Merlin, Restaurant Group, AB InBev, evolution & other:

A DAY IN THE LIFE:

I think that I occasionally suffer from ‘inbox-shock’.

You know, the malady that has you opening your inbox after a few days (or heaven forbid, a week or two) of not clearing emails to find that you have a couple of hundred requests, offers and random bumph at least some of which you must (or at least should) respond to.

Of course, you can thin these down.

You might find your trash-folder has a couple of hundred more already but you can bin many daily newspaper updates, media offers, RNSs & marketing updates (new table cloths in our Welwyn café, tile off the roof in Stoke etc.) but you will always run the risk of deleting something important.

Though here one should get real, acknowledge that the world is not simply full of bit-part players in your own drama and that if a company had a profit warning a fortnight ago, the world probably knows about it already.

But nonetheless, this is a real issue. It’s right up there with Brexit depression, Trump Phobia and what-the-hell’s-going-on-itis as one of the true issues of the day. On to the news:

RESTAURANT GROUP’S NUMBERS NEXT WEEK:

• Restaurant Group reports next Wednesday; will it cut its dividend?

• RTN: Our belief is that the group will cut its payment next week because, with a new Chairman, CEO and CFO, why wouldn’t it?

• The group’s shares are down 40% in the last 12mths on the back of 3 (or was it 4?) profit warnings.

• Shop closures, boarded up (but still rent-paying) sites, lower margins, remodelled sites & menus etc. don’t come without cost

• RTN options:

o Hold the dividend (an arbitrary number foisted upon the co by the previous (and now out of favour) management)

o Pass the dividend altogether.

o Cut the pay-out. We consider this the most likely outcome.

• RTN: Mechanics of a dividend cut. Perhaps pass the final altogether. Say that, in calendar 2017 the dividend will be around 40% of earnings (which are meant to be c21p) and that it will be paid one third, two thirds between the interim & the final.

• RTN outcome. This would have the co cutting its dividend (FY17 estimate) from about 16.2p to around 8.5p.

• RTN outcome. A c50% dividend cut would acknowledge what the market already knows. There’s work to be done & a halving of value looks about right

PUB, RESTAURANT & DRINK MANUFACTURERS:

• IEA research shows that when measured by ‘edible weight’, healthier food in supermarkets tends to be cheaper than less healthy food.

• BrewDog is launching a campaign for ‘the world’s first crowdfunded craft beer hotel’ on Indiegogo.

• Sussex based brewery, Bedlam, launches new bottled pale ale. Head brewer Fabio Israel explained the beer has taken inspiration from the modern generation of American Pales.

• Sales of Prosecco will surpass 412 million bottles by 2020 and will ‘take over from discounted Champagne’, according to Vinexpo CEO Guillaume Deglise. A biennial study by Vinexpo and the IWSR into global wine and spirits trends hints at the expansion of the sparkling wine market worldwide. Revealing IWSR forecasts that sales of sparkling wines (including Champagne) will grow by 8.6% to total 240.4m 9l cases by 2020, up from 221.3m in 2016, Deglise said that ‘the big trend is Prosecco, which will definitely drive sparkling wine growth for the future’.

• New data from Vinexpo has predicted wine sales to increase by 39.8% in China over the next three years, which means it would become the second largest market behind the US. Vinexpo CEO, Guillaume Deglise, stated that China’s wine sales will overtake that of the UK and France by 2020, reaching $21.7bn (US wine sales are predicted to reach $36.6bn).

• Yorkshire Tea has undertaken its largest ever advertising campaign, spending £7m. The campaign will focus on TV ads, and will try to increase the relevance of black tea among a younger audience.

• Jamie Oliver is to close his remaining Union Jacks pizza restaurant in London’s Covent Garden Piazza.

• ETM Group has appointed ex-Tragus CEO Graham Turner as its non-executive chairman. ETM co-founder Ed Martin said: ‘We’re thrilled to have Graham joining our board as we move into the next phase of ETM’s development and look to increase our estate as well as invest in our current portfolio.  Graham’s extensive leisure experience will be invaluable in helping us deliver the ambitious growth plans that we have for the business’.

