Langton Capital – 2017-07-10 – JDW, burger closures, wages, economy & other:
JDW, burger closures, wages, economy & other:
A DAY IN THE LIFE:
Given his comments whilst business secretary, I didn’t think I’d end up defending Sir Vince Cable but the attacks upon him have been a little off-putting and I guess we should add ‘new-era truth’ to our list of euphemisms for lying (or at least misleading) statements.
The £360m to the NHS, the sick of experts, the take our country back, the no snap general election, no money tree, no deals, no U-turns, nothing has changed, no, nothing etc. and now we have the ‘fact’ that 80% of people voted for parties who say they support, or will make the most of Brexit is being bandied around by vaguely disturbing politicians saying that there’s no going back and implying that, no matter what proportion of the population feel disquieted by the prospect of Brexit, they will not be given a chance to change their mind.
But if that were sensible, why would be have a Court of Appeal?
And why would we ever need more than one General Election per century, why would it be enshrined in law that one government can’t bind its successors and, ironically, why is divorce legal?
I mean all of the above imply changing one’s mind.
And what about unforeseen consequences? What about the Hard Left government that may be foisted on us for 5 or 10 years in the wake of the Brexit debacle? Do we really think this is all a good idea?
Maybe we do. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• JD Wetherspoon is to update on trading on Wednesday. The group, whose Chairman, Tim Martin, was a major Brexit campaigner, has said on two occasions in recent weeks that current trading is strong.
• JDW Friday announced that it had bought back another 400k shares at 961p. The group has now spent in the region of £7.7m on buybacks since it commenced its most recent programme on 4 July.
• Punch’s decision to change distributors from Carlsberg to Kuehne & Nagel means the pubco has changed its tied agreement and has thus breached a ‘trigger’ event under the MRO, writes The Telegraph. Punch has admitted to its tenants that orders will not be delivered to tenants as quickly under the new arrangement. Chris Wright, head of the Pubs Advisory Service, said the intention of the code was ‘clear’ and that any change imposed by the landlord which noticeably altered the way the pub had to operate meant a request to go free of tie could be lodged. However, Punch disagrees. The change in distributor ‘does not qualify as a trigger for MRO under the Pubs Code’ and publicans should seek independent advice or speak to the Pubs Code Adjudicator (PCA), it said.
• The gourmet burger market appears to be suffering from a reduction in demand, as Byron announces it is to close four of its units amid a profit slump, the Sunday Times has reported. Rival burger restaurant chain, Handmade Burger Co went into administration last week, putting 900 jobs at risk.
• US restaurants continued their hiring spree in June adding 29,300 jobs, while the US economy as a whole added 222,000 jobs for the month, according to federal data. NRN claims this suggests a healthy demand for the restaurant industry to grow in the US, which has added 277,000 jobs over the past year. However all this hiring will create a more challenging labour market that will drive up wages.
• Research by Urban Laboratory at University College London has found that over the past decade more than half of London’s LGBT+ venues have closed.
• BrewDog has raised just $6m of its $50m US crowdfunding target, despite there only being three weeks left of its year-long fundraiser. BrewDog’s first USA-brewed beers will go on sale next week in Ohio.
• The British Beer & Pub Association has urged a cautious approach to further increases in the National Minimum and National Living Wage rates, given economic uncertainties and rising costs. The trade body says that the National Living Wage costs the industry around £34m per year in 2016. The increase to £7.50 this year adds a further £52m, giving a total additional staff cost of £86m over the first two years of the NLW – an average of around £1,600 for every pub in the UK.
• Deliveroo has called for the government to revamp workers’ rights legislation to allow it to give its delivery riders benefits without the conditions that would be attached to counting them as employees. Co-founder Will Shu wrote in The Telegraph that companies are currently forced to choose between offering workers flexible work and entitlements such as sick pay and maternity leave because the law had not been ‘updated’ to reflect new ways of working.
• Molson Coors is setting up a new brand called Dead Brewers Society and has registered the name as a trademark, as well as setting up a relevant web domain and twitter address.
• NRN writes that US brand Buffalo Wild Win7gs’ shares have fallen nearly 14% since Marcato Capital Management won three seats to the company’s board.
