Langton Capital – 2017-06-19 – Sky, late-night market, US restaurants, inbound & other:
Sky, late-night market, US restaurants, inbound & other:
A DAY IN THE LIFE:
So, who would have thought mowing the lawn could be so traumatic?
But it’s proving to be so because, in addition to the mental anguish of having to psych oneself up for the task (and top up the petrol cans, remove all the dog’s toys, broken branches and the like from the area in question), there are then the physical problems that need overcoming after you’ve located the keys.
You have to get the thing to start. And oblige it to move and to cut stuff but, after the fan belt or drive belt or whatever it was snapped and pinged off into the bushes half-way through the job, we called it off for the moment had a BBQ & decided to make a virtue out of long grass.
Patchy long grass that is as half the lawn was cut at the point of said incident so the status quo may not be an option and we either have to hire a trailer to drag the mower to the nearest repair shop or try to mend the thing ourselves. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Deltic’s most recent Late Night Index survey of 2,444 people from February to April 2017 has found that pubs were the most popular late-night activity for adults, with 24.2% of people spending the most money in pubs each month. Respondents reported spending an average of £55.56 on a night out – up 6.3% on the previous quarter – while an average £9.78 was spent on pre-drinks.
• The 15th annual Taste of London was hosted in Regents park other the weekend, with more than 150 signature dishes on show and many restaurants and F&B producers exhibiting. Among the attendees, Club Gascon, ROKA, Temper and Kricket.
• Bain Capital plans to sell its 25.5 million shares of Japanese restaurant chain Skylark for a reported $400m. The group has over 3,000 restaurants and owns brands including Gusto and Bamiyan.
• The ALMR has credited Sky for taking into account ‘spiralling rates’ following the news that the media group will apply its 5% price increases for on-trade customers to lower rateable values over the next 12 months. ALMR Chief Executive Kate Nicholls: ‘The decision to use lower rateable values will mean that no pub will face a repeat of previous double whammy increases at a time when their rates bills are going up and margins tightening… This will help to offset some of the costs that continue to increase for eating and drinking out businesses, but this rise is still well above inflation, at a time when supply chain pressures are increasing and economic and consumer confidence is uncertain.’
• Grab-and-go healthy lunch pot concept HiLo (led by Chop’d founder Jasper Wight) is preparing to open its first store next month close to Liverpool Street Station, writes MCA.
• Four-strong Spanish tapas group Camino has put its London Blackfriars site on the market as it looks for a new flagship unit. MCA reports that Davis Coffer Lyons is now marketing the 6,468 sq ft Blackfriars site, which is held on a 25 year lease from October 2012, at a passing rent of £115,000 per annum exclusive.
• US analyst Technomic has released its latest Top 250 Fast Casual Chain Restaurant Report in which it suggests that ‘the fast-casual segment is not immune to the challenging operating conditions facing the broader restaurant marketplace.’ It reports that the Top 250 fast-casual chains grew sales a cumulative 8.4% in 2016 to a total of $40.4 billion.
• Technomic reports ‘while this growth significantly outpaces other industry segments, it lags compared to the 11.9% sales growth in 2015 and 13.8% growth in 2014. A key factor contributing to the slowing sales growth trend is decelerating unit development within the segment, which registered at 8.9% in 2016, following a rate of 9.6% unit growth in 2015. It says ‘as the overall chain restaurant marketplace tightens and the fast-casual segment slowly moves toward a point of maturity, it will become increasingly important for chains to differentiate themselves and stand out in a crowded playing field.’
• Forward ordering co Orderella has announced the termination of the appointment of co-founder Michael Thomas Zeitler as a director on 7 June 2017
• Thousands of small cafes and restaurants must adapt to the revolution in online ordering or risk closure, experts have warned the Mail on Sunday. The industry is estimated to be more than 15 years behind retailers in adopting online ordering systems.
• Food entrepreneurs continue to push ahead with insects as a source of protein. The health and environmental benefits of crickets, flies and worms have recently been highlighted by the UN, with spokesperson, Patrick Durst stating ‘There is clearly a market for edible insects and risk-taking entrepreneurs are moving quickly to capitalise’.
• Amazon is acquiring Whole Foods Market for $13.7bn that could mark a stepchange in the internet giant’s expansion into brick-and-mortar stores.
• Moody’s reports that Amazon.com’s planned acquisition of Whole Foods is credit positive. It says ‘the planned transaction, which Amazon expects to close in the second half of this year, is credit positive because it accelerates Amazon’s push into the food business, as well as provides the company with additional pick-up points for online orders.’
• McDonald’s is ending its multi-decade sponsorship of the Olympic Games, following the likes of Budweiser, Citi, Hilton, and AT&T.
• Canadian cafe and bakery brand Tim Hortons is preparing to open its second UK site, again in Glasgow, at Silverburn Shopping Centre.
