Langton Capital – 2017-07-14 – JDW buyback, Dart slips, steak, tourists & other:
JDW buyback, Dart slips, steak, tourists & other:
A DAY IN THE LIFE:
Thinking for no particular reason about Venice, the other day, I wondered, what with the smell and the overcrowding and with all that ‘slipping-into-the-sea’ thing going on, isn’t it just, well, in the wrong place?
I mean presumably somebody thought it would be a bit of a giggle to build in a swamp and to fight Mother Nature for a couple of millennia. Maybe they’d just been kicked in the head by a horse. Or maybe they were making a protest, didn’t think anyone would actually go through with the project but then, and this is the most inexplicable thing, nobody sensible thought to stop the project, they presumably said ‘we’ve started so we’ve got to finish’ and ‘there’s no turning back’.
And then they spent probably billions of man-hours building the thing and billions more dealing with the consequences and now, with the Repeal Bill only just launched, it brings some other potentially damaging economic projects to mind, don’t you think? On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• JD Wetherspoon yesterday announced that it has bought back a further 64,500 shares for cancellation at 978p
• JDW has now bought back for cancellation 914,500 shares at an average price of 964p (totalling £8.8m) since 4 July
• NRN has reported that sales and footfall continued to decline across US restaurants in Q2. It says, however, that the rate of decline had slowed.
• US restaurant LfL sales have now declined for six successive quarters reports NRN. Comps are easier & the rate of decline has slowed. Same store sales were down 1% in June and were down by 1% for Q2 as a whole. TDn2K reports ‘brands seem to be reluctant to implement significant price increases, given the current environment. Price promotions have been widely utilized, especially by struggling brands and segments to drive traffic.’
• Poland was announced the world’s best steak producer at the annual World Steak Challenge awards earlier this month thanks to its sirloin steak, a grain-fed heifer bred by F&M Frackowiak.
• The MP, Mike Wood, has been appointed the Chairman of the All-Party Parliamentary Beer Group
• Technomic’s 2017 Burger Consumer Trend report suggests that burgers are facing increasingly stiff competition from other menu options and that fewer consumers are eating burgers than in previous years. Of Technomic’s survey of more than 1,500 consumers, 56% said they eat burgers at least once a week — down from the roughly two-thirds of consumers who said they eat burgers at least once a week when they were surveyed in 2013. What’s more, respondents added that they are now more likely to prepare and consume burgers at home.
• The US operator Panera Bread Co. has added customisable diet items to its in-house and digital menus, increasing customer flexibility. Ron Shaich, the CEO of the group said ‘The new, curated menus take the guesswork out of our menu for a guest with specific taste or dietary preferences, making it faster and easier for them to enjoy our food’.
• CNBC reports that Amazon Prime Day has brought ‘back to school’ spending, at least in the USA, into early July.
• Per MCA, Fulham Shore-owned chain Franco Manca is set to open a new site next to Tower Bridge underneath Bridgemaster’s House on Duchess Walk. The company is also expanding into the regions with openings scheduled in Bristol and Oxford, and is thought to in talks about sites in Cambridge, Edinburgh and Chelsea.
• The ALMR has called for the Government to work collaboratively with businesses to ensure an efficient transition following the publication of the EU Withdrawal Bill. Chief Executive Kate Nicholls said ‘The ALMR will be liaising with the Government to ensure that eating and drinking out businesses are represented and the valuable contribution the sector makes both economically and socially is factored into the Government’s strategy’.
• Pernod Ricard, the French spirits group, has agreed to sell the Glenallachie Distillery to Billy Walker, the former managing director of BenRiach Distillery. The sale includes Glenallachie’s flagship single malt whiskey, and Scotch whisky brands MacNair’s and White Heather.
• Woodinville Whiskey Company, based in Washington, has been acquired by Moët Hennessy, marking its first expansion into American whiskey. Woodinville is Washington’s largest craft distillery and produces Woodinville Straight Bourbon Whiskey, and Woodinville Straight Rye Whiskey.