• Wine giant Constellation Brands has paid $60m for Napa Valley Cabarnet specialist Schrader Cellars as part of its strategy to move into the premium wine area of the market. Schrader produces just 2,500 to 4,000 cases a year, depending on the vintage, and sells its routinely high scoring wines, such as its Old Sparky’ Cabernet from the To Kalon vineyard, for $200 a bottle.
• Arla boss Peter Turborgh has warned that Brits could face a butter and cream shortage by Christmas. Wholesale UK butter prices have risen by a staggering 108% year on year to record highs of £4,225/tonne, per Mintel, but the NFU has dismissed Turborgh’s warning as ‘scaremongering’.
• The 2017 OC&C/Grocer Global 50 report indicates that headline revenues of the world’s largest fmcg players have fallen for the first time in more than a decade. The sector remains under pressure globally and is facing headwinds including the fragmentation of consumer tastes and buying habits in the West, weakening economic conditions in many emerging markets, and the global rise of smaller, specialist brands. Sales across its 50 biggest players declined by 0.7% in 2016 compared to growth of 0.3% in 2015.
HOLIDAYS, LEISURE TRAVEL & HOTEL:
• Hoseasons reports a 13% rise in peak summer bookings made in June yoy, with south-west continuing to be the most popular region. North Yorkshire, Northumberland and north Norfolk were the best-selling areas on cottages.com, which saw its sales of its luxury range up 49%. This data showed a shift towards high-end accommodation in the surge in demand for UK breaks this summer.
• Travel advice from the Foreign and Commonwealth Office (FCO) has warned Britons travelling to Norway of an increased terrorism threat in the country. The FCO said ‘Terrorists are likely to try to carry out attacks in Norway. Attacks could be indiscriminate, including in places visited by foreigners.’
• Dame Carolyn McCall, EasyJet CEO, is planning to refocus the budget airliner on cracking the tour operator market. McCall said about the market ‘It’s important, but it’s never been up there. To make it successful it has to be someone’s real top priority. We are going through a process to see how we are going to do that.’
• All Star Lanes has reported full year numbers to Dec 16 saying that turnover rose from £14.5m to £15.3m. EBITDA rose by 40% from £1.1m to £1.5m.
• All Star Lanes sees gross margin rise to 81.1% from 80.1% & sees ‘significant top line growth’ at two, newly-opened venues. The Group says that it ‘continues to evaluate a number of new potential venues with the intention of expanding when suitable sites and commercial opportunities have been identified.’ It adds ‘trading post year end has continued in line with the group’s budget and ahead of prior year levels. During January the Group’s flagship site in Brick Lane, was significantly renovated, in the period post this renovation trading from this site is significantly above prior year.’
• The Blue Man Group will be acquired by Cirque du Soleil in a deal worth tens of millions of dollars.
• Jawbone, a fitness tracker firm that was once valued at £2.3bn, is facing liquidation according to the BBC. CEO Hosain Rahman is said to be starting a new health-based tech start-up.
FINANCE & MARKETS:
• NIESR reports that GDP grew by 0.3% in Q2 saying ‘the economy continues to grow below its long run trend of 0.6%’. The NIESR comments ‘we estimate that output grew by 0.3 per cent in the second quarter of 2017. Growth in services has offset a contraction in industrial output, yet remains subdued when compared with last year. The saving ratio reached an historic low of 1.7 per cent in the first quarter of this year, implying that, so far, households have reduced their saving to cushion the effect of falling real incomes on consumption as inflation rises’.
• The Times reports ‘confidence among both large and small businesses has collapsed amid mounting concerns over the domestic political backdrop and fresh evidence that households, the engine of recent economic growth, are tightening their belts.’ It suggests growth may have been only 0.2% in Q2.
• Sterling falls on poor PMI data. Markets consider rate rises, despite Governor & Deputy Governor comments, may be some months away. The MPC reports this Thursday.
• UK trade deficit widened to £3.1bn in May.
• Halifax says UK house prices fell in the 3mths to June, down 0.1% on prior three months. Annual rate now 2.6% (from 3.3%). Halifax says ‘although employment levels continue to rise, household finances face increasing pressure as consumer prices grow faster than wages.’
