Langton Capital – 2017-05-12 – US market, Apps, holiday visa fees, economy & other:
US market, Apps, holiday visa fees, economy & other:
A DAY IN THE LIFE:
So, Hull City face Crystal Palace on Sunday (away from home, doesn’t look good) and then Tottenham (at home but looks worse) the Sunday after in a couple of games that will seal the team’s fate one way or another.
And then it will be all over, at least until next season. Too stressed to write any more. Why couldn’t they have been a mid-table, non-ulcer-inducing team like Southampton or Stoke. On to the news:
APPS AND THE ON-TRADE:
• Langton has been let loose with a pen again & we’ve written about Apps in the On-Trade. Briefly they’re here, they’re big & they’re getting bigger. The note is here
PUB, RESTAURANT & DRINK PRODUCERS:
• US numbers continue to show the impact of overexpansion. Saturation looks as though it may be holding back comp sales.
• US restaurants extend LfL sales slump, hit 3rd straight month of declines in April. LfLs down c1% (after down 1.1% in March)
• US restaurants see 3.3% drop in LfL traffic in April per TDn2K. Rising prices fail to make up the gap & LfLs fall. TDn2K reports however ‘there are some reasons to be cautiously optimistic about the second quarter, at least in terms of improvement over what we’ve seen in the recent past.’ The analyst continues ‘the move of the Easter holiday meant that April’s results were likely softer than they would have been without this shift, meaning spending in restaurants was probably a little stronger than the numbers show. Furthermore, sales started softening considerably starting with June of last year. This translates into easier comparisons when calculating this year’s sales growth rates.’ This last comment seems to be counter-intuitive.
• M&B have launched a Groupon deal for its brand, Toby Carvery, offering a meal and a drink for two for under £15. A spokesman for the groups said ‘Groupon is just one of a number of new channels we are exploring to bring even greater value to new guests.’
• Coca Cola HBC reports Q1 numbers, says has made ‘good progress’ with same currency revenue growth of 5.2%
• CCH reports volumes +0.7% in Q1. The company says ‘excluding the impact of the timing of Easter, which shifted into Q2 this year, volumes grew in the majority of our countries.’ It adds ‘established markets volume down 2.2%, reflecting an improving trend, excluding the impact of Easter’ whilst ‘developing markets segment volume down 3.6%, largely driven by lower volume in Poland, where our focus continues to be on driving value.’
• Phoenix Capital has acquired the Pizza Hut business in Japan.
• Derby Brewing, which is currently fund-raising on Crowdcube, has announced that it has raised £341k, or some 68% of its targeted investment
• The MCA has reported that Jamie’s Italian is considering franchising sites in the US. The group currently operates c40 restaurants internationally with different partners.
• Tesco has integrated its online services with Google Home in order to enable voice-activated ordering.
HOLIDAYS, LEISURE TRAVEL & HOTEL
• Nearly half of Britons (47%) have stated that they anticipate having to pay for a visa to visit EU countries post-Brexit, research indicates. If a fee-based visa were to be introduced, 49% said they would expect EU travellers to pay similar fees to travel to UK, with a third wanting EU visitors to come to Britain for free.
• Fosun, the Shanghai-based group backed by billionaire Guo Guangchang, has raised its stake in Thomas Cook Group to 11%. Two years ago Fosun took a 5% stake in the company for £91.8m.
• Eurostar reports sales of £232m in Q1, an increase of 15% yoy. Passenger numbers increased by 2% to 2.27m, benefitting from a growth in non-European travellers using the service.
• The Hotel Bulletin Q1 2017 report suggests that budget hotels’ continued rise will cause other segments to stagnate, as Premier Inn and Travelodge account for 52% of branded rooms in the industry. The report was published by HVS, AlixPartners, STR and AM:PM.
• Times reports CEO & CFO of Generator Hostels have been removed by its new PE owner Queensgate Investments post the €450m acquisition. Queensgate is to ‘announce plans to invest €300 million in expanding Generator through the acquisition of freehold properties, mainly in America.’
• Heathrow had its best April on record thanks to a ‘thumping’ Easter that saw the London hub handle more than 6m passengers, up 11% yoy. New York and Dubai were the most popular destinations with almost 500,000 passengers. John Holland-Kaye, Heathrow’s CEO, said ‘Britain’s exports outside the EU are thriving and with Heathrow expansion opening up to 40 new long-haul trading links, the scale of the opportunity across the globe is tremendous.’
