diner restaurants, despite the chain previously being identified as a key growth avenue. One of the three units had been opened as late as May of this year. Richoux, which operates the Dean’s Diner, Villagio, and Zippers restaurant brands and is led by Jonathon Kaye, also recently confirmed that former former Prezzo men Mehdi Gashi and Salvatore Diliberto have joined as executive director and non-executive director respectively.
• C&C Group has extended its Magners distribution network as far afield as Thailand, New Zealand, and most recently in Indonesia in partnership with PT Pantja Artha. The Indonesian company says cider consumption is growing in the region.
• Brasserie Bar Co has reported like-for-like sales growth of 10% across its Brasserie Blanc estate and c6% in its White Brasserie pub business in the first four months of its financial year. The 30-strong group (18 Brasserie Blancs and 12 White Brasseries) enjoyed a c25% uplift in sales in its London restaurants.
• Five Guys has up to 16 sites in its UK pipeline that is could open next year, per MCA.
LEISURE TRAVEL & HOTELS:
• Maidenhead-based long-haul specialist Skies The Limit, aka STL Holidays, has gone out of business leaving 142 people abroad and 321 forward bookings. The group traded under Atol number 9396.
• Debbie Marshall, MD of Silent Travel Advisor, says that the impending advent of driverless cars will liberate older citizens who have had to stop driving.
• More than 100,000 Lufthansa passengers have had their plans disrupted by a third day of strikes affecting around 830 flights. The airline has been forced to cancel more than 2,600 flights since the first strike last Wednesday.
• Birmingham has been named as the UK’s top destination for business tourism outside of London, ranking above Manchester, Edinburgh and Leeds in the annual BMEIS. It follows a report by the Office for National Statistics (ONS) which named Birmingham as the fastest growing tourist destination in the UK, with 619,000 business travellers visiting in 2015.
• Stride Gaming reports FY. Says seen ‘strong organic growth’ with revenues at £47.8m (+22%) & adj. EBITDA +27% at £12.3m. CEO Eitan Boyd reports ‘I am delighted to present these excellent results to shareholders. 2016 was an exciting year for the Company where we once again delivered strong organic growth and undertook transformational acquisitions.’ He says ‘the business has never been in such a strong position to build on its excellent achievements of 2016. Our focus in 2016/17 will be on integrating these recent acquisitions, continuing our strong organic growth and examining entry into other soft gaming verticals. Looking ahead, we are excited by the outlook for the Group as we build on our goal of being the leading UK based soft gaming company and maximising value for shareholders.’
FINANCE & MARKETS:
• The UK economy grew by 0.5% in Q3. The ONS says that business investment ‘coupled with growing consumer spending fuelled by rising household income, and a strong performance in the dominant service industries, kept the economy expanding broadly in line with its historic average.’
• The ratio of house prices to average incomes in London is now over 14x
• Ladbrokes has said that the UK is now odds-on to remain in the EU until 2020. It says Tony Blair has influenced its thinking. Ladbrokes says ‘few people have the capacity to move a market like this but the Blair effect means it is now odds-on Britain is still a fully paid up member of the EU in 2020.’ Re a second referendum, Ladbrokes says ‘we shouldn’t rule that out either.’
• Malta’s PM Joseph Muscat has said EU leaders are not “bluffing” when they say the UK cannot have access to the single market if it leaves the EU
• Irish PM Enda Kenny has said the deal necessary to secure a full Brexit will not be possible in 2yrs
• PM Theresa May has said that the challenge of delivering Brexit is keeping her awake at night
• Brexit supporters have rejected a plan reportedly put forward by B of England Governor Mark Carney for a transition period when Britain leaves the EU.
• World markets: UK & Europe up on Friday and US also higher. Far East mostly higher in Monday trade
• Brent trading at around $47.05
• Sterling at $1.251 and Euro 1.174
• Long term rates in US still 3.01% for 30yr government bonds
YESTERDAY IN A NUTSHELL – SELECTION OF TWEETS, LIVE TWEETS ON WEBSITE:
• Domino’s UK has said that it now expects to grow to c1,600 outlets in the UK. It had previously been targeting 1,200.
• British wage growth is set to lag inflation for a number of years reports the IFS. It says wage growth prospects look ‘dreadful’.
• The IFS has said that earnings may not now get back to 2008 levels until around 2021 as firms decline to award pay rises
• The Resolution Foundation has said that the poorest third of consumers will see their incomes drop
• Ernst & Young Item Club suggests loss to British economy as a result of Brexit will be c4% of GDP. ONS estimates 2.4%.
• Franco Manca won the Breakthrough Brand and Best Concept awards at the CGA Peach Hero and Icon Awards
• Plaza Hotels & Resorts is to grow its upscale brand to some 3,158 rooms over the next few months
• London hotel capacity growth was earlier this month singled out by STR as a reason for poor October occupancy & REVPAR numbers
• Gatwick is to investment as £250m on expanding both the north and south terminals’ departure lounges and shopping facilities
• Ctrip, the Chinese travel giant, is taking over Scottish-based online travel search firm Skyscanner in a deal worth £1.4bn
• The ECB has said that shares in the UK look overvalued and perhaps vulnerable to a sharp setback
• Later Tweets: BBA says consumer credit expanding at fastest rate in 10yrs. Well that’s one way to deal with the financial crisis
• IFS using phrase ‘extraordinary & dreadful’ seems to have turned a few heads. But, as Brexit taught us, we don’t need experts, do we?