• US employment rose by more than expected in June but wage growth was subdued reports that US Dept of Labor
• The Times reports analysts’ comments that ‘the economy is stumbling and is unlikely to have gained any momentum since its disappointing start to the year.’ Interest rate rises perhaps less likely
o Sir Vince Cable reports he is “beginning to think Brexit may never happen”. The deteriorating economy could make people think again.
o Eurosceptic Conservative MP Owen Paterson says Vince is on the wrong side of history. He says that 80% of people voted for parties supporting Brexit last month. Almost 100% of people voted for candidates with two legs.
o Ex-Sainsbury’s boss Justin King has said that people are being kept in the dark about the impact of Brexit. He says it will lead to “higher prices, less choice and poorer quality”.
o France becoming more “finance-friendly” as it seeks to take London jobs
o US President Donald Trump’s underused thesaurus was in evidence over the weekend as he said the US will be able to strike a ‘very, very big deal’ and a ‘very powerful deal’ with the UK ‘very, very quickly.
• Oil down a shade at $47.13
• Sterling lower at $1.289
• Pound down vs Euro at Euro 1.1306
• UK 10yr gilt yield down 1bp at 1.31%. Sterling down on slow/no growth fears but interest rates unchanged suggests stagflation concerns
• World markets: UK & Europe up on Friday with US also higher. Far East up in Monday trade
YESTERDAY’S LATER TWEETS:
• Later tweets: Halifax says house prices down by 0.1% in quarter to June versus three months to May. Annual inflation 2.6% vs 3.3% last month
• Cheese prices are set to rise by up to 30% due to an increased demand from Europe and currency fluctuations
• ONS reports that real household incomes are falling at their steepest rate since 2011. Down 2% this Q1 on last year
• JDW yesterday announced that it had bought back another 87,500 shares for cancellation at 960p.
RETAIL NEWS WITH NICK BUBB:
• Saturday Press: The improved Dunelm trading update and the CEO change at Howden/Screwfix got some coverage in the Times and the Telegraph, but otherwise all the focus in the Saturday papers was on Mike Ashley/Sports Direct and Christian Härtnagel/Lidl UK…The Times had a prominent article highlighting that one of Mike Ashley’s main shareholders, the fund manager Crispin Odey, has added to the pressure by criticising some of his recent moves and the Times also had a double-page spread on Mike Ashley, listing all his quotes in the High Court last week and noting that the City is used to this stuff, headlined “Frustrated City isn’t laughing at Ashley’s one-man show”. The FT had an article about Sports Direct headlined “Booze and banter put Sports Direct in the spotlight” and there was a separate critical Comment piece by the Lombard column doyen Jonathan Guthrie headlined “Ashley’ tragic
• Sunday Press: There was more focus in the Sunday papers on Mike Ashley …The Observer’s “Quote of the Week” was his admission that “I like to binge drink” and although the Business Leader column in the Observer said that investors in Sports Direct know what they’re getting (“a boss who owns more than half the shares and doesn’t care what they think”), the Business Editorial in the Sunday Telegraph thundered that “It’s high time that you stopped the ‘fun’, Mike”. In other news, the Sunday Times flagged that the families of the JD Sports founders, David Makin and John Wardle, will share £40m from the planned sale of 40% of their Footasylum chain and it also highlighted that a new pay row has hit Burberry ahead of its AGM. There was plenty of coverage of Marks & Spencer ahead of its AGM and Q1 update next week: the Sunday Telegraph noted that the City is reasonably optimistic about
• The Grocer Watch: The widely followed Grocer “33” weekly supermarket pricing survey in Saturday’s The Grocer magazine saw Asda back in the lead, after a nervy couple of weeks, although its £57.07 basket was only 3p cheaper than Tesco, which meant that Asda had to dish out a £2.74 voucher for failing its guarantee to be at least 10% cheaper…Sainsbury, on £59.33, claimed third place and Morrisons was 4th, on £59.64. Poor old Waitrose was a long way off the pace again, on £65.25…The separate regular Grocer “Mystery Shopper” weekly survey on Store Service and Availability was won by Morrisons, as its 42,000 sq ft store in Doxford, Sunderland came top, scoring 78 out of 100.
• News Flow This Week: As we head into the second week of July and the second week of Wimbledon (come on Andy!), there are some big updates this week, kicking off with the BRC-KPMG Retail Sales for June first thing tomorrow (which is likely to flag a slight pick-up last month), followed by the Marks & Spencer Q1 update and AGM. The Burberry Q1 is on Wednesday and the ASOS Q3 is then on Thursday.