• Gifts and books retailer The Works, owned by Endless, sees potential for 1,000 stores. Currently the chain has 400 shops.
HOLIDAYS, LEISURE TRAVEL & HOTEL:
• Dart Group shares fell by 10.5% by mid-morning yesterday on the back of an earnings miss. Profits, revenue and EPS undershot estimates as a result of start-up costs at Birmingham & Stansted airports and a £10.9m charge for foreign exchange revaluation losses. The group’s logistics company suffered a £0.4m bad debt. Underlying numbers, if the market were prepared to look through short term one-offs (which it appears not to be), were said to be ‘resilient’.
• Big ticket spending may come under more pressure than ‘affordable treats’ if / when the consumer is squeezed a little further.
• New data has revealed overall spending by foreign tourists in the UK was higher in the second half of 2016, helped by favourable exchange rates. More than 37.6 million people visited the UK last year, up 4% on 2015, spending £22.5 billion, an increase of 2%. Visitors from the US dominated spend, with visitors from the Nordics, Benelux, US, Italy and Spain spending significantly more on eating out. Tourists from Denmark, South Korea and Israel spend more on live entertainment whereas those travelling from China, Hong Kong and Thailand spend more on UK products in retail.
• Trends continued into Q1 this year with & the weak pound has been credited for encouraging a surge in the number of tourists visiting the UK in the first three months of 2017, according to the Office for National Statistics. The number of holidaymakers coming to the UK leapt by 21.1%, although business visitors declined. Overall there were a record 8.3 million visits in the quarter (+10% year-on-year) and visitors spent £4.4bn while in the country, also a record amount. Meanwhile, UK residents made 14.1 million trips abroad over the three months (+8.1%).
• Uber is set to merge its Russian arm with a local competitor called Yandex, in an effort to build a presence in Russia and the surrounding regions. Yandex will own 59% of the combined company, valued at £2.9bn.
• Savills reports investment in the UK hotel market reached £2bn in H1 2017, and predicts investment will reach £5.1bn for the full year. Overseas investors desired big-ticket properties, accounting for £1.2bn of investment in H1, with individual sales accounting for 92% of the overseas investment.
• A fall in the popularity of malls in the US means hoteliers need to think about the future of retail space, as the fortunes of hotels are linked with the retail industry.
• STR reports that for the week 2-8 July 2017, the US hotel industry reported mixed yoy KPI results. Occupancy dropped 3% to 65.3%, ADR increased 1.1% to $122.73 and RevPAR decreased 2% to $80.11.
• STR reports; the US hotel industry saw an 11.6% increase in the number of rooms in the pipeline yoy for June 2017. There were 583,028 rooms in 4,836 hotel projects Under Contract in June.
• STR reports; Europe’s hotel industry saw a 17.5% increase in the number of rooms in the pipeline yoy for June 2017. There were 169,046 rooms in 1,100 hotel projects Under Contract.
• Pilar Carbonell, head of tourism for the Balearic Islands, has demanded a limit on drinking alcohol on flights and in airports in an effort to curb anti-social behaviour. In one particular incident, passengers reported members of a stag party fighting in the aisles of a Ryanair flight on its way from Manchester to Palma in Majorca.
• The tourism authority of the emirate Ras Al Khaimah reports a 10% rise in international guest arrivals yoy. Occupancy increased 4.7% to 72.7% with average length of stay increasing from 3.5 days to 3.9 days. Year-on-year figures for June show a 27% increase in guest arrivals and hotels recorded a 37.6% year-on-year increase in the holy month of Ramadan against 2016.
FINANCE & MARKETS:
• RICS reports that the number of houses for sale is the lowest in 40yrs. Says uncertainty is ‘exerting itself on transaction levels, which are flat-lining, and may continue to do so for a while, particularly given the ongoing challenge presented by the low level of stock on the market’.
