Langton Capital – 2017-10-12 – Millennials, new openings, delivery, Jet2 & other:
Millennials, Goals, new openings, delivery, Jet2 & other:
A DAY IN THE LIFE:
Young people are the future, we’re told.
And indeed, they are but, in an economy where they emerge from university with £50k plus of debt, where they can’t afford the insurance on a car, where owning a house is a distant dream and where more than half of their net income goes on rent, how can we keep them engaged and encourage them to mature to such a point that they’re ready, willing and able to take over when we fall from the perch?
Because if they’re still living at home, playing Minecraft and Angry Birds on their handhelds and throwing their dirty washing down the stairs for their mums to do when they’re in their mid-30s, we’ve not done an entirely good job in bringing them up, have we?
When I was a newly qualified accountant in Hull in the 80s, my pre-tax gross salary was ‘worth’ around 16,000 pints of beer. But a newly turned out bean-counter Up North now can only afford maybe 5,000 pints. And he/she can’t afford a car, can’t afford a house etc. meaning perhaps we should be doing something about it, be redistributing income, be pushing down house prices and pensions whilst raising incomes for the young?
Just a thought. And, admittedly, with five kids to think about, I’m at one end of the seesaw whilst the empty-nested wrinklies with 1.5 children and their mortgage-free piles may be at the other. On to the news:
LANGTON RESEARCH, GET IT WHILE IT’S HOT @ £200 + VAT:
Topical to say the least. See comments below from Prezzo parent Papa Topco.
Headings in our note include Why the Increase in Supply, evidence of oversupply, consequences of oversupply with a case study comprising a City of London walk.
It’s an easy (if at times queasy) read & if you’d like a copy at £200 + VAT (in money, beer or pizza subject to negotiation), then please drop us a line.
PUB, RESTAURANT & DRINK PRODUCERS:
• Pizza Hut is introducing a new pouch in its US stores that delivers pizzas 15 degrees hotter than in the past as part of a package of changes to its delivery business. ‘The pizza pouch is part of our completely re-engineered “oven-hot delivery system,”’ said Zipporah Allen, Pizza Hut vice president of brand marketing and consumer insight, told NRN on Monday. The pouch, which accommodates three boxed pizzas, was designed to accommodate a 20 to 35-minute delivery period.
• Online meal kit delivery group HelloFresh is aiming for a $1.8bn valuation and proceeds of between $294m and $353m in its recently announced flotation.
• Asos is launching its new same-day delivery service in London, Asos Instant, which will cost £12.95 and make deliveries between 6pm and 10pm.
• Amazon has expanded its UK grocery offering via a deal with Booths, the up-market food retailer based in the north west of England
• Data from Alix Partners has shown that smaller restaurant chains are defying current market headwinds by continuing to expand and disrupt Britain’s eating out sector. Many larger chains have slowed expansion plans due to higher input costs and difficulties in the labour market.
• US teens have reduced their spending by 4.4% y-o-y, spending less in restaurants, according to data from Piper Jaffray’s fall survey. US teens currently spend 22% of their budget on food, down from 24% in spring.
• Young first time buyers are taking larger mortgages in order to tackle short-term financial pressures. The average length of a mortgage is 25 years, however the proportion of new buyers taking out 31-35 year mortgages has doubled in the last ten years.
THE MILLENNIAL MARKET:
• Getting youngsters (at least those over 18) out of their bedrooms and into the pub has been a bit of an issue for some time now.
• The Pub Goers’ Conference 2017 yesterday focused on the Millennial market. Attendees heard that the market, variously defined as the 18-34yr olds or those between the end of mandatory education and their first child, were the best-educated but also the most demanding in history.
• Millennials are said to be around 10% to 20% worse off than their parents were at their age. Around half of them are less well off than their parents with the other half lucky to be only a pound or two a week better off than their parents were some 25yrs to 30yrs ago.
• Kate Jacobs of Cardinal Research told The Pub Goers’ Conference 2017 said that Millennials were drinking less than their parents had a generation earlier. They were eating out more, were concerned about cash, they were trading up (drinking less but better), were into experiences rather than things and were more concerned about health than earlier generations.
• The merger between Just Eat and Hungryhouse has been provisionally cleared by the CMA, with the CMA expected to release a final report on the matter in November.
HOLIDAYS, LEISURE TRAVEL & HOTEL:
• Elegant Hotels Group has updated on trading for its year to 30 September 2017 saying ‘trading since the interim results in June has remained in line with market expectations. Whilst the Group is only 12 days into its new financial year, it is pleased to report that bookings are currently tracking ahead of the same period last year.’
