Coffee shops, new openings, air travel, Marriott & other:

A DAY IN THE LIFE:

There are often too many variables in the market to find a ‘reason’ as to why something happened.

Accepted, when rates go up unexpectedly or when an incident moves sentiment sharply, then it’s somewhat easier to ascribe a cause to an observable effect but, on a day to day basis, there’s often little going on.

Hence, as market commentators have a lot of copy to file, it’s often a case of ‘observe event, establish reason’ as in ‘the market rose on Sterling weakness’ or indeed ‘the market fell on Sterling weakness’.

And you can change the word ‘Sterling’ for ‘oil’ or put in the words ‘Trump fears’ or ‘Trump hopes’, ‘Brexit fears’ or ‘Brexit hopes’ and you arrive at much the same thing.

Perhaps being somewhat on the inside here makes Langton a little sceptical but one can only hope that other professions, doctors, dentists, nuclear physicists and the like, have a little more certainty in their lives.

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.

PUB, RESTAURANT & DRINK PRODUCERS:

• Overcapacity at some point may become a thing. One of the features of it becoming a thing, is that people say it isn’t.

• Research carried out by UK Coffee Week has found that 3.4 new coffee shops are opening daily in the UK. The coffee shop industry adds to £8.9bn to the UK economy, this is a growth of 12% since 2016. If growth continues at this rate the number of coffee shops are set to overtake pubs by 2030. The founder of UK Coffee Week, Jeffrey Young, stated ‘The UK has embraced coffee culture in a phenomenal way that has seen the industry grow and thrive to the size it is today – and it’s continuing.’

• Nimble new entrants still seem able to make a difference. Some would argue that keeps the market vibrant & relevant.

• The Fulham Shore-owned Greek cuisine chain The Real Greek has lined up two further openings this year in Bournemouth and Reading. The latter will be set up in the Debenhams in Reading’s Oracle Shopping scheme, alongside sister brand Franco Manca, while an additional site has reportedly been lined up for the second half of the year, writes MCA.

• Pizza Pilgrims is to open its first site outside the capital in Oxford later this year. The opening will follow another in West India Quay in April, which will be the group’s largest yet, at 174 covers.

• Staid, dull & safe can be good. But then again, offers can become stale and, if they do, then LfL sales will come under pressure.

• NPC International, the largest Pizza Hut franchisee in the US, has reported negative same-store sales across its units in Q4. The group, which also has Wendy’s burger outlets, said ‘our Pizza Hut business has continued to struggle to consistently activate the consumer and drive the top-line in an otherwise thriving category.’ The company’s president and CEO Jim Schwartz said the operation needed to ‘modernize the brand and to continue on our mission to make it easier for consumers to get a better pizza.’

• The pay of Domino’s Pizza CEO David Wild trebled last year to £4.47m on the back of larger share-based payments. The CEO’s base salary of £510,000 is frozen until 2019.

• Champagne value sales have fallen 14% in the UK in 2016, with the CIVC blaming the slumping pound. The UK remains the largest export market by volume at 31.2m bottles. The CIVC have stated ‘It seems that UK customers are no longer seduced by the cut-price propositions but their appetite for premium-priced Champagnes is plainly growing with rosé and prestige cuvées gathering momentum.’

HOLIDAYS, LEISURE TRAVEL & HOTELS:

• The UK travel sector will ‘hold up’ this year but outbound travel will ‘take a hit’, according to the World Travel & Tourism Council (WTTC). The WTTC Economic Impact Report 2017, published on Monday, forecasts spending by overseas visitors to Britain will rise 6.2% this year on last. It predicts outbound spending will fall 4.2% year-on-year, however, ‘as the drop in the value of the pound will continue to impact UK citizen’s spending power and their propensity to holiday abroad’.

• London has slumped from being the world’s sixth most expensive city to 24th place – its cheapest in 20 years. The findings appear in a new worldwide cost of living survey produced by the The Economist Intelligence Unit, which assessed the cost of a basket of more than 150 goods across 133 cities. London is now 17% cheaper than Paris and the cost of living is on a par with that of Dublin. London is also cheaper to live in than New York, for the first time in 15 years. Meanwhile, Manchester fell by 25 places to 51st, marking the steepest decline of any city surveyed this year. The cost of living in the city is on a par with that of Bangkok.