• The pricing gap between grocers and restaurants in the US widened to as much as 460 basis points in 2015 as a result of the former lowering prices. This gap is thought to have contributed to a slowdown in US restaurant traffic and same-store sales but is now showing signs of narrowing – in May, grocers cut prices by 0.2 % and restaurants pushed menu prices by 2.3%, making for a gap of 250 basis points. Furthermore, federal government forecasts suggest grocer inflation of flat to 1% this year, meaning grocers could raise prices in the second half of the year.
HOLIDAYS, LEISURE TRAVEL & HOTEL
• The number of overseas visits to, and spending in, the UK hit record levels in April, according to data from VisitBritain. Around 3.7 million inbound trips were made in the month, up 19% year-on-year, while spending by overseas visitors grew by 20% to some £2bn. The monthly figures bring the number of inbound visits to the UK for January to April this year to 11.8 million, 11% up on the same period in 2016 with visitors spending £6.2bn, up 14%.
• A third of people planning trips abroad this summer will take a self-catering holiday, according to new research from Post Office Travel Money and Monarch Holidays.
• Thomas Cook has revealed a 113% rise in the number of people using mobiles on thomascook.com to search for holidays between May 2014 and April 2017.
• Advantage Travel Centres has reported a 21% hike in annual profits to £600,000 for the year to 30 September 2016.
• Donald Trump is retreating on previous US President Obama’s foreign policy of engaging more with Cuba.
• The US hotel industry had a mixed week ending 10 June 2017, during which a 1.5% increase in ADR helped mitigate a 0.8% fall in occupancy. Revenue per available room grew 0.7% to $93.73.
• Shanghai’s $5.5bn Disney Resort has seen more than 11m visitors in its first year since opening, in line with the company’s expectations but below banks’ expectations of 12-15m. Meanwhile attendance at Disney’s 13 other parks all fell, with Disneyland Paris falling 14% according to one independent report.
FINANCE & MARKETS:
• Barclays comments on rate rise concerns, notes ‘the count of dissenters voting for a hike increased to three against five favouring the status quo.’ Barclays comments ‘for members voting for a hike, the rationale is that now that last year’s rate cut had delivered stabilisation in the economy it was time to reverse it, in order to mitigate risks of a persistent inflation overshoot.’
• Barclays comments ‘we believe that some of the dissenters must feel quite confident regarding the investment outlook to justify a rate hike based on micro evidence and bilateral contacts.’
• Resolution Foundation reports UK’s wealth gap has been widening over the past decade. It says 1% of adults (c488k people) own 14% of the nation’s assets with 15% (7.3m people) either own no assets at all, or are in debt. The Resolution Foundation says it is non-partisan. It says ‘given the hugely unequal distribution of wealth across Britain, it’s time we looked into how the nation’s wealth is divided up and what the consequences are for those who never build up assets of any significance.’ Falling home ownership numbers could widen the wealth gap further reports the foundation.
• Labour Father Christmas move to cancel student debt attractive to some but perhaps difficult to afford / justify
• Rightmove house price index drops by 0.4% in June
• Eurozone CPI for year to May confirmed at 0.9%
• Oil price up 25c over weekend to $47.20
• Sterling virtually unchanged at $1.2773
• Pound down vs Euro at €1.1409
• UK 10yr gilt yield down 2bps at 1.02%
• World markets: UK up Friday with Europe & US also higher. Far East up in Monday trade
o Jeremy Corbyn now portrayed as the cuddly granddaddy of reasonableness as Brexit divide pushes UK towards the Hard Left
o Conservatives in disarray as BBC docudrama portrays Boris as overweight, unprincipled bumbler. He’s not overweight say supporters
o Marxist experiment feared under Corbyn / McDonnell as Tories fail & unintended consequences of 2016 Brexit vote grind on
o Door still open say France & Germany.
o David Davis heads to Brussels today. He will call for “a deal like no other in history”. He says there is ‘no turning back’.
o Davis suggests there is a “long road ahead” but predicted a “deep and special partnership”. There will be a joint UK/EU statement at the end of the day.
o Reuters suggests PM Theresa May’s strategy is unclear and her position is insecure. DUP deal still not inked. Queen’s Speech delayed. There will not be a Queen’s Speech next year.
o Der Spiegel suggests ‘crippled’ PM May is ‘stumbling’ into Brexit talks ‘amid chaos in London’
o Five business bodies have come together to call for continued access to the European single market
o Chancellor of the Exchequer Philip Hammond says Britain should adopt a pragmatic approach to Brexit negotiations
o Labour shadow Brexit minister Keir Starmer says the ‘customs union should be left on the table’
o Calls for a Soft Brexit mount but, unless the ‘four freedoms’ can be made divisible, and the EU says that they cannot, then there would not appear to be any such thing as a Soft Brexit
o We’re still sick of experts says the now re-employed Michael Gove (probably)
FRIDAY’S LATER TWEETS:
• Later tweets: Consumer stocks bashed on confidence falls, real wage declines, interest rate rise fears & uncertainty. What’s not to like?
• Bank of England kinda reminds us that interest rates will go up at some point. Could be just when real wages are falling.
