Langton Capital – 2017-07-21 – Card surcharges, departing directors, more burgers etc.
Card surcharges, departing directors, more burgers etc.
A DAY IN THE LIFE:
So, if as the UK’s air traffic controllers have said, today will be the busiest day of the year, how are all of the people that are flying out today ever going to get back?
I suppose they’re more likely to stagger their return than they are their departure but Friday seems a slightly odd day to clear off and, despite the fact that the ‘out-off-office’ replies are now likely to soar, we’ll still be at our desks as the schools in York will be open next week.
Anyway, it would be wrong to say that we’re not looking forward to something of a break. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
Departing directors Pt II:
• Two of the four founders of Dishoom have decided to exit the restaurant group. Amar and Adarsh Radia are leaving the company to pursue other business ventures, seven years after the restaurant chain was founded.
• Carluccio’s has reported that Sarah Murray, Chief Operating Officer, ceased to be a director on 13 July.
• Anheuser Busch InBev has announced it will buy the San Francisco-based energy drink producer Hiball. This is yet another move into the non-alcoholic industry for the world’s largest brewer. Anheuser released a statement saying ‘Hiball’s products target some of the most important trends in the beverage space today, including health and wellness’.
• The US burger giant Wendy’s is holding a one-day UK pop-up today on London’s Queen Street. This could signal the company’s interest in operating in the UK again, 17 years after it officially moved out of the country. Other burger chains that have crossed the pond in the last few years include Five Guys, Shake Shake, The Counter and Smashburger.
• Michael Gove has said that farm subsidies will have to be earned post Brexit as they will no longer be simply handed out.
• Ei Publican Partnerships research has revealed that UK pubs remain important locations for local communities, ahead of the inaugural National Pub Fortnight.
• Hawthorn Leisure has increased EBITDA by 10.1% to £9m in the year to 25 December 2016. This is the third year of ‘significant growth’ for the Avenue Capital-backed 312 pub strong operator.
• Alcohol is still being sold for ‘pocket money prices’ according to charity, Alcohol Health Alliance (AHA). The AHA found that cider is still the cheapest alcohol, with a 3-litre bottle of 7.5% ABV costing £3.59.
• Bounce Ping Pong, the parent company to the ping pong and bar concept, Bounce, is to be renamed to Social Entertainment Ventures. The company plans to expand globally, opening 20 new venues by 2020.
• The latest edition of the CGA Peach BrandTrack survey has shown that 18-34 year olds have visited an average of 3.6 new brands in the last six months, highlighting the challenges of securing loyalty among young adults.
• UK retail sales increased by 0.6% in June, beating market expectations. The ONS figures were driven by strong sales of household products, clothing and shoes.
Activism on the rise:
• Most noticeable in global packaged goods, activism is on the rise. This has featured in the leisure sector in the past, particularly for companies with a large freehold estate, where Robert Tchenguiz and others made their presence felt 10yrs ago or so.
• Nelson Peltz has been active on the registers of Heinz & Mondelez. Nestle is under fire & Unilever was the target for Warren Buffett / Kraft Heinz
• Peltz, aged-75, is now having a crack at Procter & Gamble whilst activist shareholder Oasis has taken a seat on the Premier Foods board
• Although Carl Icahn famously tried (and at least partially succeeded) to influence Apple with a shareholding of 1% (i.e. he did not own 99% of the stock), such moves serve as a warning to companies that, at the end of the day, they remain accountable to their shareholders.
HOLIDAYS, LEISURE TRAVEL & HOTEL:
• The travel sector could take a £150m hit over the government’s ban on debit and credit card surcharges. UK Cards Association data for the year to April shows that consumer credit card spend with travel agents totalled £7.5 billion. Based on charges of between 0.5% and 2% of transaction value, this indicates a cost implication in the range of between £35 million and £150 million across the sector.
• Air traffic controllers have warned that UK skies are becoming crowded. They point out that this Friday could be the busiest day of the year with some 8,800 flights expected to run, a record number. They have called for modernisation with NATS director Jamie Hutchison saying ‘in the last few weeks we have already safely managed record-breaking daily traffic levels, but the ageing design of UK airspace means we will soon reach the limits of what can be managed without delays rising significantly.’
• 1,400 British Airways cabin crew represented by Union Unite are set to hold another strike running until mid-August in a dispute over pay and conditions.
• The European Commission has stated that online platforms such as Airbnb and Uber can cause confusion among customers, failures on pricing, misleading information and biased reviews. A study by the EC found that 55% of users experienced problems in the sector, worth €28bn pa, in the past year.
• Transat’s 35% holding in Ocean Hotels will be sold to H10 Hotels. Transat said the move was made in order to ‘accelerate the development of its own hotel chain in the South’.
• STR reports that the three key hotel KPIs were mostly positive in the US and Canada, yoy. In the US, occupancy was -0.1% to 77.4%, ADR increased 1.7% to $130.76 and RevPAR was up 1.6% to $101.15. In Canada, occupancy increased 0.1% to 79.2% with ADR and RevPAR both increasing 1.3% to US$136.93 and US$108.48 respectively.
FINANCE & MARKETS:
• Eurozone interest rates were yesterday left unchanged at 0% by the ECB.
• The Euro rose to a 2yr high versus the US$ yesterday on the back of comments from the ECB that its stimulus programme would be discussed in the Autumn. There is no short term change to the bond buying programme.
o Reuters reports that neither the EU nor the UK offered many compromises in their first full round of Brexit talks.
o Academics have warned of “widespread, damaging and pervasive” costs if a transitional deal is not achieved.
o Michel Barnier has referred to “a fundamental divergence” on how to protect the rights of EU citizens in the UK
o UK trade minister Liam Fox has said a trade deal with the EU should be “one of the easiest in human history”
o Whilst the UK/EU starting point is from a position of equivalence, the Canada deal, which was voted through in February this year, took 8yrs to negotiate.
o Sterling weakened vs a strong Euro on no-deal concerns
o Goldman boss Richard Gnodde has said that a deal should be agreed ‘the sooner the better’
o CEO of Deutsche Bank John Cryan has said that his business is preparing to book the “vast majority” of its business out of Frankfurt in the future. He told staff the bank was working on expectations of a “reasonable worst outcome”. The German bank employs around 9,000 people in the UK
• Oil down at $49.28
• Sterling weaker at $1.2962
• Pound down vs strong Euro at €1.1149
• UK 10yr gilt up 1bp at 1.20%
• World markets: UK up yesterday on weak pound but Europe & US down. Far East mostly down in Friday trade
YESTERDAY’S LATER TWEETS:
• Later tweets: JDW has bought back another 250k of its own shares for cancellation at 1019.6p per share
• Delivery companies take a hit as credit card charges will be outlawed next year. They’re amongst the ‘worst offenders’ per BBC
• Travel companies see c£150m of income at risk as credit card surcharges are to be banned from January.
RETAIL NEWS WITH NICK BUBB:
• AO World: Ahead of today’s AGM update from AO World (aka AO.com), for the period from 1 April to 30 June, the share price has been drooping well below the c133p placing price at the end of March, at c119p, but shareholders will be cheered to hear that although “the UK trading environment remains challenging with the MDA market overall seeing lower volumes year on year in Q1…we are pleased to report revenue growth in UK AO Website Sales of 6.2%”, despite tough comps, and that with European expansion said to be on track “the Board expects results for the full year to fall within the range of market expectations”. There is an analyst’s conference call at the unusual time of 7.30am.
• BDO High Street Sales Tracker: We flagged on Wednesday that John Lewis had a quiet time in Fashion last week, in the last week of the Summer Clearance Sale, and today’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains flags that w/e July 16th saw Fashion Store LFL sales slip back by 1.6%, despite soft-ish comps. Including Homewares and Lifestyle chains, total Store LFL sales were down by 0.3% last week, but overall Online sales were up by 18.7% (against 23.3% growth a year ago).
• Planet ONS Watch: We flagged yesterday that in the real world, June (the 5 weeks to July 1st) was a bit better on the High Street (as per the BRC-KPMG Retail Sales figures last week), helped by the hot weather and the early fall of the Eid festival, but on the Planet ONS we are informed, via yesterday’s Office of National Statistics Retail Sales figures for June, that it was a very good month. City economists were pleased to see a 0.6% month-on-month recovery in “seasonally adjusted sales volume” (inc petrol), to pull the year-on-year growth back up to 2.9%). We were, as usual, more interested in the year-on-year movement in “non-seasonally adjusted sales value” and the infamous “Big Retailer” versus “Small Retailer” ONS sales split. And total Retail Sales growth (ex petrol) picked up from 3.4% in May to 5.4% in June, which looks over the top, given that Food Retail sales growth
• Trade Press (1): The front cover of Retail Week magazine today is a photo of shopping centres in the Midlands, with the headline “High speed Retail: How the Midlands is welcoming regeneration”, as part of its “On the Road “ series (the article focuses on Grand Central in Birmingham and interviews Andy Street, the new West Midlands Mayor). RW also has a column by Dixons Carphone CEO Seb James on “Why Amazon is not invulnerable to retail competition”. In his column the Editor looks at the appointment of Karren Brady to be the next Chairman of Arcadia (thundering that “Brady could help Philip Green get back on track”) and also at the debate about the frequency of Fashion sales reporting (noting that there is merit in our not entirely serous view that all Retailers should report sales monthly). In terms of News stories, RW focuses on the view of B&M boss Simon Arora that shoppers are
• Trade Press (2): The colourful cover photo of Drapers magazine today flags up a feature on Spring 2018 Womenswear (“new womenswear is all about pared-back style and vibrant palettes”), but the main feature is an interview with Marc Granditer, the head of the privately owned fashion chain Base. In her column the Editor looks at the decision of John Lewis to appoint a Manager of Brand Experience at its new Westgate Oxford store and thunders “Embrace experience – if it reaps rewards”. In terms of News stories, Drapers focuses on the news that the fashion retailer White Stuff has made close to 30 redundancies across its Head Office in recent weeks (alongside the departure of its CEO, Jeremy Seigal) and that Missguided is planning to introduce a series of third-party sportswear labels to its website.
• News Flow Next Week: As we head into the last week of July we get the McColl’s interims on Monday and the latest Kantar/Nielsen grocery market share data on Tuesday. Then the Joules finals, the Halfords AGM and the Hammerson interims are on Wednesday. The Intu Properties interims, the Inchcape interims and the Bonmarche AGM are on Thursday.