• Elegant Hotels adds ‘the Group also confirms that Treasure Beach hotel is on track to reopen for business at the start of the peak tourist season. Treasure Beach is a 4-star, 35-room hotel in Barbados which the Group acquired in May 2017. The project of refurbishing, repositioning and ultimately repricing the property is progressing to plan.’ Elegant concludes ‘the Company intends to announce its full year results for the year ended 30 September 2017 on Tuesday 9 January 2018.’
• Jet2holidays has overtaken Thomas Cook to become the second largest operator in the UK behind Tui UK as a result of its expansion into the south of England and the collapse of Monarch. The operator has knocked Thomas Cook from the number two spot in the list of top Atol-holders after adding more than 650,000 extra seats in the week following Monarch’s failure. Jet2holidays is now licensed by the CAA to sell 2,936,420 Atol-protected seats, while Thomas Cook Tour Operations is licensed for 2,389,227.
• Industry leaders say the UK travel industry is ‘fundamentally in good shape’ despite Brexit uncertainty and the recent collapse of Monarch Airlines. Speaking at The Travel Convention in the Azores, Alistair Rowland Specialist Retail Group general manager for the Midcounties Co-operative, said: ‘The market is pretty resilient and 2018 looks remarkably strong. Whatever happens, consumers are going to go on holiday. Our job is to make it happen for them.’
• Time convenience and consumer confidence are the top reasons why holidaymakers use travel agents, according to research conducted by Abta.
• Consumers are showing increasing resilience to terrorism, with 78% refusing to change their travel plans, an increase of 6% on last year.
• September figures show a swell in the number of airport passengers, with Manchester Airports Group calling for an aviation strategy to drive economic growth across the UK. Manchester airport saw 7.4% growth year on year, with passenger numbers reaching 2.9m in September. Stansted figures rose 12.6% to 2.5m.
• Tui UK & Ireland has begun talks with staff at its Luton contract centre, following plans to relocate their roles to Swansea.
• Goals Soccer Centres has announced that CEO Mark Jones has notified the Board of his intention to resign from the Board and the Company as he has decided to take another role in the private sector. The company says ‘the search for a strong successor has already commenced and the Board will update on this process when appropriate. In order to further progress the strategic turnaround of the Company, Mark will continue in his role whilst his successor is sought.’ Goals adds ‘the Board wishes to thank Mark for his contribution and wishes him well for the future.’
• As eSports gains popularity, products such as energy drinks, luxury automobiles and computer hardware are sponsoring competitive teams and tournaments. Since the beginning of 2016 more than 600 eSports sponsorship agreements have been made.
• eBay’s UK arm only paid £1.6m in corporation tax on revenue of £1bn last year, according to the US parent accounts but the UK accounts only recorded revenue of £200m, all directly from the parent firm. The firm said its tax affairs were entirely legal.
FINANCE & MARKETS:
• US central banker Charles Evans says ‘I really don’t see any harm in waiting longer to take more stock of the inflation situation’. The Chicago Federal Reserve Bank President warned against preemptive moves saying they ‘may not be very constructive’. He adds ‘I think we would be well served by trying harder to get it (inflation) up , even if inflation went to 2.25 percent or 2.5 percent. We need to see substantial progress of inflation in the data.’
• The IMF has said that risks to global financial stability in the immediate future have declined. It says, however, that vulnerabilities over the longer term are building.
• IMF maintains that higher rates of tax should not harm economic performance. Want to be PM in waiting Mr Corbyn may be taking note. The average top rate of tax in rich countries was 62% in 1981 but it is only 35% now.
• Oil little changed at $56.62
• Sterling up vs dollar at $1.3258
• Pound down a little vs Euro at €1.1163
• UK 10yr gilt yield up 2bps at 1.39%
• World markets: UK little changed yesterday with Europe mixed & US up. Far East mostly higher in Thursday trading
START THE DAY WITH A SONG:
Yesterday was the Arctic Monkeys with ‘Do I Wanna Know’. Many of you will be happy to hear that the band are currently recording their sixth album back in their hometown of Sheffield. Today’s song:
I hit the sack, I’ve been too long I’m glad to be back,
Yes, I’m let loose,
From the noose,
That’s kept me hanging about
RETAIL NEWS WITH NICK BUBB:
• WH Smith: Today’s finals from high-flying WH Smith (for y/e August) are predictably good, with PBT 7% up at £140m, EPS up 10% to 103.6p and the full year dividend up 10% to 48.2p. The major features are that the much-maligned High Street Division held its operating profit at £62m, despite -5% LFL sales, thanks to good margin and cost control, whilst the lucrative Travel Division has overtaken the High Street in revenue terms for the first time. International expansion continues (CEO Stephen Clarke says “During our 225th anniversary year, we were delighted to open our 225th international store and now have 233 stores open. We have won 273 stores across 25 countries, including new stores in Singapore and Rome”) and WH Smith have announced a further share buyback of up to £50m “reflecting the Group’s cash generation and our confidence in the future prospects of the group”.
