Brands, Carlsberg, Morrison’s, Sportech, youth & other:

A DAY IN THE LIFE:

I’ve decided that I should take a leaf from the dog’s book. Eat first and worry later. Bit busy this morning so let’s move on to the news:

60 SECONDS: LEISURE & YOUNGER CONSUMERS…

Wish you were younger?

• Yes, but…what about car insurance, student loans, house prices, later retirement, worse pensions and less job security?

• What about zero hour contracts, a clogged health service, higher taxes, the environment & the wrinklies’ last bequest, Brexit?

• Deloitte today tells us that, whilst spending across older age groups has held up, younger consumers are cutting back

• It’s perhaps a wonder that they aren’t throwing themselves from bridges

A virtue or a necessity?

• So, are they Instagramming a picture of a meal, a club or a holiday because they want to? Or is it because they can’t afford to eat, visit or take the product itself?

• Are they in their bedsits because they like the wallpaper? Or can’t they afford to go out?

• Are they pirating films, music & books because of some innate criminality? Or are they truly stretched? Is ‘experiential leisure’ real or is it a placebic illusion?

• Similarly why aren’t they drinking? Why are they on Tinder and do they have ‘maximum stuff’ or are they kidding themselves that they’re happier with less?

It was harder in my day…

• Well, actually, it wasn’t

• Jobs fell from trees, you had a car when you were 18, a house at 23 and you retired, student loan and mortgage-free, at 55 on an index-linked, final salary pension

• But get real. Money’s a token, a confidence trick. It doesn’t really – get this – even exist

• There needs to be a redistribution and there probably will be. Either via death duties or in vivo. But back in the here and now, what does the above mean?

• We deal with symptoms, not causes, so affordable, experiential leisure is the way to go.

• Not many Millennials are paying £40 per head plus for lobster, try a Franco Manca pizza and have fun while you eat.

PUB, RESTAURANT & DRINK PRODUCERS:

• BrandZ has listed what it believes are the UK’s 50 most valuable brands. Some 67% of the brands listed are either telecoms, finance or utility companies. Leisure companies are scarcely represented. Sky is in at no6. Arguably not leisure. William Hill is in at no39 and Betfair is no48. Johnnie Walker, which is owned by UK company Diageo, is no28.

• Shops do better in top 50 BrandZ. Tesco is no7 with the other three major UK supermarkets also in the top 50. M&S is no20.

• Danish brewer Carlsberg has reported Q3 numbers saying that net revenue fell 5% over the same quarter last year. Some 3% of the hit was due to business disposals. Volumes were down by 6%. The company is projecting profit growth of 7% to 8% for the year as a whole.

• Buca di Pizza is to open in Hull’s fruit market. The unit will be its fifth pizza restaurant. The company is owned by brothers Geoff and Nick Thornton. The former reports ‘we’re really happy to be part of the great things happening in the Fruit Market and we’ve had a fantastic reception from customers.’

• BRC Nielsen has reported that fresh food inflation rose by 2.2% in the year to October. 

• The Deltic Group has updated on trading for the period from Freshers’ Week on 17 September to Halloween on 31 October, with total sales up 9.1% like-for-like to £16.4m. The nightclub operator had a record Halloween Saturday in terms of admissions, which were up 2.3% to 90,598 despite strong comparatives. Peter Marks, Chief Executive of The Deltic Group said: ‘This strong trading period, including a record Halloween weekend and very strong Halloween Tuesday, follows a period of significant investment for the Group, including an extensive refurbishment programme and the introduction of further music-led entertainment. I believe that our recent performance reflects the Group’s quality brands, well invested estate, and dedication to customer service, coupled with the substantial appetite amongst consumers for great nights out. We are seeing sales growth across all our regions, and we look
forward to building on this going forward.’

