DP Poland, Hotel Chocolat, Gaming Realms & other:

A DAY IN THE LIFE:

Bit busy. On to the news:

DP POLAND UPDATES ON H1 TRADING:

DPP has this morning updated on Q2 trading and our comments are set out below:

Trading Headlines:

• DPP has reported system sales +50% in H1 with LfL sales +17%

• The group reports H1 revenues of 27m PLN versus 18m PLN last year

• Q2 represents the 19th consecutive quarter of >10% system sales growth

• 10 new stores have been opened to date since 1 Jan

• The group now operates 45 stores in 18 towns and cities across Poland

More on Trading:

• DPP CEO Peter Shaw reports ‘we continued to see strong growth in system sales in the first half of 2017, thanks to robust double digit like-for-likes and 10 store openings, year to date.’

• Mr Shaw adds ‘eight additional towns and cities have been added to the Domino’s map in Poland so far this year.’

• Group CEO reports ‘our rate of growth in online sales continues with 73% of all delivery orders made online in the first half of 2017, compared to 71% for the full year 2016, a trend that brings us in line with many of the more mature Domino’s markets.’

• The group continues ‘an effective online ordering system benefits both our customers and our operational efficiencies, making the ordering process easier and less labour intensive. We expect the proportion of delivery sales made online to continue to grow as we invest in our digital technology and marketing.’

• Re the commissary, DPP reports ‘our state-of-the art commissary in Łódź is nearing completion and we expect it to come on stream in September, giving us the capacity to supply up to 150 stores with fresh dough and ingredients, in combination with our Warsaw facility.’

• The Company will release H1 numbers on 18 September

Langton View: DPP is continuing to deliver. It has 45 stores & is on track to have 55 by its December year end.

The group is loss-making, as one would expect at this stage in its development, but growth continues and, post the group’s fundings in December 2016 and June 2017, the group has the resources to grow its estate of company-managed stores (currently around 40% of total units) more rapidly.

Poland is a fast-developing economy and, with the New York Times saying that it may be the first major economy since South Korea 20yrs ago, to make it into the world’s group of ‘rich countries’ (per capita income of >$15k), this looks set to continue.

The group’s current growth (it will have been a little slower in Q2 than in Q1 due to the shift of Easter) should propel it to cash flow break even by FY19 & profit shortly thereafter. There is no obvious reason why Poland should not be host to 300+ DPP stores in due course.

PUB, RESTAURANT & DRINK PRODUCERS:

• Hotel Chocolat updates on FY trading saying ‘revenue for FY17 was £105 million. On a comparable basis, revenue for the 52 weeks ended 25 June 2017 was £104m, an increase of 12 per cent compared to the prior year, slightly ahead of market expectations.’ The group says ‘trading since FY17 continues to be in line with management’s expectations.’ Angus Thirlwell, Co-Founder and Chief Executive Officer of Hotel Chocolat, said: “Hotel Chocolat has had another good year, with encouraging growth. We are excited about the progress made with our new shop+cafe format stores and our seasonal ranges continue to perform well.”

• Gourmet Burger Kitchen reports FY numbers to end-Feb. It reports that it opened 13 units during the year taking its estate to 84 restaurants.

• GBK reports revenues +16% to £77.9m with the increase driven by ‘new openings and strong underlying LfL growth’. The group’s ‘order & collect’ business has continued to expand.

• GBK gross profit for the year to end-Feb +15% but opening costs held back PBT, which increased by 9% to £6.2m. The group reports that ‘our obsession with brilliant burgers positions the business well to achieve further growth’.

• Speakers told the Restaurant & Bar Forum 2017 that recent CEO changes at the likes of Pizza Express, Byron and Wagamama (and Restaurant Group) could see change in UK restaurant chain management, as each look to organise their business in their own vision. Further expansion could follow.

• David Read of Prestige told the Restaurant & Bar Forum 2017 that food inflation for the restaurant and bar sector is currently at 9% according to Prestige Purchasing’s Foodservice Price Index (FPI), outstripping consumer food inflation by 7%.

• Chairman of Prestige Purchasing, David Read, said at the Restaurant & Bar Forum 2017 that supermarkets are better at absorbing inflationary costs, as well as being better positioned to push pricing pressures up the supply chain. He followed on to say that some supermarket suppliers may look to restaurant and bars industry in order to alleviate the cost pressures place by supermarkets.

• Chairman of Prestige Purchasing, David Read, said at the Restaurant & Bar Forum 2017 that food inflation should begin to level off in spring 2018. Mr. Read stated that food inflation could ease once UK and EU trade agreements make ground. Mr. Read did concede that further political instability could continue pound weakness and further inflationary pressures.