• N Brown: The interims from N Brown, “the online, specialist fit, fashion retailer” (for the 26 weeks to 2 September) are less impressive, with adjusted PBT only 2% up at £32m, but the company highlights the 9.5% growth in ladieswear revenues, implying a 90bps increase in market share (size 16+), and new partnerships with Amazon Fashion (Simply Be and Jacamo) and Debenhams (Jacamo) to sell capsule collections Online. CEO Angela Spindler says “At this early stage in the second half, current trading is on track with our plan and we are focused and well prepared for the peak trading period ahead”.
• BDO High Street Sales Tracker: We flagged yesterday that John Lewis struggled last week against harder comps and, in the same way, tomorrow’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains shows that w/e Oct 8th saw Fashion Store LFL sales slump by 6.1% (against +2.0% LFL a year ago), hindered by the warmer weather. Including Homewares and Lifestyle chains, total Store LFL sales were down by 3.4% last week (versus +3.8% a year ago) and overall Online sales were only up by 19.8% (against +26% a year ago).
• Trade Press: As we are not publishing tomorrow, we have obtained special dispensation to bring you the highlights of tomorrow’s trade magazines. The front cover of “Retail Week” magazine flags up that it is a Personalisation Special and the Acting Editor looks in his column at the news that CEO Alex Baldock is to leave the home shopping group Shop Direct next year and thunders that “Having established Shop Direct in pole position for personalisation, Baldock leaves valuable lessons for its rivals”. In “Drapers” magazine the Editor looks at Ted Baker in her column and thunders that “Ted Baker is proving to be one of the success stories of 2017”. In terms of News stories, Drapers focus on the news that the lifestyle retailer Fat Face will extend its closing times during the festive break and plans to shut 40 stores on Boxing Day, plus the failure to sell Shop Direct this summer sparked
• News Flow Next Week: Things are a bit quieter next week, but we get the ASOS finals and the latest Kantar/Nielsen grocery sales data on Tuesday morning and then the Travis Perkins Q3 sales and the ONS Retail Sales figures for September on Thursday.
• Dunelm: The weather has been pretty kind to homewares retailers like Dunelm recently, but, even so, yesterday’s Q1 LFL sales growth is still eye-catching, at 9.3%, even though it was driven by 46% Online growth (with Stores up 6.5% LFL) and gross margins took a 100 bps hit (over and above the Worldstores mix impact). Andy Harrison, the Chairman, says: “Our like-for-like sales were boosted by favourable weather comparatives and, pleasingly, we continue to outperform the homewares market”. That news should please the City first thing, ahead of the Capital Markets Event being held today at the new warehouse in Stoke, for analysts and institutional investors. The agenda will include “Dunelm’s sales aspirations for the future…and progress on the Worldstores integration”.
• Quiz: The jump in the share price of Quiz on Tuesday implied that the recently floated fashion retailer might also have good news to relay yesterday, in its first half pre-close update for the 6 months to 30 Sept. Total sales jumped by 35%, driven by 204% Online growth, but UK stores growth was still a solid 15%, albeit that was driven by new store openings. Gross margins were in-line with expectations and Tarak Ramzan, the CEO, says: “We are very pleased with the QUIZ brand’s strong growth across target markets and channels with Online in particular experiencing continued outstanding momentum”.
• John Lewis Partnership Sales Watch: Cool weather and soft comps helped John Lewis deliver decent sales growth last month, but October may be a different story…and yesterday’s sales figures for last week from JLP revealed that John Lewis found the going quite tough, with sales 0.9% down in gross terms (c2% down LFL) in w/e Oct 7th, against a much tougher comp. Thanks to the warmer weather, Fashion sales were down by 2.7% gross and Home was down by 2.5% gross, but Electricals were up 2.4% gross (thanks to good smartphone sales). Over the last 10 weeks John Lewis sales have been cumulatively up by a bit over 2.5% LFL (up 3.6% gross). Over at Waitrose sales were up by 1.5% gross last week (c0.5% down LFL), but over the last 10 weeks Waitrose sales have cumulatively been broadly flat LFL (up 1.9% gross).