• Admiral Taverns has bought 17 ‘high quality community pubs’ from Heineken’s Star Pubs & Bars business. Commenting on the acquisition, Admiral Taverns’ Chief Executive Kevin Georgel said: ‘Just over a month ago we announced new investment into our own business. Our new investors support our ambitious growth plans and as stated at that time we intend to be at the forefront in reviewing all opportunities as and when they arise in the market. This acquisition is early testament to our commitment to this growth strategy and I am delighted to be able to welcome these high quality licensees and pubs in to the Admiral business.’

• Shake Shack Inc. has reported Q3 LfL sales down 1.6%, with traffic declining 3.8%. The 143 strong fast-casual burger chain saw revenue climb 27% to $94.6m with adjusted net income increasing 13% to $6.2m. 

• Spencer Ayers has stepped down as managing director of c250-strong Frankie & Benny’s despite only joining The Restaurant Group last year, writes MCA. Ayers will become International Licensing & Development at Le Pain Quotidien. It is thought Murray McGowan, who joined TRG earlier this year in the newly created role of managing director across its leisure division, will now assume responsibility for both Frankie & Benny’s and Chiquito.

• Morrison’s recovery continues. More to come says CEO.

• Morrison’s has updated on Q3 trading to 29 Oct saying LfL sales ex-fuel rose 2.5%. Total sales, including fuel, were +2.3%.

• MRW Q3: Reports ‘LfL volume was again positive, and LFL transactions were up 2.1% as more customers continued to buy more from Morrisons. We again worked hard during the quarter to limit the impact of lower sterling on imported food prices, and made good progress on becoming more competitive. ‘Price Crunch’ is popular with customers, and our new ‘Way Down’ campaign is holding prices lower for longer, delivering great value for money at Morrisons.’

• MRW Q3: CEO David Potts comments ‘we are pleased with a further step up in our competitiveness and another period of positive like for like sales growth. I am confident our plans to keep serving customers better will enable us to continue the strong momentum of the year so far, into the important fourth quarter.’ Mr Potts concludes ‘as we work towards becoming a broader, stronger business, a new Morrisons is taking shape, built by our colleagues on firm balance sheet foundations.’

• The campaign for a cut in beer tax in the Budget has been debated in Parliament. MPs from all parties spoke in support of fairer tax treatment for the sector and Treasury Minister Andrew Jones recognized the challenges facing the sector. BBPA Chief Executive Brigid Simmonds, who at the same time hosted a drop-in event for MPs, commented: ‘It was great to hear so much cross-party support for beer and pubs from MPs in Parliament yesterday. The campaign has achieved widespread recognition that the sector is greatly overtaxed, and that further tax rises in the Budget are unsustainable. We now need the Government to turn this goodwill into action, with a cut in beer tax and further action on business rates in the Budget on 22nd November.’

• The US restaurant chain, Chili’s has seen traffic fall 9% following the hurricanes Irma and Harvey. The 1600+ strong group also reported Q3 LfL sales down 3.4%.

• Loungers has grown LfL sales in the 24 weeks to 8 October by 7.4%, with the group opening 11 new sites. The group remain on track to open 24 new sites this financial year.

• Papa John’s has blamed slow pizza sales on the NFL controversy that saw some players refusing to stand during the national anthem. Founder John Schnatter reports that ‘the controversy is polarising the customer, polarising the country, and that’s the big difference here.’

• So called ‘beer-bikes’ have been banned in Amsterdam after complaints from locals about drunk tourists urinating and exposing themselves while riding.

• Michel Roux Snr has banned customers from taking pictures of their food at one of the family’s restaurants, claiming a photo fails to capture the flavours of the food.

• Iceland has pledged to accept round pound coins until the end of 2017.

• AlixPartners’ consumer survey revealed, in a global perspective, 34% of consumers expect to dine out more often over the next year but only 28% plan to spend more for their meals. Instead the survey found people want to spend more on travel and non-food retail purchases. However, 77% of consumers thought restaurant chains should open more locations.