• Henry Dimbleby, co-founder of London Union and Leon, stated at the Restaurant & Bar Forum 2017 that London Union was holding talks with regards to a site to host its ‘Great London Market’ concept in central London.

• Ben Pask, MD of the customer insight firm Rare, said at the Restaurant & Bar Forum 2017, that 65% of people say they would still shop with a brand even if their currently loyalty scheme was not in place. Mr. Pask explained that customer loyalty is not functional but emotional to the customer, and for this reason many companies are looking at customer loyalty in the wrong way.

• Chipotle shares have fallen amid concerns that the burrito chain may have been the cause of customers becoming ill after having eaten at one of its restaurants. One store has been temporarily closed. The symptoms of the sufferers are consistent with the highly contagious norovirus.

• McCormick & Co, the US spice, herb and flavourings maker, has agreed to buy the food business of Reckitt Benckiser for more than $4bn. Chairman and CEO of McCormick, Lawrence Kurzius said ‘The acquisition of RB Foods strengthens McCormick’s flavour leadership with the addition of the iconic French’s and Frank’s RedHot brands to our portfolio, which will become our number two and number three brands, respectively’.

• The MP of Burton on trent, Andrew Griffiths, has been named the ‘beer drinker of the year’ by the All-Party Parliamentary Beer Group. Chairman of the group, Mike Wood MP, said about Mr. Griffiths ‘he has probably done more to change the political fortunes of beer than anyone in recent history.  He has successfully shown Ministers that beer and pubs are not the problem but part of the solution – massive employers, vital to communities and British to the core’.

• Cash payments are for the first time not the most popular way to purchase goods, the British Retail Consortium has found. Card payments were discovered to account for more than 50% of payment transactions, bringing the prospect of a cashless society one step closer. Tami Hargreaves, Commercial Director of Digital Consumer Payments at Barclaycard said ‘As we approach the tenth anniversary of ‘touch and go’ payments, it’s interesting to see just how much UK shoppers are valuing the convenience the speed and ease of contactless payments. Uptake and usage of the technology has evolved at a rapid pace, which is supported by our data which shows a significant surge in recent years’.

• Data from the US has shown same-restaurant sales have increased 0.5% in June, as the restaurant industry begins to recover from a year of weak performance. Traffic, however, continued to fall, declining 1.8% in June. Much of the upturn in LfLs has been attributed to easier comps with the co-founder of MillerPulse, Larry Miller saying ‘It has more to do with easier comparisons than business getting better. But traffic is still negative.’

• A survey conducted by the MCA has found that only 3% of food-led and 1% of wet-led pubs accounted 18-24-year-olds as a key customer group. The survey’s results also showed that 7 in 10 licensees agreed that they need to do more to attract young adults, with WiFi and more modern drink ranges.

• Pizza Hut and its franchisees in the US plan to hire around 3,000 new delivery drivers a month for the remainder of 2017, as well as updating its delivery technology.

• Data from the MCA’s Eating Out Panel has shown a significant fall in eating out visits throughout all dayparts, a trend seen across all months in 2017, apart from May. It is believed June’s results were negatively affected by the Manchester and London terror attacks and the general election.

• Respondents of a survey conducted by the Grocer said they would be cutting back on ‘too expensive’ fresh fruit & veg, with one third saying they had cut back on sugar in the last year. 

HOLIDAYS, LEISURE TRAVEL & HOTEL:

• Thomas Cook has opened its second lifestyle hotel in the Greek island of Kos. The operator has described the unit as a ‘beachfront hideaway, with the modern lifestyle traveller in mind’. The new hotel concept creates a sense of community in a village layout.

• Research by Carlson Wagonlit Travel (CWT) and GBTA has found that airfares and hotel prices are expected to rise by 8.5% and 9.5% respectively for UK business travellers next year. Price rises in Western Europe are forecast to be 5.5%, with Kurk Ekert, CWT CEO, stating ‘The higher pricing is a reflection of the stronger economy and growing demand’. The report also found that any impact from Brexit will not likely to be felt until 2019 when the UK is formally due to leave the EU.

• A survey by The Advantage Travel Partnership has found that British tourists are starting favouring island holidays, with the Balearics coming in at number one. The Greek islands and the Canaries were the next two most popular but mainland Spain still dominated, with 71% of respondents reportedly making bookings there.

• Major hotel companies have implied a desire to add serviced-apartment brands to their portfolios, according to a panel at the Serviced Apartment Summit Europe. Serviced-apartments tend to see more profit generated through longer guest stays. Simon Walford, development director at Staycity Aparthotels, saying ‘the sector has huge upsides, but you have to invest in it’.

