Langton Capital – 2017-06-16 – DP Eurasia, delivery, interest rates, holidays & other:
DP Eurasia, delivery, interest rates, holidays & other:
A DAY IN THE LIFE:
So how is it that, when you’re obliged to install upgrades to your computer that are meant to improve its performance, everything seems to slow down?
Because I would swear that that’s what happens hence, in addition to your machine taking ten minutes or so to boot up, you find pages won’t load and various plugins, that you don’t need, want or know that you had, seem to power up to spy on you.
Anyway, add that to an emergency visit to the pub yesterday (not my fault, the sun was shining) and we’re a little behind. But it’s Friday and, with a glorious weekend to look forward to, let’s move on to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• UK consumer stocks lower on fears that higher rates would put a further squeeze on consumer spending
• DP Eurasia it to IPO shares at between 200p and 230p per share. This prices the company at up to £330m. DP Eurasia has 571 stores and intends to open roughly 70 this year. It is expected to list on the main market in London early next month.
• Food price inflation back from the dead. ONS says food price inflation is now firmly re-established after about three years of falling prices.
• Gaucho, the steakhouse chain, is considering launching a pub-based concept the MCA has reported. The concept would focus on ‘exclusive rural and suburb locations’ in the home counties.
• All Bar One has pledged to phase out the use of plastic straws in its pubs as it follows the #strawssuck campaign. The chain currently puts straws in 25% of its drinks, which equates to 13,000 a day.
• Wetherspoons has announced it is opening its 52nd hotel in one of its pubs in Hull. Eddie Gershon, a spokesman for Wetherspoon, has stated ‘Wetherspoon’s hotels continue to prove popular with a wide range of customers’.
• The Campaign for Real Ale (CAMRA) has renewed its plea to the Government to review the business rates system in order to ‘relieve the burden’ on the pub sector, ahead of the Queen’s Speech on 19th of June.
• The ONS has found that retail sales fell 1.2% in May, as higher inflation takes it toll. Data has shown that prices rose 2.8% over the year, the greatest increase since March 2012.
• Halo Coffee plans to ‘aggressively’ grow in the UK and overseas, as it seeks further funding. The cafe chain aims to raise £1.6m for this expansion plan.
• US burger chain The Counter plans to open 20-25 UK sites over the next five years, writes MCA.
• The UK general manager of UberEats, Matthieu Proust, has said that restaurants must adapt to create more of a balance between their delivery and dining in offers. Mr. Proust when on to say ‘Maybe [restaurants need to] add a specific entrance to make sure both experiences run smoothly. We think delivery can become something that people use daily, but there is nothing that will replace the experience people have in restaurants.’
• A recent study on the impact of the US restaurant industry by Credit Suisse has concluded that same-store sales are falling because restaurants are opening too many locations. The industry has added about 40,000 new restaurants over the past six years (roughly 18 a day) and unit growth has outpaced population growth for four of the past five years. Although restaurant sales grew at a healthy 4% in 2016 and the sector continues to take share from retail, the US restaurant industry appears to essentially be trading unit economics for sales growth.
• Switzerland’s Nestlé has announced it is quitting the US confectionery business, putting up for possible sale brands such as Butterfinger and Crunch chocolate bars, which generated sales of SFr 900m last year.
• Nestlé has announced that it is exploring ‘strategic options’ for the business after failing to increase market share and boost profitability. ‘Rather than making the significant investment needed to be a leader in US confectionery, it is the right time to focus on other growth opportunities,’ a Nestlé spokesman said. The review is expected to be completed by the end of the year.
• Sainsbury is reported set to cut the number of beer and cider SKUs that it offers across its stores. About 70 lines will disappear from shelves
HOLIDAYS, LEISURE TRAVEL & HOTEL
• A state of emergency in Tunisia originally imposed after a suicide attack on a police bus in November 2015 was yesterday extended for a further four months – effectively wiping out the summer holiday season. Confirming the extension, the Foreign and Commonwealth Office said: ‘The Tunisian government has put in place additional security measures, but the intelligence and threat picture has developed considerably, including in neighbouring Libya. Terrorists are very likely to try to carry out attacks in Tunisia.’
• Raffles Hotels and Resorts will revamp the iconic Grade II listed Old War Office building in Whitehall, London and is scheduled to reopen it in 2020. Sébastien Bazin, chairman and CEO of AccorHotels said: ‘This is the start of an important partnership for Raffles Hotels & Resorts and will create a new and vibrant landmark for London. This is a significant step for Raffles and a strategic addition to the Group’s Luxury portfolio. We remain committed to providing guests with unparalleled service and experience.’
Tui has completed the sale of Travelopia to KKR for €369m.
• New York City had 60.7 million visitors in 2016 and the president and chief executive of NYC and Co made a point of drawing attention to the strong growth in international visitors, in light of Trump’s proposed travel ban.
• Transport app Careem – seen as Uber’s rival in the Middle East – has closed its $500m series D funding round led by Dubai’s Kingdom Holding.
• The chief executive of aerospace trade body ADS Group has said that leaving the EU without a deal would represent the ‘worst case scenario’ for the aviation and aerospace sector. Paul Everitt, chief executive, said the general election result meant the government had failed to secure a mandate for a so-called ‘hard Brexit’ and its approach now needed a rethink.
• The systems failure that caused disruption to thousands of British Airways passengers and saw the cancellation of more than 670 flights over two days will cost the airline at least £80m.
• U.S hotel industry data has produced mixed y-o-y figures for the week 4-10 June 2017, with occupancy down 0.8% to 73%, average daily rates up 1.5% to $128.37 and RevPAR increasing 07% to $93.73.