RETAIL NEWS WITH NICK BUBB:
• Grocer Watch: The widely followed Grocer “33” weekly supermarket pricing survey in Saturday’s Grocer magazine saw Asda make it a “magnificent seven” wins in a row. The Asda basket of £68.11 was £1.30 cheaper than second-placed Morrisons, but the relatively narrow margin of victory meant that the Asda guarantee to be at least 10% cheaper than its rivals cost it a chunky £4.24 voucher… Sainsbury was in 3rd place, with a £71.18 basket, with Tesco in 4th place, on £73.16, before a chunky Tesco instant “Brand Match” discount of £4.03. Guest retailer Ocado was 5th, on £74.45, but that was £1.58 cheaper than poor old Waitrose…And Waitrose also came bottom of the separate “Mobile 33” survey of Online Grocery and Availability, with a score of just 61 out of 100 (Ocado scored only 74, having been marked down for having no cauliflowers or tomatoes, with Sainsbury coming top with an impressive
• Saturday Press: There was, inevitably, a lot of focus on “Black Friday” and the shift to Online shopping in the Saturday papers, with lots of photos of empty-looking Tesco superstores and shopping centres like Trafford Manchester, with headlines like “Blank Friday” in the Times and “Bleak Friday” in the Daily Mail, whilst the Guardian contrasted the quiet scenes in Britain with photos of the much bigger crowds of shoppers around the world, in Greece, Japan and Brazil. There wasn’t much else about Retailing in the papers, apart from the usual uncritical coverage of the wretched monthly CBI Distributive Trades survey, although the Daily Mail stockmarket report noted that Travis Perkins and Intu Properties are at risk of falling out of the FTSE 100 index in next week’s quarterly review and the “Festival of Business” supplement in the Telegraph had an interesting article about how Amazon
• Sunday Press: There was more about the disappointing outcome of “Black Friday” in the Sunday papers (eg in the Sunday Express and the Mail on Sunday, with Online sales only up by 7%), but the big story was the Sunday Times scoop that Nigel Oddy, the CEO of House of Fraser, has resigned after a row with its Chinese owner, Sanpower, and that Ray Kavanagh, the Supply Chain Director, is also about to leave. Another interesting story was that Poundland is planning to close up to 80 stores, just two months after being taken over by Steinhoff, according to the Sunday Telegraph. Apart from that, there wasn’t much else of note, although the “Inside the City” column in the Sunday Times highlighted that the used car dealer BCA Marketplace is the “Amazon of cars”, the Observer mocked the fact that Retail analysts have been bullish about Topps Tiles all the way down (the shares are nearly 50%
• JD Sports: The high flying JD Sports was in focus today anyway with its 5 for 1 share split, but it has also announced that its protracted quest to buy the Go Outdoors chain has been successful. It is thought that price was the big issue in the deal and the cash consideration of £112.3m (plus net debt of approximately £16m) looks a bit toppy, but for that they get 58 stores across the UK, the majority of which are situated in out of town retail parks. In the 53 weeks to 31 January 2016, Go Outdoors generated revenues of £202.2m, an operating profit of £6.1m and a profit before tax of £4.9m, but there will be good synergies with the existing Outdoor Sports business of JD, namely Blacks and Millets and its fledgling Ultimate Outdoor chain (which has 6 stores).
• Dunelm: As flagged by Sky News over the weekend, Dunelm has also announced an acquisition this morning, namely the loss-making World Stores Online Homewares business. It is buying it from the administrators, so something has gone wrong (showing that high Online valuations aren’t always justified…), with the £8.5m purchase price a fraction of its £100m turnover…
• Ocado Warehouse Watch: We are grateful to the “Markets Live” webcast on FT Alphaville for pointing out that at 11.30am on Friday Ocado put out a brief RNS announcement to flag that their third warehouse, the Andover CFC, had gone live at last (“Customer orders have been picked and delivered from the site starting earlier this week and we expect volumes will increase over the coming months”). Notwithstanding the pithy comment by the FT’s stockmarket correspondent that “I’m not sure opening a thing that they said they’d open at the time they said they’d open it, which adds a bunch of idle capacity that they’ll have to fill up with “your first five orders for just £50” tokens, is entirely significant to the investment case”, we recall that back on 28 June with the interims Ocado said that “The testing of our new proprietary modular, scalable physical fulfilment solution and software
• News Flow This Week: Today is so-called “Cyber Monday”, so the discounting goes on…Tomorrow brings the Topps Tiles finals and the Motorpoint interims. The monthly GFK Consumer Confidence index is out first thing on Wednesday and the FTSE Quarterly Index review comes out last thing on Wednesday. The McColl’s Q4 update and the ASOS AGM are on Thursday, whilst the DFS AGM is on Friday.