• AB InBev boss Carlos Brito will not be paid a bonus for the first time in 8yrs on the back of disappointing numbers unveiled yesterday

SURVEYS, SURVEYS, SURVEYS…

• PwC CEO survey shows UK CEOs’ confidence in the global economy continues to decline. Globalisation in retreat

• CEO survey: CEOs either more pessimistic or more realistic than the population as a whole

• CEO survey: Shows ‘17% of UK CEOs expect global economic growth to improve over the next 12 months – that’s down from 30% last year, and well below the global figure of 29% who think growth will improve.’

• CEO survey: Bosses are confident in prospects for their own company – but cautious on the economy as a whole. Twas ever thus.

• CEO survey: PwC says ‘the impact of the uncertainty springing from the prospect of Brexit is clear.’ Asked to list their fears, UK CEOs rank uncertain economic growth top at 84% (compared to 82% among all CEOs globally), exchange rate volatility second at 82% (against 70% globally), and the future of the Eurozone third at 78% (against 56% globally).

• IFS on living standards: The Institute for Fiscal Studies has said that UK consumers are in for 2 more years of stagnant real pay as inflation rises & wages do not

• IFS survey: Says the squeeze may come as a surprise. Says growth has slipped from trend. Cumulative earnings loss could be nearly 20% over 2 decades.

• IFS survey: Says ‘following on from the deep recession and already-tepid recovery, this would leave median household income in 2021–22 18pc lower than might reasonably have been expected back in 2007–08, based on the long-run trend growth rate of almost 2pc per year.’

• IFS survey: Warns Brexit will lead to biggest squeeze on real incomes in 70yrs. Who needs experts?

• IFS survey: Says pensioners will be OK but the working poor could be worst hit.

HOLIDAYS & LEISURE TRAVEL:

• The U.S. hotel industry reported occupancy growth of 2.3% to 65.6% during the week of 19-25 February 2017, while average daily rate rose 3.7% to $124.37 and revenue per available room increased by 6.1% to $81.56.

• Gatwick is planning to make more than 1,000 summer jobs available this year, a 40% increase from last year’s figure. These jobs will be offered in the shops and restaurants in the airport’s terminals as it prepares for a record breaking summer.

• Cityjet has stated that it is to cut staff and routes in a new restructuring plan of London airports. Executive chairman Pat Byrne commented that the airline is to reduce its city crew as it looks to further develop its wet lease strategy.

OTHER LEISURE:

• MERL shares slipped about 3% yesterday (albeit from all-time highs) on confirmation that trading is challenging.

• MERL repeated its earlier-stated view that much of the uptick in London visitor numbers was from friends & family visitors. Wherever many of these visitors were going, it was not into the nearest Mme Tussaud’s

• MERL updated saying that visitor numbers in Nov & Dec were of a higher quality. They were spending money

• MERL points out that, reporting in Sterling and earning the bulk of its revenue in foreign coin as it does, Sterling weakness is helpful in translation

• MERL suggests low Pound will suck in more London visitors. Suggests also that Paris terrorism fears are abating

• Snap Inc’s (SNAP.N) shares ended up 44 percent on their first day of trading despite some concerns over the loss-making messaging app company’s slowing user growth.The stock closed at $24.48 on the New York Stock Exchange on Thursday, well above the initial public offering price of $17 per share on Wednesday, giving the company a market value of $28.3bn.

FINANCE & MARKETS:

• CBI says leaving EU without a trade deal would be ‘irresponsible’. PM Theresa May suggests no-deal is an option

• Budget next week. Economy’s public finances are better than feared. Albeit on the back of puffed up consumer spending & personal borrowing against an uncertain future & into the teeth of what at some point must be rising interest rates

• Yorkshire Building Society has suggested that Stamp Duty should be levied on sellers rather than buyers in order to encourage first-time owners to buy houses

• US Fed’s Jerome Powell has said that the ‘case for a rate increase in March has come together’. Odds are now heavily in favour of a rise when the Fed meets on 14 and 15 March.

• Eurozone inflation hit 2% in Feb up from 1.8% in Jan

• UK construction PMI rose to 52.5 in Feb from 52.2 in Jan

• Eurozone unemployment held steady at 9.6% in January

• Bret $55.20 (was $56.15)

• Sterling down a shade. Trading at 122.57 vs US$ (was 122.77) and 116.53 vs Euro (was 116.56)

• UK 10yr gilt yield up a little at 1,21% (was 1,20%)

• World markets. UK down yesterday but Europe up. US higher & Far East mostly higher in Friday trade

YESTERDAY’S TWEETS:

• Later tweets: Cocoa down 32% in US$s in last 12mths with coffee+51%. Time to switch bedtime drinks?

