Langton Capital – 2016-12-21 – Carnival, current trading, inflation, Brexit & other:
Carnival, current trading, inflation, Brexit & other:
A DAY IN THE LIFE:
You know the day’s going to start slowly when you realise there’s no toothpaste in the house, somebody’s hidden the towels and when the first thing you do when getting dressed is put your foot straight through the bottom of your sock.
And then the dog wants feeding, the ducks have got their knickers in a twist and you didn’t fill the kettle the night before.
The tea’s ran out, the box has still got the cellophane on it, you’ve just cut your fingernails, you can’t find a pair of scissors and the milk’s run out.
And then one of the bulbs blows in the home office. It plunges the house into darkness, you can’t find the fuse box and the dog decides you’re a familiar-smelling burglar and tries to savage your ankle at least in part because he thinks you won’t know it was him in the dark.
Then you switch your laptop on and, guess what, configuring updates. Lovely.
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WHEN FOOD CRITICS GO VIRAL: YOUTUBING ‘THE PENGEST MUNCH’
Younger consumers mean you cannot ignore the internet…
• ‘Online’ isn’t just a buzzword, it’s a key battleground. Social media (when navigated correctly) is a potent asset.
• A canny young food critic called The Chicken Connoisseur has popped up on Langton’s news feeds, prompting a lively discussion on the pengest munch (essentially, good food).
• When even the budget chicken shop experience is so critically deconstructed, perhaps it is time to accept that online reviews cannot be ignored.
The online Petri dish:
• Digital culture and trends evolve rapidly. With the advent of the internet everyone can be a critic, and a lot of us are.
• The overnight popularity of the Chicken Connoisseur reminds us that younger age groups often shape long term trends.
• Research from Cardinal suggests that some 19% of customers look at a pub’s website before visiting.
• This number may be higher for bars and restaurants with a younger mix.
Still a worthwhile investment for those late to the game
• Some 80% of the UK’s c52,000 pubs are rural and there are 19,000 independents in the market.
• There is still a flow of applications for various pubs to be turned into Assets of Community Value (ACVs), suggesting that many find current conditions tough.
• A coherent, linked up offer (across website, Twitter, Facebook, Instagram, Pinterest et al.) is a valuable way of connecting to cash-strapped younger generations who can be so vital to word-of-mouth trading momentum and yet are proving notoriously difficult to prise away from their Netflix accounts.
PUB, RESTAURANT & DRINKS PRODUCERS:
• The ALMR and CGA Peach’s Future Shock concludes that Brexit and rising costs will present on-trade operators with challenges next year but there are also causes for optimism. New openings growth, technology and the Night Tube are among the reasons to be optimistic, although operating costs now account an average of nearly half (47.7%) of turnover, and the industry is faced with rising property and staff costs.
• CGA Peach business unit director Jamie Campbell commented: ‘It has not been an easy ride for operators in the eating and drinking out markets in 2016, and CGA Peach’s research shows that any growth is hard won in an intrinsically flat market. And with the seismic shock of Brexit yet to play out in full, and property and staff costs still rising, conditions aren’t likely to get much better in 2017.
• ‘But as Future Shock shows, there are still plenty of growth opportunities for the leading brands over the coming year. By good use of technology, smart marketing and giving consumers the food, drinks and experiences they want—plus, crucially, some support from government over industry issues—operators can look forward to 2017 with optimism.’
• Olive Garden reports LfL sales beat casual dining sector by >5% as parent co Darden Restaurants says it attracted customers with value offerings and to-go service. Sales in 842-strong Italian themed chain +2.6% in Q2 to end-Nov. CEO Gene Lee says ‘our approach continues to be effective. But we still have opportunities to improve in all aspects of the business.’
• JDW bought back 60k shares at c860p on Monday
• Punch CEO Duncan Garrood says 2017 will bring change and opportunity thanks to major developments including the pubs code and Brexit. Garrood told the PMA: ‘As we step into the new year we look at ways in which Punch can continue to support and reassure both our publicans and our staff. With the success of the workshops we held for our licensees throughout this year, these are set to continue next year as we offer more provision on a range of aspects, including the options available to tenants when their lease is up for renewal.’
• Sales of fortified wine in the UK have more than halved in the past ten years, while the duty paid on them has almost quadrupled, according to figures from the WSTA. In 2005 over 61 million litres (600,000 hectolitres), the equivalent of just over 82 million bottles, of fortified wines were sold in the UK. In 2015, 26 million litres (260,000 hectolitres), or just over of 35 million bottles, were sold – a drop of 50 million bottles in a decade.
• Employers have so far resisted cutting jobs in response to minimum wage increases, with just 2% of companies having made redundancies as a result so far. The findings come from think tank The Resolution Foundation.