• London House prices on the slide says RICS with 45% of agents seeing prices fall.
o Repeal Bill published. Opposition promise to oppose. Tories, despite calls for help from political opponents, are wearing it
o Corbyn shadow cabinet adopts role of ‘Government in Waiting’ as Brexit debacle rolls on.
o UK exit may leave Corbynistas free to experiment in private with UK economy. No European restraint. May not happen but 1) why not? And 2) uncertainty not helpful
o Jaguar Land Rover has said it is to make its first vehicle wholly outside the UK. The E-PACE will be built in Austria & China.
• Oil up 70c at $48.46
• Sterling stronger at $1.2949
• Pound up vs Euro at €1.1351
• UK 10yr gilt yield up 3bps at 1.29%
• World markets: UK mixed yesterday with FTSE100 down. Europe up, US up & Asia up in Friday trade
YESTERDAY’S LATER TWEETS:
• Later tweets: FTSE100 best day in 3mths yesterday but a number of consumer stocks took a bath. Job numbers OK but money (in form of share selling) talks
• Real income down sharply as pay incl. bonus +1.8% but CPI at 2.9%. Big ticket should feel pinch first
• RICS house price intentions (up vs down) at 11mth low of 7. BBC highlights stock of houses for sale now at 40yr low
• JD Wetherspoon has bought back a further 64,500 shares at 978p. JDW has retired 914,500 shares (av. 964p, total cost £8.8m) since 4 July
• Dart down 10.5% on earnings miss. Numbers undershot estimates due to start-up costs at Birm. & Stansted airports & forex hit
• Big ticket spending may come under more pressure than ‘affordable treats’ if / when the consumer is squeezed a little further
• June Tracker. Is >0% (at 0.6%) but not brill. as it’s way below both inflation & average earnings. JDW says need 3-4% to stand still
• Anaemic tracker suggests margins under pressure. Sunshine should have made June a better month. GNK / MARS shares at 5yr lows
• June Tracker a bit feeble. London > Provinces & pubs > restaurants as weather helps former, overcapacity hits latter
• Game & Mike Ashley. Is he contrarian genius or, well, is he something else? Streaming etc. suggests Game is on wrong side of history
RETAIL NEWS WITH NICK BUBB:
• BDO High Street Sales Tracker: We flagged on Wednesday that John Lewis did not do well in Fashion last week, with the second full week of the Summer Clearance Sale impacted by the renewed heatwave, and today’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains flags that w/e July 9th saw Fashion Store LFL sales slip back by 1.3%. However, including Homewares and Lifestyle chains, total Store LFL sales were up by 0.4% last week and overall Online sales were up by a decent 17.8% (on top of 23.6% growth a year ago).
• Quiz IPO Watch: Back on June 15th (the same day as the DFS profit warning), Quiz, the Scottish based fast fashion retailer, announced its intention to float, on the back of strong current trading and the news that no less a personage than Peter Cowgill, the boss of mighty JD Sports, was to become the non-exec Chairman. But we have heard nothing since then…Could it be that they have struggled to interest City institutions in the mooted £200m valuation, which smacked more of an Online etailer price tag than the right price for a High Street fashion chain?
• Trade Press: The front cover graphic of Retail Week magazine today about Amazon Prime Day flags up a feature on “How Amazon thinks: Retail lessons from its approach to data”. RW also has features on shopping centres on the South Coast (as part of its “On the Road” tour) and Evans Cycles’ new boss Andy King.
• Mockery Watch: The FT’s stockmarket reporter, Bryce Elder, was on good form again on the FT Alphaville “Markets Live” daily webcast yesterday, mocking Sports Direct’s newly declared stake in Game Digital: “Strategic partnership. Why not? We’re getting a reasonable insight on how Ashley negotiates partnerships in the High Court right now…All the evidence suggests he uses Sports Direct cash to punt on random retailers as a kind of distressed High Street hedge fund…The partnership with Debenhams has so far delivered a few rather awkward concessions dropped into the stores and the stock sinking to a record low…”.
• News Flow Next Week: The big day is Thursday next week, with the much-awaited Sports Direct finals, the Howden Joinery interims, the Mothercare Q1 update and the ONS Retail Sales for June. Before that, Conviviality announce their interims on Monday, whilst on Friday there will be an AGM update from AO World (aka AO.com).