• Tories blamed for everything. Brexit debacle, economy, negative real wages, inflation, building safety etc. Nobody said it was easy
• Carpetright CEO Wilf Walsh says Mrs May ‘complacent, arrogant [and] lacked visibility’. No, Wilf. Say what you think…
• Tesco says is working with suppliers to keep prices low. Food price inflation nonetheless back with a vengeance says ONS
• BDO says store LfL sales down 5.2%. Implication for jobs & High Street coffee shops etc. Plenty of jobs in warehouses, online +22.2%
• DFS yesterday said sees ‘significant declines in store footfall’. Leads to ‘material reduction’ in sales. Big ticket feeling the pinch?
RETAIL NEWS WITH NICK BUBB:
• Saturday Press: The Tesco Q1/AGM coverage in Saturday’s papers was overshadowed by the amazing news on Friday afternoon that Amazon has agreed to buy Whole Foods for $13.7bn, sending shockwaves through the supermarket sector on both sides of the Atlantic. Lex column in the FT suggested that the troubled Whole Foods should have driven a harder bargain and separately thundered that “Tesco remains firmly stick in turnaround mode”, given the competition in the UK from Aldi and Lidl. In terms of other Editorial comments, the Telegraph said that Amazon’s grocery rivals must “adapt or die”, the City Editor of the Daily Mail said Tesco might have been better off buying Ocado rather than Booker and the Times said that Tesco is “in the worst of all worlds” as the least likely to be taken over by Amazon, but facing a nightmare rival. The Times also noted that Tesco has been fined £8m for
• Sunday Press: The Sunday Times had its usual plethora of Retail stories, with the most eye-catching its front page Business lead that Sainsburys has emerged as the front runner to buy the struggling Nisa convenience store chain, after agreeing a £130m bid and beating off competition from the Co-op. The Sunday Times also flagged that the US private equity fund Hellmann & Friedman has tabbed a £2.5bn bid for the home shopping group Shop Direct and it had an interview with the bullish Mark Newton-Jones, who lamented that the City doesn’t seem to appreciate his turnaround of Mothercare, plus a profile of Amazon boss Jeff Bezos (headlined “Alexa, what shall we do next? Take over the world, Mr Bezos”). The Sunday Telegraph went big on the Amazon Whole Foods deal with a double page spread exploring the key issues, but it also had a feature on the decision of Conde Nast to pull the plug
• Bonmarche: Today’s final results statement from Bonmarche, “one of the UK’s largest women’s value retailers”, reflects at length on a challenging year (the 53 weeks to April 1st), but doesn’t give much away about prospects for the year ahead, beyond the comment that “trading since the beginning of the new financial year has been in line with the Board’s expectations” and lots of fighting talk about being able to profitably grow market share. Last year saw store LFL sales down by 4.3% and Online sales up by only 2.2%, but, “in line with revised expectations”, underlying PBT was £6.3m (versus £10.6m in the previous year). Amusingly, under “External factors”, Bonmarche note that “Retailers are sometimes perceived to be overeager to refer to the weather as the cause of poor performance; nevertheless it does have a significant effect on our business, both positively and negatively. The
• The Grocer Watch: The widely followed Grocer “33” weekly supermarket pricing survey in Saturday’s The Grocer magazine saw Morrisons pick up a big win, coming in no less than £3.79 cheaper than Asda, with a basket of £65.66, forcing poor old Asda to dole out a whopping £8.10 Price Guarantee voucher, for failing to be at least 10% cheaper than its main rivals. Tesco was pipped for third place by 14p by Sainsbury, on £72.25, but it gave an instant £3.67 Brand Guarantee deduction. Waitrose was only a long way off the pace on £79.05…not helped by charging nearly £12 for a leg of lamb (£6.96 in Morrisons). The separate regular Grocer “Mystery Shopper” weekly survey on Store Service and Availability was won by Tesco, as its 80,000 sq ft Tesco Extra in Bradford came top, in another generally low-scoring week, scoring 81 out of 100. The Waitrose store in Preston came bottom, with a score of
• Trade Press: Drapers magazine wasn’t available first thing on Friday, but it was published and the front cover flagged up a feature on Graduate Fashion Week. In terms of News stories, Drapers flagged that Next is to launch an own-label range for its Label division, New Look has lost both its Menswear and Footwear directors and Matalan has reported a recovery in its results for y/e February. Drapers also had a feature on H&M’s upmarket new fascia Arket.
• News Flow This Week: As we head into the second half of June (with the longest day of the year coming up on Wednesday…), there isn’t much more scheduled company news this week (although the N Brown trading update is tomorrow and the Boohoo.com AGM is on Friday). For many people, the highlight of the week will be Royal Ascot, which starts tomorrow (“Honest Nick” will be bringing you his Tips each day), but the delayed Queen’s Speech on Wednesday will be another political highlight and the prestigious BRC Annual Lecture on Thursday by Richard Pennycook will be a Retailing industry highlight…