• US hoteliers have started wondering if RevPAR growth may halt soon, after 87 consecutive months of growth. With a pipeline of 200,000 rooms under construction for the industry, other KPIs peaking, a high dollar, rising costs and the OTA dilemma some hoteliers are having doubts. However, the macroeconomic climate still looks encouraging for hotels barring an ‘external’ event. Foreign capital, mostly from China, has kept values steady, if not higher yoy.

OTHER LEISURE:

• Angel Maria Villar, head of Spain’s football federation (RFEF) and also a FIFA vice president, was arrested as part of an anti-corruption investigation following a raid on several offices in Madrid. Spanish police said Villar and several other federation members were detained on allegations of collusion, fraud and embezzlement.

• Gaming Realms has updated on H1 trading saying that it is on track to deliver in line with the Board’s expectations for the year as a whole.

FINANCE & MARKETS:

• UK CPI has fallen to 2.6% in June (from 2.9% in May) largely on the back of lower fuel prices. This is the first fall since October last year. Inflation, though lower, is still running ahead of wage increases. Fuel prices fell for the fourth month in a row per the ONS.

• Fall in inflation eases pressure on Bank to raise rates. Short term UK rates fell & Sterling weakened.

• PwC advisor Andrew Sentance reported ‘we have not necessarily passed the peak of inflation. Oil prices are volatile and could bounce back later this year. Meanwhile, the big fall in the value of the pound since last summer is still working its way through the pipeline and has not yet fully fed through into shop prices.’

• RPI dropped from 3.7% to 3.5%

• UK house price growth has continued to slow per the ONS. It reports that prices rose by 4.7% in the year to May, down from 5.3% in the year to April.

• Two parliamentary committees have said the government should make public any promises that it has made to carmaker Toyota ahead of its planned £240m investment in the UK

• Oil up at $48.73

• Sterling off a little at $1.303

• Pound weaker versus Euro at €1.1292

• UK 10yr gilt yield 6bps lower at 1.22%

• World markets: UK mixed yesterday with Europe down buy US higher. Asian markets mostly up in Wednesday trade

YESTERDAY’S LATER TWEETS:

• Later tweets: Deloitte has reported that UK consumer confidence has fallen for the third straight quarter. Rising costs causing problems.

• New capacity. We built it & they did not come say some operators. A bemused grin and a shrug will not be sufficient to pay the rent.

• The number of nights booked in booked through the Airbnb app in London increased 130% on last year

• David Davis keen to “get down to work”. Germans say UK readiness ‘farcical’. Brexiters hope for ‘cunning [though currently invisible] plan’

• June’s CPI fell to 2.6% from 2.9% in May. Volatile items, primarily fuel, led the decrease. Sterling down on the news, rate rise less likely

RETAIL NEWS WITH NICK BUBB:

• Hotel Chocolat: The premium British chocolatier Hotel Chocolat has issued a reassuring year-end trading update, announcing that sales rose by 12% in the 52 weeks to 25 June, which it claims was “slightly ahead of market expectations”. Angus Thirlwell, the co-Founder and CEO says: “Hotel Chocolat has had another good year, with encouraging growth. We are excited about the progress made with our new shop+cafe format stores and our seasonal ranges continue to perform well”.

• Safestyle: By way of contrast, the leading UK retailer and manufacturer of PVC replacement windows and doors, Safestyle, issued a trading update yesterday for the six months ended 30 June 2017, flagging that since the AGM on 18 May the Company has continued to see order intake levels up 2% year on year, but that within this overall figure “the trend from week to week during Q2 has been more volatile than we have experienced for a long time. Furthermore, FENSA statistics for the five month period to the end of May 2017 show a market decline in volume terms in excess of 10%”. Despite warning that it expects conditions to remain tough in the second half, Steve Birmingham, CEO of Safestyle UK, said “Despite the difficult market conditions we have increased our order intake in the first half and significantly grown our market share”.

• John Lewis Partnership Sales Watch: The last week of Clearance saw sales at John Lewis up by 4.0% up in gross terms (about 2.5% up LFL) in w/e July 15th. On a cumulative basis over the last 24 weeks, John Lewis is now running up by 1.3% gross (slightly down LFL). Fashion sales were up by 1.0% gross last week, Home sales were 1.9% up and Electricals were 9.9% up gross. Over at Waitrose  w/e July 15th saw total sales 2.0% up gross (a bit up LFL) and so over the last 24 weeks combined Waitrose is now running up by 2.1% gross (slightly up LFL).

• News Flow This Week: Tomorrow is the big day, with the much-awaited Sports Direct finals, the Howden Joinery interims, the Mothercare Q1 update and the ONS Retail Sales for June. On Friday there will be an AGM update from AO World (aka AO.com) and interims from the London property company Capital & Counties (aka CapCo). Today Amazon UK is holding a press briefing on its Xmas range: the “Amazon Wish List”.