• Hollywood Bowl is investing £325,000 in refurbishment of its venue in Cribbs Causeway, Bristol. The venue boasts 26 fully computerised lanes, 4 VIP lanes, a ‘Hollywood Diner’ and a bar all decorated in an Americana theme.
• Snap Inc’s shares tumbled 20% due to disappointing growth in Q1 of 2017. The company reported an adjusted loss of £145.3m which was £7.7m higher than expected while revenue increased 286% to £115.8m, again £6.9m beneath expectations. The number of daily active users increased by 5% to 166m, 2m fewer than expected.
• Snap Inc. shares are down on the tech group’s eye-watering IPO due to recent losses and underwhelming platform user figures, but investors are also worried by the upcoming expiration of an agreed upon lockup period that applies to some 1.2bn shares. JPMorgan says the shares will become available for sale by the end of July, suggesting the group’s shares could be subject to non-economic sellers over the summer.
• Netmarble, the third-largest developer of mobile games, is climbing the Seoul stock market after having floated last month. Shares were up 7.3%, while the benchmark Kospi slid 0.1%.
FINANCE & MARKETS:
• Bank of England votes 7-1 to hold interest rates at 0.25%. The MPC voted unanimously to hold QE at £435bn.
• B of England reports ‘aggregate demand slowed markedly in 2017 Q1.’ The Bank now expects slower 2017 growth (1.9%, down from earlier estimates of 2.0%) with a pickup in 2018, so long as the UK’s exit from Europe is orderly.
• Bank expects inflation to average 2.7% this year.
• Bank says UK economic slowdown ‘appears to be concentrated in consumer-facing sectors, partly reflecting the impact of sterling’s past depreciation on household income and spending.’
• Bank forecasts incomes to rise 2.0% this year, rising to 3.75% next
• NIESR estimates that UK GDP grew by 0.2% in the 3mths to end-April. It says ‘growth in the service sector has remained subdued, consistent with softer consumer spending growth. We expect the squeeze on household real incomes to continue as inflation accelerates throughout the year, reaching almost 3½ per cent by year end.’
• ONS reports activity in the UK’s industrial and construction sectors fell by 0.5% in March.
• UK trade deficit up in March per ONS. Says UK imported £10.5bn more than it exported in March alone. The ONS comments ‘the main causes of the widening of the deficit in Quarter 1 2017 were increased imports of machinery and transport equipment (mainly mechanical machinery and cars), oil and chemicals; these commodities also contributed the most to the increase in imports in March 2017.’
• Brexit & Election:
o Scotland’s Brexit minister said that the UK’s exit from Europe will be damaging. Michael Russell says that the UK will be attempting to get back in within two decades
o Labour blizzard of spending promises. Funding a bit hazy
o You wouldn’t run a company like this. You wouldn’t run a church gardening club like this. Policies said to be adopted ‘because they play well with the electorate’. Bread & circuses. Bread & circuses.
• Oil price up around 40c at $50.81.
• Sterling down half a cent or so at $1.2884
• Sterling down vs Euro. Also c40c lower at €1.1853
• UK 10yr gilt yield down 1bp at 1.16%
• World markets: UK mixed yesterday with Europe lower. US market down & Asia mostly lower in Friday trade
YESTERDAY’S LATER TWEETS:
• Later Tweets: April Tracker: Good April but poor Easter suggests wallet-fatigue struck mid-month. Numbers still good, +4.4% LfL for month
• Tracker. Provinces >> London (bit odd given full hotels) & Pubs >> Restaurants (weather). New capacity still an issue
• B of England to comment on inflation at lunchtime. Outlook perhaps a shade more benign given Sterling’s recent strength
• Apps at Langton. For hospitality, they’re big & getting bigger. See note here
• Pret to IPO in London. £1.5bn? £1.75bn? £2bn? Good co, good product but would be rather pricey with considerable execution risk
• Loungers growing like crazy, up to 100 sites. EBITDA +50% at nearly £13m with more in the pipeline.