• Bookings for holidays to Italy have surged by 35% across the Thomas Cook Group in the past year, with much of the growth coming from Sicily, where the group is opening a new own-brand hotel. Thomas Cook UK managing director, Chris Mottershead, said: ‘We’ve seen increased demand for holidays to Italy over the last few years, so we’re delighted to be to be able make this beautiful region even more accessible to our customers… Our own-brand hotels are what make us unique, so the newly launched SENTIDO Acacia Marina will provide our customers with the high quality experience they have come to expect from us.’

• The U.S. hotel industry reported mixed results in the three key performance metrics during February 2017, per STR. Occupancy fell 0.5% to 61.2%, while average daily rate rose 1.7% to $123.24 and revenue per available room grew by 1.2% to $75.37. ‘The 1.2% increase in RevPAR was the lowest for the industry since the last time we had a RevPAR decrease way back in February of 2010,’ said Jan Freitag, STR’s senior VP of lodging insights. ‘That was due mainly to the lowest ADR increase since October 2010. Occupancy performance fell in line with expectations as supply growth outpaced demand, but that supply growth also looks to be placing added pressure on hotelier pricing power.’

• Marriott International yesterday hosted a capital markets day. It plans to add 285k to 300k rooms worldwide by 2019.

• Marriott: Group says planned expansion ‘would also allow the company to further capitalize on its industry leading loyalty programs – Marriott Rewards, which includes The Ritz-Carlton Rewards, and Starwood Preferred Guest.’

• Marriott boss Arne Sorenson says ‘we are more optimistic than ever about our future. Marriott has made a significant leap forward in distribution and scale with its once-in-a-generation acquisition of Starwood. With global travel estimated to increase at a 7 percent compounded rate over the next 10 years and international trips expected to top 1.8 billion by 2030, Marriott is well positioned to benefit given its strong global footprint now in 122 countries and territories and an unmatched portfolio of 30 lodging brands.’

• Former managing director of Whitbread Hotels & Restaurants, Paul Flaum, has been announced as the replacement to John Dunford as Chief Executive of Bourne Leisure. Mr. Dunford is retiring after more than a decade at helm of the Butlins, Haven and Warner Leisure Hotels group.

• Travelodge is set to open 15 new hotels across the UK in 2017. This expansion will cost an estimated £125m and will take the company to 558 locations in the UK, Spain and Ireland.

• Large electronic devices in cabin baggage have now been banned on flights from 8 Muslim majority countries by the US Department of Homeland Security. The measure has affected 9 airlines from 10 airports with no end date planned for the ban. However, large electronics may still be boarded in checked baggage from these countries and mobile phones have been exempt.

• The UK has also announced the large electronics ban in relation to 6 countries: Turkey, Lebanon, Jordan, Egypt, Tunisia and Saudi Arabia. BBC correspondent Daniel Sandford said it was ‘obviously part of co-ordinated action with the US.’ This ban will affect 6 UK carriers and 8 overseas airlines.

• A study by the GBTA Foundation has found that business travellers believe that terrorism is the biggest security threat they face on a trip. With 45% of repliers ranking it as the number one risk it was more feared than street crime, illness/disease, property theft, kidnapping or natural disasters.

OTHER LEISURE:

• Following its tender offer to buy back stock, Sportech reports that it will buy back a total of 20,623,804 shares at a Tender Price of £1.015 representing an aggregate consideration of £20.9 million.

FINANCE & MARKETS:

• CPI rose in Feb to 2.3% from 1.8% in Jan. Economists had been looking for 2.1%. Bank of England says rate could peak below 3% but the market is beginning to suggest otherwise.

• ONS shows prices rose by 0.7% in Feb. Volatile items were partly to blame but even core prices rose by 2%.

• UK prices now rising at fastest rate since 2013. RPI, which includes mortgage payments (seen by many consumers as a real payment) is now rising at 3.2% vs 2.5% in January.

• Sterling up on belief that UK may have to raise interest rates to dampen price rises sooner than previously expected

• Government borrowing fell last month to £1.8bn from £4.6bn a year ago. Year to date borrowing is down by £19.9bn at £47.8bn.

• B of England governor mark Carney has defended the Bank of England’s handling of Charlotte Hogg’s resignation

• German car manufacturer BMW has reiterated that it also builds Minis in countries other than the UK. CEO Harald Krueger reports ‘the UK remains an important location for us. Much will depend on how Brexit is ultimately negotiated. At the BMW Group, we are preparing different scenarios. Our production network offers us flexibility. Mini models are also built at VDL Nedcar in Born in the Netherlands.’

