Langton Capital – 2017-03-17 – Easter, the Big Days, St Pat’s Day, delivery, costs & other:
Easter, the Big Days, St Pat’s Day, delivery, costs & other:
A DAY IN THE LIFE:
I think I’m suffering from anatidaephobia.
That’s the irrational fear of being stared at by ducks but, as we keep ducks, whether it’s irrational or not is up for debate because I would contend that they follow me around with their eyes all the time.
Which, I suppose, is understandable as I both feed them and steal their eggs.
And they seem to suspect (and not without good reason) that I wouldn’t be above eating one of them from time to time if I got peckish in which case keeping a beady eye on me makes a lot of sense.
However, until they put on another 50lbs or grow nasty big teeth, I’m not going to let their staring put me off my morning tea. But those eyes. Those eyes…
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On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Big Days are holding up for the on-trade. But it’s worth remembering that Easter moves into April this year. Hence September year end pub companies, and there are a few of them, will see Easter income shift into H2 this year compared with H1 last year. Interestingly March year end companies, for example Young & Co and Fuller’s, will have no Easter trading in FY17 at all. They may have two in FY18 as Easter Sunday that year is on April Fool’s Day.
• CGA’s Trading Index suggests that Britain’s pubs, restaurants and bars are poised for a sales boost today in celebration of St Patrick’s Day. Average sales of draught beer through pubs, restaurants and bars increased by 86 pints on St Patrick’s Day last year, while sales of draught stout rose by 56 pints – providing two-thirds of the total 38.8% uplift in alcoholic drink sales on Ireland’s national day.
• Having a big venue is necessary if you want to shoot the lights out on Big Days. However, it can feel lonely nursing a pint in an empty monstrous shed on a Monday lunchtime. Getting the balance right is important. Movable partitions may be going a bit too far – but at least the furniture could be moved around a bit.
• Nando’s has begun to trial its own delivery service in the UK at a London site and plans to introduce the service to more sites in the coming months, per MCA. ‘Nando’s Delivery’ can be accessed on the group’s website www.nandos.co.uk/delivery, at which point orders will be delivered by third party delivery companies. FlyPay’s Flyt platform is being used to process orders.
• Northern cities are enjoying a boom in independent restaurant openings, according to hospitality trade show Northern Restaurant & Bar (NRB) commissioned research. Growth in cities like Leeds and Newcastle is outstripping traditional hotspots such as London and Edinburgh thanks to cheaper costs and wider availability of sites.
• Government ministers have told the agricultural community that there has been ‘no evidence’ to date that migrant labour has been hard to find. Hum. More of the ‘don’t be a precious snowflake’ medicine?
• Alix Partners’ and CGA’s Market Growth Monitor report shows that the numbers of branded food pubs and restaurants have continued to grow despite fierce headwinds. Casual dining operators had another strong year of growth in 2016 and ended the year with 20.9% more restaurants than it did at the end of 2011. Major pub groups also ensured another year of expansion for branded food pubs as they continued to transform struggling wet-led sites into destination food-led ones. Much of the growth has come from suburbs and regional cities. The latest Coffer Peach Business Tracker recently showed like for like sales growth of 1.7% for managed pub and restaurant groups in February 2017.
• The robust figures are tempered by a more cautious industry outlook, however, and ‘it is no surprise to find that the licensed sector contracted slightly in 2016’ as a result of rising costs, according to CGA Peach vice president Peter Martin. Meanwhile, AlixPartners managing director Paul Hemming warned: ‘The pressure on independent operators and smaller groups is intense. Faced with fewer cost saving options, less operational experience and often cash constraints, the future looks tough… The sector is clearly not for the faint hearted but this type of environment simply drives a more marked divide between the winners and losers.’
• Grey market strong, offers need to evolve.
• Dept. for Work & Pensions says pensioners 10% better off than they were a decade ago but incomes stagnant for working age consumers
• Deliveroo is set to open a Roobox in Brighton & Hove, making it the company’s first outside of London, the MCA reports. Deliveroo will open the site in collaboration with Gourmet Burger King and Thai Leisure Group.
• The pizza restaurant chain, Homeslice, is set to open further sites in 2017, focusing firstly on London but with the possibility of broader UK expansion.
• BrewDog, the Scottish-based brewer and pub operator, is considering a potential IPO, which would see almost a third of the company being sold. BrewDog has stressed that shares would be priced at a minimum of £765. The company also plans a fifth round of Equity for Punks crowdfunding campaign later in 2017.