• London hotels very strong in April. Easter helps but that can depress rates (leisure >> business). However, REVPAR still +10.3%
RETAIL NEWS WITH NICK BUBB:
• Today’s Press and News: The badly received trading update from SuperGroup provides plenty of opportunities for photos of Idris Elba, but there is also plenty of coverage of the news that the FD Mothercare is on the move again (apparently to another job) and that House of Fraser has appointed as its CEO somebody with no Retail experience, the unknown Alex Williamson from the Goodwood group down in Sussex…
• Grafton Watch: We flagged on Wednesday that Travis Perkins was hit on Tuesday by a gloomy update from its Irish sector peer Grafton, but Grafton wasn’t actually that downbeat. Gavin Slark, the CEO, said: “The Group has had a good start to the year and the outlook is positive. We expect a continuation of the favourable trends in the Irish and Netherlands businesses. In view of recent economic and political developments, we are more cautious about the prospects for the UK. However, we have a good portfolio of businesses with strong market positions and we look to the future with confidence”. In the UK their fast-growing Selco builder’s merchant chain saw 4.8% LFL revenue growth in constant currency in the first 4 months of the year. By the way, Selco has just opened its 50th UK branch, on an industrial estate in North Guildford, opposite a Howden Joinery depot.
• Peach Tracker Watch: We are indebted to our friends at the Leisure sector experts, Langton Capital, for flagging up yesterday’s figures for April from the curiously named Coffer Peach Tracker of pub and restaurant sales. A fortnight ago they issued a specific Easter trading report, headlined “Late Easter does no favours for Britain’s eating-out market”, but for the month overall their headline was “Pub and restaurant groups see return to sales growth in April”, flagging that because of the boost from Easter managed pub and restaurant groups were back in growth in April, with combined LFL sales up by 4.4% compared to the same month last year (after a 0.5% dip in March). Unusually, pub operators (+6.1%) did better than restaurants (+1.5%) in April and, on a regional basis, London (+2.8%) underperformed the area outside the M25 (+4.9%).
• BDO High Street Sales Tracker: We also flagged on Wednesday that trading at John Lewis last week was a bit subdued, and today’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains flags that w/e May 7th saw Fashion Store LFL sales dip by 3.7% against last year, albeit the comp was relatively firm as the weather was much warmer a year ago. However, including Homewares and Lifestyle chains, total Store LFL sales were up by 0.6%. And overall Online sales were up by 17.4% (on top of 20% growth a year ago).
• Trade Press (1): The front page headline story in Retail Week magazine today is “M&S drafts in dynamic duo”, flagging that Asda saviour Archie Norman and Halfords chief Jill McDonald have joined the efforts to revive the retailer’s fortunes. And in his column the Editor thunders that “together, Rowe and Norman could be the team to convince shoppers of M&S’s continued retail relevance”. In terms of News stories, RW focus on the report that Sainsbury’s boss Mike Coupe is confident it can rebuild profitability over the next “three to five” years after suffering another fall in full-year earnings, Monsoon has suffered another drop in full-year profits and sales (for y/e Aug 2016) and M&S has unveiled a radical new brand proposition, ‘Spend it Well’, with the launch of an advertising campaign. RW also have features on “The DIY Disruptors” (New retailers determined to shake up
• Trade Press (2): The main feature in Drapers magazine today is on “Ethical Fashion”, but in her column the Editor flags that the customer journey (and how to personalise it without becoming intrusive) was the centre of debate at the recent Drapers Digital Festival and thunders that “What became apparent was that the fastest-growing companies – from Zalando to Missguided – have a clear understanding of their customer and what makes them tick. Karen Millen and M&S could learn a thing or two from these younger operators”. In terms of News stories, Drapers focus on the news that Beth Butterwick, the new CEO of Karen Millen, has unveiled her three-pronged strategy to overhaul the loss-making womenswear chain and bring it back to its “heartland”; H&M opened its largest UK store at Westfield Stratford City last week (a relocation to a c64,000 sq ft unit, which had been occupied by
• News Flow Next Week: We have another mini-“Super Thursday” next week as that day brings the Burberry finals, the Mothercare finals, the Greggs trading update, the Booker finals, the ONS Retail Sales for April and the Asda Wal-Mart Q1, as well as the Land Securities finals. Before that, Wednesday brings the British Land finals (in the world of Retail property), whilst the Moss Bros AGM is on Friday.