• Nike Inc has announced it will cut around 2% of its global workforce and remove a quarter of its styles as the group looks to become more nimble.
• Spotify’s operating loss widened to €349m ($389m) in 2016, ‘explained by substantial investments… mostly in product development, international expansion and a general increase in personnel’. Revenue at the music streaming service rose by more than 50% to €2.93bn as paid subscribers increased to 48 million in 2016 from 28 million the year before, pushing its total monthly active users figure up to 140 million (2015: 126 million).
FINANCE & MARKETS:
• The Bank of England yesterday voted by 5 to 3 to hold interest rates at 0.25%. The narrowness of the decision surprised markets.
• Bank Hawk Kristin Forbes no longer alone in saying that UK interest rates should rise.
• Bank’s MPC votes unanimously to hold QE at £435bn. Mark Carney comments ‘five members thought the current policy stance remained appropriate to balance the demands of the MPC’s remit. Three members considered it appropriate to increase bank rate by 25bps. All members agreed that any increases in bank rate would be expected to be at a gradual pace and to a limited extent.’ He continued ‘the committee will continue to monitor closely the incoming evidence, and stands ready to respond to changes in the economic outlook as they unfold to ensure a sustainable return of inflation to the 2% target.’
• NIESR comments ‘the MPC voted narrowly to hold monetary policy unchanged, a closer vote than market expectations. This level of disagreement raises the probability of an interest rate rise in the near future and that would exert further pressure on household budgets, which are already under pressure from subdued real wage growth. Furthermore, it focusses the spotlight on the two forthcoming appointments to the MPC, which could tip the balance of future votes either way.’
• NIESR reiterates ‘we forecast consumer price inflation of 3 per cent and 2.8 per cent on average in 2017 and 2018 respectively, before a return to target in 2019.’
• Sterling up initially on higher interest rate projections
• Eurozone ministers have agreed to release the latest tranche of Greece’s bailout cash.
• Brexit & Election:
o Prince Andrew says UK businesses face several years of uncertainty and upheaval due to Brexit
o Prince goes on to say: ‘you may lose one thing but you may gain something else.’
o Property Week survey says industry ‘fears the worst’ post election & pre Brexit. It says ‘initially, there may be a slowdown in transactional property deals, while people wait for some form of certainty for the short to medium-term and clarity as to how much cross-party involvement there will be in the Brexit negotiations.’
o Half of Property Week respondents now believe UK will negotiate a ‘soft Brexit’. It is far from clear whether that is possible or not.
o Brexit is binary. It happens or it doesn’t. There is no such thing as a Soft Brexit.
o European negotiators and UK Brexit hardliners agree that the ‘four freedoms’ are indivisible. If this is the case, such a thing as a soft Brexit may not exist. Mrs May pretty much said this in January and David Davis has said nothing else since.
• Oil down a little at $46.95
• Sterling gives back earlier gains, closes at $1.2767
• Sterling up vs Euro at €1.1454
• UK 10yr gilt yield sharply higher at 1.04% (versus 0.93% yesterday)
• World markets: UK down yesterday on interest rate concerns, domestic stocks particularly hit. Europe down, US down but Asia mostly up in Friday trading
RETAIL NEWS WITH NICK BUBB:
• Tesco: After a gloomy day for Retailers yesterday, some better news today, in the form of a surprisingly punchy Q1 update from Tesco yesterday (for the 13 weeks to May 27th), which is headlined “Sixth consecutive quarter of growth”. In the UK, Tesco saw LFL growth of 2.3%, driven by 2.7% LFL sales growth in Food, 1.3% growth in customer transactions and particularly strong volume growth in fresh food of 1.6%. NO figure is provided for the level of Food price inflation, but Dave Lewis, the CEO, says: “In tough market conditions, we have stayed true to our commitment to helping customers – working closely with our supplier partners to keep prices low. Customers have responded by doing more of their shopping with us and as a result we continue to grow volumes, particularly in fresh food”. That should defuse any criticisms ahead of the AGM later on today.
• BDO High Street Sales Tracker: We flagged on Wednesday that trading at John Lewis last week was better in Fashion, thanks to promotional price-matching, but today’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains flags that w/e June 11th saw Fashion Store LFL sales slump by 8.1%, because of “the mixed weather and political uncertainty”. Including Homewares and Lifestyle chains, total Store LFL sales were still down by as much as 5.2% last week, but overall Online sales were up by a heady 22.2% (on top of c20% growth a year ago).
• Today’s Press and News: The front page headline in the FT is “BoE holds rates as weak retail sales add to fears of prolonged slowdown” and the weak ONS Retail Sales figures for May get plenty of coverage, as they, together with the DFS profit warning, had a pretty devastating impact on the General Retail sector yesterday, as noted by all the stockmarket reports. The FT market report also highlights a gloomy note on Next issued by Credit Suisse yesterday, with exquisite timing.
• Trade Press: The main feature in Retail Week magazine today is on the annual Power 100 List, but the front cover photo is of the hapless Theresa May, to flag up a feature on “Power failure” and a guide to the outlook for Retailers after the shock Election result, with Carpetright CEO Wilf Walsh saying “she was complacent, arrogant, lacked visibility”. RW also have features on how Arcadia can get back on track and how Ocado aims to redefine Online grocery order fulfilment, plus a profile of the new Go Outdoors boss Claire Webb.
• News Flow Next Week: As we head into the second half of June (the longest day of the year is Wednesday…), next week is not so busy, but Monday brings the Bonmarche finals, the N Brown trading update is on Tuesday and the Boohoo.com AGM is on Friday. For many people, the highlight of the week will be Royal Ascot, which starts on Tuesday, with the delayed Queen’s Speech on Wednesday another political highlight…