• Brent down at $50.58

• Sterling up on interest rise hopes/fears. Trading at 124.79c vs US$ and 115.5c vs Euro.

• UK 10yr gilt yield up to 1.26% vs 1.24% yesterday

• World markets: UK down on Sterling strength. Europe lower. US down in biggest drop in five months. Far East down in Wednesday trade

YESTERDAY’S TWEETS:

• Later tweets: UK prices rose 0.8% in February to take them up by 2.3% y-o-y. This CPI figure compares with 1.8% last month

• UK RPI now rising at annual 3.2% (vs 2.6% last month). Well ahead of consensus numbers.

• UK gilt yields sharply up on higher-than-expected inflation numbers. Bank’s forecasts assume consumer take hit, don’t ask for pay rises

• Will consumers really absorb higher prices without asking for pay rises? Really? If yes, big ticket will be hit, if no….inflation awaits

• ScS (furniture) says Feb was ‘challenging’ but March was better. Comps now get tough, however

• Evolution, key points. Demographics in background but delivery, mobile ordering move to the fore. Why would you not know about them??

RETAIL NEWS WITH NICK BUBB:

• Kingfisher: Alongside today’s finals from the Anglo-French DIY group Kingfisher, it has been announced that the new Chairman will be…English! The current incumbent, the veteran Daniel Bernard, who oversaw the CEO switch from Ian Cheshire to Véronique Laury a couple of years ago, is retiring in June after 8 years in the role and will be replaced by one Andy Cosslett, who has “strong branding and consumer credentials gained at companies such as Unilever, Cadbury Schweppes and InterContinental Hotels” (and is also Chairman of the RFU). In the spirit of “ONE” Kingfisher, maybe this appointment is a sign that the French and the Brits aren’t at loggerheads anymore. Or it could be that prospects for the core French business aren’t as good as hoped… Véronique Laury says that “the EU referendum has created uncertainty for the UK economic outlook and we remain cautious on the outlook for
France, especially in light of the forthcoming Presidential elections”, whilst the Divisional review notes that “both French businesses have delivered weaker sales compared to the market”. But there is plenty going on in the group to drive synergies and, helped by a decent 7% FX translation benefit, underlying PBT was up 15% at £787m in y/e Jan, driven by decent UK (mainly Screwfix) and Poland LFL sales growth and £30m Goods Not for Resale (GNFR) benefits. There is no update on current trading ahead of the Q1 on May 24th.

• John Lewis Partnership Watch: After the distortions caused by the calendar shift of Mothering Sunday…we now get the distortion caused by the fact that last week last year was the week before Easter. At Waitrose, despite the helpfully warm weather, that meant that gross sales were down by 2.1% last week (c4% down LFL). Over the last 7 weeks combined, up to w/e March 18th, Waitrose sales now running down by 0.1% (down c2% LFL). Over at John Lewis last week, things weren’t so bad, with gross sales up by 0.4% (c1.5% down LFL) in w/e March 18th. Fashion sales were up by 4.8% gross, thanks to the benign weather, although Electricals was 2% down and Home was 1.6% down.  The cumulative 7 week run-rate at John Lewis is now +1.4% gross (c0.5% down LFL). Things will probably look worse this week, Week 8, given the full Easter comp, even with a boost from Mother’s Day this Sunday, but by
the end of Week 12 the calendar will have unwound and it will be interesting to see what the trend is looking like then …

• Next: As a reminder ahead of tomorrow’s finals, Next guided back on Jan 4th (after a disappointing Christmas and start to the January Sale) that their central forecast for full year Group profit was £792m, which could “increase or decrease by £7m depending on trade in January”. And given cost pressures, the 2017/18 guidance was for profits to drop further, to between £680m (-14%) and £780m (-2%).  Now, Next are well-known for being over-cautious and beating expectations, but with the High Street off to a sluggish start in 2017/18 it seems unlikely that full-year guidance will be shifted up at this stage…

• News Flow This Week: The highlight of this week is the Next final results tomorrow, as everyone is keen to hear CEO Simon Wolfson’s view of the economic outlook, but tomorrow also brings the Ted Baker finals and the ONS Retail Sales for February.