• Amazon is to introduce a free beer and wine 2-hour delivery service in the US. Prime members with orders exceeding $7.99 will be guaranteed a 1-hour delivery slot. This service will only be run in Cincinnati and Columbus, Ohio, but is expected to be rolled out more broadly in the near future.
• Trade bodies have joined JD Wetherspoon chairman Tim Martin in asking operators to back the return of Tax Equality Day, which aims to highlight the benefit of a VAT reduction in the hospitality industry. Each of JDW’s 900-plus pubs in the UK will be cutting the price of all food and drink by 7.5% on 20 September. Martin said: ‘We’re aiming to make it the busiest day of the entire year in our pubs and would urge other pub and restaurant operators to participate too.’
• Bank of England sees ‘weaker real incomes growth’ of ‘a few years’.
HOLIDAYS, LEISURE TRAVEL & HOTELS:
• Phoenix Equity i& Bridges Ventures have placed their remaining equity in The Gym Group at a price of 175p per share to raise £68.5m. The investors said yesterday ‘the disposal will be through a placing of 39,136,669 existing ordinary shares in the Company (the “Placing Shares”) to institutional investors by means of an accelerated bookbuild offering process (the “Offering”), which is to begin immediately. A further announcement will be made following completion of the bookbuild and pricing of the Offering.’ The Placing amounts to c30.5% of the issued share capital of the Company. The vendors say ‘following completion of the Offering, none of the Sellers will hold any ordinary shares of the Company. The Company will not receive any proceeds from the Offering.’
• Atol-licensed Diamond Shortbreak Holidays Ltd has ceased trading due to ‘financial difficulties’. The operator has 7,000 forward bookings comprising around 16,000 passengers.
• STR data claims that, for the 5-11 March 2017, the US hotel industry saw positive performance in the three KPI metrics. With occupancy +0.8% to 67.4%; ADR +3.9% to $128.61 and RevPAR +4.8% to $86.72.
• A decrease in passengers in 2016 has led to Eurostar reporting an operating loss of €28m (£25m). Terror attacks in 2015/6 contributed to a 4% drop in passengers to 10 million, with revenue down 3% to £794m. However, the company had a strong end to 2016 which carried on into 2017.
• Industry leaders claim that the abolition of credit card charges will present a big threat to operators and agents. The EU Payment Services Directive will come into action in January 2018 and will ban some current practises, such as agents charging an additional 2% credit card fee.
• Karen Bradley, the UK’s culture secretary, has called for an examination of Fox’s takeover bid for Sky. Rupert Murdoch’s company is attempting to buy a 61% share in Sky for £11.7bn and said it was ‘confident’ the deal would go ahead.
FINANCE & MARKETS:
• Bank of England policymakers voted 8-1 yesterday to keep UK rates at 0.25% and unanimously to keep QE at £435bn. The Bank minutes reveal ‘as the MPC had observed at the time of the UK’s referendum on EU membership, the appropriate path for monetary policy depends on the evolution of demand, potential supply, the exchange rate, and therefore inflation. The Committee expects a slowdown in aggregate demand over the course of this year, as household demand growth declines in reaction to lower real income growth.’
• Bank says ‘official estimates of retail sales have weakened notably.’
• Bank comments ‘it is possible that slowing consumption may be offset to some degree by other components of demand, such as a more supportive net trade position following last year’s fall in sterling and the recent pickup in global momentum.’
• Bank says major adjustment to come. Low interest rates alone will not do the job. It says ‘monetary policy cannot prevent either the real adjustment that is necessary as the UK moves towards its new international trading arrangements or the weaker real income growth that is likely to accompany it over the next few years.’
• Bank suggests its hands are tied. If it acts to head off inflation, it could do this ‘only at the cost of higher unemployment and, in all likelihood, even weaker income growth.’
• MPC dissident member was Kristin Forbes.
• US homebuilding stats strong, new claims for unemployment benefit down. Further rate rise in June likely
• Red, White & Blue Brexit. But without the Blue?
• PM Theresa May has said she will not allow another Scottish referendum on independence until after Brexit
• German finance minister Wolfgang Schaeuble has said a strong financial centre in London is in the interests of the EU
• Toyota has announced that it is to invest £240m in its UK operations, specifically at its Derby plant
• Brent down at $51.77
• Sterling up a shade vs US$ at 123.55c and against the Euro at 114.67c.