• Odds now c80% on March rate rise in US. Long march upwards for rates continues. Reflation trade back on. Feb bond yield falls reversing

• Consumer credit growing in UK at 10.3% annually. Inflation & wage growth around one fifth of that rate. Not sustainable

• Dixons out of FTSE despite Carphone merger. Says a lot about impact of online sales on market caps of the majors

• Boots cuts 400 photo-processing jobs. Surprising there are any jobs left in photo-processing to cut? Change & evolution the only constants

• Restaurant Group FY numbers Weds; will it cut dividend? We think yes because, with new chairman, CEO & CFO, why wouldn’t it?

• RTN divi. cut likely in sea of red ink? Retail parks slower, online sales eroding footfall. Branding issues to address, margin to slash etc

• IFS says this is weakest period of income growth in 60yrs. Poorest to be hit worst. Incomes c18% lower in 2021 than expected in 2008

• Travis Perkins points to cost increases & weaker outlook. Cautions that big ticket spending is sensitive to (weakening) confidence

RETAIL NEWS WITH NICK BUBB:

• BDO High Street Sales Tracker: We flagged on Wednesday that the shift of the Debenhams “New Season Spectacular” Sale from last week to this week hurt trading at John Lewis last week and today’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains also flags that w/e Feb 26th was weak, with Fashion Store LFL sales down by 4.5% against last year (although reduced footfall is blamed on “poor weather in the form of Storm Doris”). Including Homewares and Lifestyle chains, total Store LFL sales were down by 3.5%. Interestingly, overall Online sales were up, but by only 11.5%, much less than the usual 20% growth.

• Today’s Press and News: The big news is that the embattled Mike Ashley (and Sports Direct, via the Four Marketing vehicle) has swooped on the bankrupt Agent Provocateur lingerie chain in a controversial £31m pre-pack deal that the Agent Provocateur founder Joe Corre has branded “a stitch-up”.

• Trade Press (1): The front cover of Retail Week magazine today is a photo of a happy-looking John Roberts arm in arm with his successor as CEO of AO.com, Steve Caunce, flagging up a feature interview with the low-profile new boss on the back of the recent investor trip to Germany. In terms of News stories, RW focuses on the news that the embattled Philip Green has agreed a £363m BHS pension settlement, Tesco is to axe 1700 deputy managers in its convenience store business, Staples’ 106 UK stores are being renamed Office Outlet by new owner Hilco Capital and Morrisons has extended its Nutmeg kids clothing range into womenswear. In his column the Editor compares the Tesco job cuts with the recent John Lewis job cuts and thunders that “the painful decisions by John Lewis and Tesco are the right ones”, but he also looks at the success of Boohoo and says “Hats off to fashion etailer
Boohoo, which this week said sales and earnings will come in at the top of expectations”.

• Trade Press (2): In Drapers magazine today the Editor highlights in her column the churn of senior staff within Arcadia of late and flags up an article on how even Topshop (“the jewel in Arcadia’s crown”) is finding it harder to stay ahead of the pack. In terms of News stories, Drapers focuses on the recent departure of 3 senior Arcadia directors (“Change at the top of Arcadia fascias raises questions”), but it also flags up how bullish John Bason, the CFO of ABF, is about Primark:  “Our like-for-like growth in the UK is extremely welcome given that like-for-like sales fell at the end of last year, which people said was because of our lack of ecommerce. We’re overcoming the margin difficulties from the weakness of sterling and we’re in good shape”.

• News Flow Next Week: A busy week kicks off on Tuesday morning with the BRC-KPMG Retail Sales figures for February, closely followed by the latest monthly Kantar/Nielsen Grocery market share figures. On Wednesday, we get the Lookers finals, the start of the big “Retail Week Live” industry conference in London and the Budget. And then Thursday brings the Morrisons finals, the John Lewis Partnership finals and the Signet Q4 results, plus the prestigious “Retail Week” Awards in the evening.