• In the US there are rumours that JAB Holdings may try to acquire Dunkin’ Donuts, which sent Dunkin’s shares up by nearly 8% on Monday.

• Next shares down 7% on tough outlook.

HOLIDAYS & LEISURE TRAVEL:

• The Department of Homeland Security has been ordered to ‘step up’ its vetting procedures by Donald Trump in the wake of yesterday’s terrorist attack in New York. The attack left 8 dead and at least 11 injured after the driver of a truck hit people on a cycle path in Lower Manhattan.

• Sabre reported overall revenue up 7.3% to $900m yoy for Q3, with net profits more than doubling to $91m. Growth was driven by global bookings, up 16% in Europe, Middle East & Africa and 10.8% in Asia Pacific, with airline passengers increasing by 7.7%. However, the impact of hurricanes saw bookings down in North America by 1.9%.

• Expedia has reported that UK hoteliers saw ‘encouraging’ growth this summer on the back of a rise in staycations. The group reports that demand from domestic travellers rose by 20%. City of Culture Hull saw demand rise by 80%.

• Ontario Teacher’s Pension Plan will sell a 30% stake in Bristol and Birmingham airports to Australia’s New South Wales Treasury Corp and Sunsuper Superannuation Fund.

• Chris Grayling, Transport Secretary, told the Airport Operators Association that there was no chance of flights being grounded in March 2019, even if no new air services agreement had been renegotiated. Grayling stated: ‘I think it is a big leap to believe that the Spanish government will not want the UK to fly there in summer 2019. It is inconceivable that the planes will stop flying. It is not going to happen’.

• UK visitors to Abu Dhabi climbed 5% in september, with the Emirates set to beat last year’s total of 4.4m hotel guests.

OTHER LEISURE:

• Sportech has announced that the Supreme Court has ruled in favour of HMRC and against Littlewoods Limited and others in respect of the latter’s claim for compound interest on repayment of overpaid VAT. The group explains that it has won its eight-year legal process to reclaim £97m of VAT overpayments. The group says ‘in 2009, Sportech had also submitted a claim to the High Court that could entitle it to receive compound interest rather than simple interest on the amount of overpaid VAT.’ It would appear that this is now under threat.

• Sportech says it ‘is disappointed by today’s judgment’. Chairman Richard McGuire says ‘whilst this Supreme Court ruling is disappointing from the perspective of our own compound interest claim, it does not affect the operational progress at the Company, our growth opportunities or our ongoing strategic review.’

• Sportech reports ‘following preliminary approaches to acquire the Company, we initiated a Formal Sales Process in October and, having signed several non-disclosure agreements to date, we will be engaging further with interested parties in the coming weeks. We will provide an update on this process within a scheduled trading update on Monday.’

• Facebook has announced soaring profits in its Q3, bringing in more than $10bn from advertising. Profits for the group increased 80% on the same time last year to $4.7bn. Facebook has been in the headlines of late for pushing fake news and its potential influence in the US election, with Mark Zuckerberg described this year as ‘pretty crazy’.

• The Chinese province of Macau has hit three-year high gambling revenues in October, increasing 22% to $3.3bn.

• Reuters has reported that action camera-maker GoPro has increased Q3 revenue by 37%, boosted by strong holiday sales.

FINANCE & MARKETS:

• Bank of England rate decision at 12.30. Rate rise from 0.25% to 0.5% likely.

• UK manufacturing PMI up to 56.3 in October from 56.0 in September. Any number above 50.0 implies growth. Construction PMI due at 9.30. Markit reports ‘UK manufacturing made an impressive start to the final quarter of 2017 as increased inflows of new work encouraged firms to ramp up production once again.’ It says ‘the domestic market remained strong, whereas new export orders increased at a slightly slower pace, the latter showing signs of being hit by the recent strengthening of sterling.’

• Begbies Traynor reports nearly half a million businesses across the UK are in a state of ