Admiral Taverns, margins, Leon, staffing costs & other:

A DAY IN THE LIFE:

Langton is mostly back from holiday. Getting back into our stride so straight on to the news:

PUB, RESTAURANT & DRINK PRODUCERS:

• Admiral Taverns, which owns more than 1,000 pubs across the UK, is to be sold to New York-based investment fund Proprium Capital. The news comes after current owners Cerberus Capital launched an auction process earlier this summer. Cerberus acquired the pubs for £200m and is working with Sapient Corporate Finance on the sale talks.

• The CBI has suggested that service sector margins have suffered as a result of rising wages. The service sector makes up around 80% of the UK economy. In the last quarter, 21% of businesses said that profits were higher whilst 25% had seen profits decline.

• Consumer services were particularly impacted with an excess of 12% of respondents seeing profits fall rather than rise. The CBI commented ‘with the latest GDP data showing no growth in consumer spending in the second quarter, it’s no surprise that consumer services firms are particularly downbeat.’

• Deltic Group’s latest Night Index has suggested that more Brits are going on a night out at least once a week with 43.2% going out compared with 37.2% in the previous quarter. MCA reports CEO Peter Marks as saying ‘although overall spend has declined, it is encouraging to see people opting to spend more on drinks in venues rather than on pre-drinks. In addition to this, more Brits are going out at least once a week than in the last quarter.’

• Leon has struck a deal with Scandinavian operator Umoe to expand into Norway and Sweden, where it plans to open 20 sites over a period of five years. A site in Oslo will join Leon’s other two overseas units (in Amsterdam’s Schiphol Airport) by the end of the year. Umoe, which runs more than 360 restaurants and cafes in Norway, Sweden and Denmark, will take an undisclosed stake in Leon as part of the agreement.

• Pret A Manger has signed its first franchise agreement in the US, with Bon Appétit Management Company, which will see it open two shops at the Wharton School of the University of Pennsylvania on 28 August, followed by a third at the University of Chicago on 14 September.

• The Department of Coffee and Social Affairs has confirmed its US debut, in Chicago, and plans to expand further in the country.

• Castle Rock Brewery will open its 23rd pub, The Fox and Grapes, at Sneinton Market in Nottingham on 7 September.

• The ALMR says of the recent government report into migrant integration: ‘Migrant workers make a hugely valuable contribution to the UK economy and are particularly vital to eating and drinking out businesses and the report rightly acknowledges this. We need a legislative approach that gives employers access to the employees they need to grow their businesses. Naturally, with virtually full employment, a significant number of these are going to be non-UK workers, so barriers preventing their easy employment will harm the UK’s eating and drinking out sector.’

• Patron Capital completed its acquisition of Punch last Friday at an implied enterprise value of c£1.8bn.

• Four in five BHS stores remain vacant a year after the retailer’s collapse, according to figures from the Local Data Company.

• Four in every five businesses in the UK have seen their costs increase this year as a result of changes to employment legislation. The British Chambers of Commerce’ annual workforce survey finds that the Apprenticeship Levy, pensions auto-enrolment, and the National Living Wage have increased costs and reduced the scope for investment and wage growth.

• Carling lager has been brewed at 3.7% ABV as opposed to the advertised 4%, since 2012. The reduction in alcohol content was implemented in order to reduce tax on Carling products. There is no suggestion that US owner of Carling, Molson Coors, has broken any laws though it is unlikely that customers were aware of the reduction.

• Amazon has cut prices at Whole Foods Market by 43% on the first day of its full ownership

HOLIDAYS, LEISURE TRAVEL & HOTEL:

• Thomas Cook’s German Leisure airlines Condor and Lufthansa are interested in a number of planes from the insolvent Air Berlin.

• This year is expected to see the largest gathering ever for the annual Islamic pilgrimage to Mecca, with 1.5 million of an anticipated 2 million having already made the trip.

• The latest GfK holiday market report suggests that demand for holidays across the UK remains strong. It says bookings this summer are +7% on last year. Revenues are up by 13%. Some of the increase in spend will be as a result of the Pounds’ fall against both the Euro and the US dollar.

• Gfk nonetheless reports of the 2017 summer season ‘it is a pleasing start given the challenging economic, political and consumer backdrop.’

• The Office for National Statistics reports that outbound holiday departures rose 3% year on year in the three months to June and were 4% up in the year to date.

• Inbound holiday arrivals to Britain were +20% y-o-y in the quarter to June.

• Moody’s reports that the US Department of State’s warning for US citizens who plan to visit the Mexican states of Baja California Sur and Quintana Roo is credit negative for Mexican lodging companies Grupo Posadas S.A.B. de C.V. and Playa Resorts Holding B.V.

• The US hotel industry had a mixed July, per STR, which also predicts a flat 2018.

OTHER LEISURE:

• Uber is expected to appoint Expedia CEO Dara Khosrowshahi as the group’s new chief executive.

• Spotify has signed a major licensing deal with Warner Music Group, meaning all three big record labels have agreed to renewed terms to make their catalogues available to the digital streaming service. The renewed terms with Sony, Universal, and Warner have led some to speculate that Spotify will float on the New York Stock Exchange next year.

• Twitter is partnering with live-streaming sports network Stadium, which has also agreed a deal with Facebook for exclusive broadcasts of college football games.

FINANCE & MARKETS:

• German GDP rose by 2.1% in Q2 on an annualised basis.

• Oil $52.05

• Sterling $1.2944

• Pound at 8yr lows vs Euro at around €1.0808

• UK 10yr gilt yield at 1.06%

• World markets: UK down on Friday & shut yesterday. Europe down but Wall street up on Monday with Far East lower in Tuesday trade

• Chinese industrial companies saw profits up 16.5% in July over a year earlier.

• Brexit:

o UK & EU back in talks. EU says UK must get serious whilst UK says EU needs to show imagination. Michel Barnier says ‘we must start negotiating seriously.’

o Boris Johnson has accepted that there will be a divorce bill to pay. He had previously said that the EU could ‘go whistle’. Mr Johnson told the BBC ‘I’m not saying that I accept Barnier’s interpretation of what our obligations are. But I’m certainly saying that we have to meet our legal obligations as we understand them and that’s what you’d expect the British government to do.’

o EU still refusing to negotiate on trade until divorce details settled.

o Labour says it ‘will keep UK in single market’ for an indeterminate period. It takes two to make an agreement. Labour accepts leaving the single market will cost jobs. Labour intends to maintain ‘the same basic terms that we currently enjoy with the EU.’ So why leave? Some suggest that Bennites wish to experiment on the UK post the next election.

o Tories wish to keep single market for a time. See above.

RETAIL NEWS WITH NICK BUBB:

• Saturday Press: The main story in Saturday’s papers was the news that Amazon’s first action on completing the Whole Foods acquisition in the US today was to slash its food prices, as highlighted by the FT, inter alia, and although the impact on the UK food industry will be miniscule, the stockmarket reporters attributed the slight dip in Tesco and the Food Retailers on Friday to the effect of Amazon’s move; this was the lead story in the Daily Mail stockmarket report (“Supermarkets take hit from fear of price war”) and the City Editor warned gloomily of “Amazon’s feeding frenzy”, whilst the Business editorial in the Times flagged that “Bezos spells more pain for Tesco”. In other news, the Times highlighted the concerted Director share buying in Dixons Carphone on Friday, whilst the Telegraph noted that Mike Ashley has said that he will not be appearing at the Sports Direct AGM next
month and the FT and the Telegraph both flagged that Arcadia has admitted defeat over a £30m charge to BHS creditors. Finally, the Tempus column in the Times looked in detail at the gloomy prospects for the General Retail sector and noted that B&M and Dunelm may be two of the relatively attractive plays. 

• Sunday Press: There wasn’t a great deal of interest in Sunday’s papers, although one of the main stories in the Sunday Times was that two of the big tobacco companies are organising a rescue deal for the struggling grocery wholesaler Palmer & Harvey. The Sunday Times also flagged that Hotel Chocolat is to open stores in Hong Kong as a first step into Asia and that the influential Labour MP Frank Field has snubbed a request by Karren Brady, the new Chairman of Arcadia, for a meeting. The Sunday Telegraph noted the big fall in profits at the fashion chain White Stuff last year and the Mail on Sunday highlighted that Christopher Bailey of Burberry has cashed in £3m of share options, whilst the Observer flagged that it had been a good week for the boss of Lidl UK, Christian Hartnagel (after overtaking Waitrose in market share terms) and mocked Dixons Carphone for believing that
consumers wouldn’t look to economise on their smartphone spending.

• Bank Holiday Monday Press: Thin pickings, but the Times made a big splash out of figures prepared by Local Data Company for the BBC and the Times that purport to show that four in five BHS stores are still vacant a year after its collapse (although it did flag that the Polish fashion chain Reserved is about to open in the former BHS site on Oxford Street).