• UK retail sales grew at their fastest pace since September 2015 in the year to December, according to the CBI. ‘It’s encouraging to see retailers reporting another month of healthy sales growth leading up to the festive season, which rounds off a fairly solid quarter,” said Ben Jones, CBI principal economist.’ However, he added: ‘While we still expect to see decent growth in the near term, the pressures on retail activity are likely to increase during 2017, as the impact of sterling’s depreciation feeds through. With higher inflation beginning to weigh on households’ purchasing power, consumption patterns are likely to shift, creating winners and losers across the retail landscape.’
• Coca-Cola has launched a designated driver marketing campaign and is offering drivers a ‘buy one get one free’ deal at a number of pubs.
• Weetabix remains in talks over the threat of strikes in the new year over shift changes at its sites in Corby and Kettering.
• Sainsbury’s says one third of its shoppers began stocking up on mince pies and Christmas puddings over four months ago.
LEISURE TRAVEL & HOTELS:
• easyHotel has acquired the 999-year leasehold of a site at 57-65 High Street in Sheffield subject to obtaining planning permission. The building, previously occupied by a Primark department store, is to be developed into a mixed-use property with 131 easyHotel rooms and is expected to open in 2018. The total cost of the purchase and conversion of the building will be approximately £6m.
• Guy Parsons, Chief Executive Officer, commented: ‘We are delighted to be investing in Sheffield, a key northern powerhouse city which has received significant inward investment. Sheffield is the fourth largest city in England, a major centre of engineering and creative & digital technologies, home to sport venues such as the Hillsborough stadium and The Crucible and has two major universities. Attracting nine million visitors per year, the dynamics of the city make it very attractive location for a new easyHotel, which will be ideally situated to service both business and leisure visitors.’
• Carnival FY & Q4: Reports adjusted net income $2.6bn or $3.45 EPS vs $2.1bn or $2.70 EPS for the prior year
• CCL FY. Reported FY net income $2.8bn or $3.72 diluted EPS vs $1.8bn or $2.26 diluted EPS for the prior year
• CCL FY. Says ‘4Q net revenue yields in constant currency increased 4.1% compared to prior year, better than September guidance of up approximately 3%’.
• CCL FY. Re outlook ‘cumulative advance bookings for first 3Qs of 2017 are well ahead of prior year at considerably higher prices’
• CCL FY. Says re 2017 ‘net revenue yields in constant currency are expected to be up approximately 2.5% compared to the prior year’
• CCL FY. Re 2017 says ‘adj. EPS is expected to be in the range of $3.30 to $3.60, compared to FY 2016 adjusted EPS of $3.45’. President and Chief Executive Officer Arnold Donald commenting on these results said ‘we achieved the most profitable year in our company’s history as well as record fourth quarter earnings. The continued execution of our core strategy to drive consumer demand in excess of measured capacity growth, contain costs and leverage our industry-leading scale resulted in our third consecutive year of significantly higher earnings and return on invested capital.’
• CCL FY. CEO says ‘we enjoyed strong momentum in booking patterns throughout 2016 and therefore are in a stronger booked position entering the new year at higher prices as a result of our ongoing efforts to increase consideration and demand for our brands.’
• CCL FY. CEO concludes ‘we are anticipating another solid year of operational improvement in 2017. Despite the unusual and significant impact of fuel and currency working against us simultaneously, the underlying strength in our fundamental business leaves us well positioned to achieve sustained double digit return on invested capital and to create continued value for our shareholders.’
• Marriott’s Arne Sorenson to be presented with Lifetime Achievement Award in March. Tess Pearson, Event Director, Questex Media Group, host of IHIF said ‘Arne Sorenson is a uniquely inspirational leader and true friend of IHIF. He has navigated Marriott through extremely challenging economic times and led the recent acquisition of Starwood to create the largest hotel company in the world. Providing leadership that is both reassuring and assertive is a skill only achieved by a few and Arne consistently demonstrates this in the management of the company and to Marriott associates around the world.’
• easyJet says it is monitoring the situation in Berlin following this week’s suspected terrorist attack on a Christmas market which left at least 12 dead and almost 50 inured.
• Marriott intends to differentiate its eight luxury hotel chains and will focus on integration and brand clarity in the coming year.
• Uber Q3 net revenue hit $1.7bn but continues to report an operating loss as it invests heavily in new technologies and initiatives.
• The airport baggage handlers’ and check-in staff’s planned strikes for Friday and Christmas Eve has been called off. Unite members voted by 62.5% to reject a 4.65% pay rise from 2015 to 2017, which the union said ‘barely’ kept up with inflation.
• Uber lost more than $2bn in the first nine months of the year as it poured money into expanding its taxi-hailing app across the world.
FINANCE & MARKETS:
• US$ hits 14yr highs. Prospect of higher interest rates sucking in money.
• UK PM Theresa May has said she will address the needs of industry once a deal on Brexit has been struck. Possibly the wrong way round.
• CBI warns business faces ‘confusion’ over post-Brexit regulation.