• UK 10yr gilt yields up from 1.21% to 1.26%
• World markets. UK & Europe higher yesterday as FTSE100 hit new records. US markets down. Far East mostly up in Friday trade
• Later tweets: Rapid Hammond rout on NIC manages to make John McDonnell look decisive, focused. And that’s a very, very big ask…
• B o England won’t put rates up. Got a house party to keep going. Run out of gin, beer etc. Now time to imbibe cooking sherry, mouthwash
• Biggest reason B o E won’t put rates up? Because it can’t. Not without crashing consumption, that is. Tight spot, Mark, tight spot
• Rates at 0.25%. A starving body feeds on itself. May stay alive but permanent damage can result. Ask Schauble
• Tight labour market, Sterling down, input prices up. Result? Inflation. Remedy? Put interest rates up. Get yer text books out, Mark…
• Easter hiccup. It’s in April in 2017. So Sep y/e companies will see it move to H2. And March companies won’t have an Easter at all in FY17
• USA restaurant LfLs down again in Feb. Their economy’s fine (ask Janet) so it’s down to overcapacity. Lesson to be learned??
RETAIL NEWS WITH NICK BUBB:
• BDO High Street Sales Tracker: We flagged on Wednesday that the shift of Mother’s Day helped 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 March 12th was better, with Fashion Store LFL sales up by 3.5% against last year, boosted by a very weak comp. Including Homewares and Lifestyle chains, total Store LFL sales were up by 3.9%, but overall Online sales were up by as much as 37.0%, albeit against a very soft comp.
• Trade Press (1): In Retail Week magazine today the front cover is a photo of the top fashion model Liya Kebede, flagging a feature on “Will Amazon fashion take off in the UK?”, noting that Amazon is already the 22nd biggest UK fashion retailer. RW also has features on the main talking points from last week’s Retail Week Live conference and a look back at Retailing’s most famous rebrands (eg Chelsea Girl/River Island). In terms of News stories, RW focuses on the news that Asda has offered all of its 135,000 store staff a pay increase to £8.50 per hour (as it ushers in more “flexible” contracts) and that the veteran French Connection boss Stephen Marks is facing calls for the business to be split up. A week ago Retail Week magazine got to us late, but it had full details of all the winners in the annual Retail Week Awards (the front cover featured a photo of the resplendent John
• Trade Press (2): In Drapers magazine today the Editor looks in her column at the beleaguered French Connection and thunders that “It’s time for Marks to let go of the reins”. And one of the main News stories is that French Connection faces a break-up call from activist investors, but Drapers also reports that Scottish retailers have “lashed out” at plans to hold a second Referendum on Independence from the UK (complaining that it will create added uncertainty and hinder trading), Next’s Womenswear product director Una Joyce has left the business and Blue Inc’s landlords will vote for a CVA with “gritted teeth”. Drapers also has a special Property report, focusing on the outlook for the West End.
• News Flow Next Week: The big event next week is the Next final results on Thursday, as CEO Simon Wolfson’s view of the economic outlook will be eagerly awaited, but on Wednesday the Anglo-French DIY group Kingfisher will be in the spotlight with its finals (after its main rival Bunnings/Homebase confessed on Monday that it had lost UK market share in kitchens and bathrooms). Tuesday bring the ScS interims, whilst Thursday also brings the Ted Baker finals and the ONS Retail Sales for February.
• Selco Watch: At Monday’s presentation to analysts by the new Aussie management parachuted in from Bunnings “down under” to run the struggling Homebase DiY chain, we recall that Selco was put up as an example of a Builder’s Merchant/DIY group that is expanding. Well, we must confess that we’d never heard of Selco, but we saw one of their delivery lorries yesterday and then found out that Selco was purchased by the big Irish builder’s merchant and DIY group Grafton Group in 1998. The name Selco originated in 1982 from a family business called Sewell & Co (Timber) and the fast-expanding rival to Travis Perkins now has nearly 50 branches.
• TIPS Watch: The great Cheltenham Festival jumps racing continues into its fourth and final day today and our alter ego, “Honest Nick”, is again bringing you his each-way Tips. Now, the great Irish trainer Willie Mullins had a great day yesterday, with no less than 4 winners and he has another 11 runners today, so he might yet end up beating his great Irish rival Gordon Elliott to be the leading trainer at the Festival. Like the current champion UK trainer Paul Nicholls, however, we are still trying to find a winner, even if place money has just about kept us alive…Yesterday the wholly admirable Top Notch came 2nd at 7-2 in the 1.30, but Art Mauresque was only 8th in the 4.10 and Southfield Royale fell in the 5.30…The big race today at 3.30, the Gold Cup, is best just watched as a fantastic