• PM May declines to say will give Parliament a vote on Brexit.
• Chancellor Hammond says a transitional period would be helpful as others say 10yrs will be needed to effect exit
• World markets: UK mixed with Europe up yesterday. US markets hitting new highs with Far East higher in Wednesday trade
• Brent $55.55
• Sterling little changed vs US$ at $1.2377. Bit weaker vs Euro at just under 119c.
• Long rates up in US with 30yr money at 3.15% (+3bps). UK 10yr gilts at 1.40% (unchanged)
YESTERDAY IN A NUTSHELL – SELECTION OF TWEETS, LIVE TWEETS ON WEBSITE:
• Food solutions company PSL has reported that the price of fruit & veg rose by 2.3% month-on-month in December
• PSL says y-o-y fruit & veg prices are now some 11.35% up. It says ‘the key drivers…are currency & weather’.
• Time for ONS to structure another inflation measure, cut out some bad stuff. How about PPRI (the Prices ex-Price Rises Index)
• Private equity firm Lion Capital is in exclusive talks to buy bar chain Loungers for around £140m poss. pre-Christmas
• Just Eat chairman John Hughes has sold 235,000 shares in the company at 571.89p
• Bosses of some of London’s most popular restaurant chains have demanded help in dealing with ‘crippling’ costs
• BrewDog’s crowdcube bond is over halfway to its £10m funding target, with over £5.2m raised of the 7.5% semi-annual bond.
• Strikes are set to cause misery for travellers over the festive break
• Later Tweets: Inflation now no joke as price of veg +11% in last year, +2% in last month. Milk +5% last month. Will feed through in N Year
• Chart nutters say market a buy (or sell?) because of long-legged rising doji candle. Whatever that is. I must’ve been twagged that lesson
RETAIL NEWS WITH NICK BUBB:
• Retail Sales Watch: We noted last Friday that the bumper ONS Retail Sales figures for November were boosted by improbably strong 18.5% growth for “Small Retailers” and that left the BRC scratching its head: it used a lengthy press release thundering that “Whilst we agree that sales have been solid in the post-referendum world, neither our own figures nor our conversations with people in the industry suggest that we’ve had quite the boom suggested by the ONS in recent months”. The ONS reported total sales up by 6.1% in November, whereas the BRC-KPMG measure of growth was only 1.3%…So who was right? Well, the new consultancy group, Retail Economics (RE), which is run by the estimable Richard Lim (who used to be in charge of the monthly BRC-KPMG Retail Sales survey), has come out with its overview and their estimate is that gross Retail sales rose by 2.8% last month, year-on-year
• John Lewis Partnership Sales Watch: Moving on to how December is going, we also flagged last Friday that the calendar timing of Christmas Day falling on a Sunday (rather than a Friday) this year is holding reported sales back at that great bellwether of the High Street, John Lewis. And although last week saw absolute sales step up well from their post-Black Friday slump, John Lewis saw gross sales edge up by only 0.4% against last year in w/e Dec 17th (over 1% down LFL). Home sales were 1.3% down in gross terms and Electricals sales were 0.6% down gross, but Fashion sales were up by 2.6% gross. Over the last 20 weeks, gross sales at John Lewis are now running 3.3% up (c1.5% up LFL), with Electricals sales running up by 6.4% gross. Over at Waitrose, sales were also held back year-on-year by the calendar, with gross sales 1.7% down (nearly 5% down LFL) in w/e Dec 17th. Over the last 20
• CBI Distributive Trades Survey: It may not have escaped your attention that December (the 5 weeks to January 1st) is not over yet, so yesterday’s wretched CBI Distributive Trades survey for “December” needs to be taken with a huge pinch of salt, even though the +35% “percentage balance” was much better than the +20% expected (which means, just to be clear, that 51% of the mere 53 retailers in the survey said that sales volumes were up, whilst 16% said they were down…). Ben Jones, CBI’s Principal Economist, said: “It’s encouraging to see retailers reporting another month of healthy sales growth leading up to the festive season, which rounds off a fairly solid quarter”.
• Today’s Press and News: Rather thin pickings in the papers again today, in terms of Retail stories, but there is quite a bit of uncritical coverage of the latest upbeat CBI Distributive Trades survey (see above), whilst the Telegraph flags that High Street retailers are cutting off “click and collect” facilities to prevent chaos in shops before Christmas. There are a few snippets about the CMA go-ahead for the acquisition by McColl’s of 298 convenience stores from the Co-op and the news that The White Company has reported another record year after posting a 51% rise in earnings for y/e March. The market report in the Times notes that UBS think that more “normal weather” should be boosting full-price sales for Fashion retailers and that M&S could surprise on the upside with its gross margins at Christmas. Finally, the Evening Standard last night highlighted that Imperial College
• News Flow This Week: The monthly GFK Consumer Confidence survey is out first thing on Friday.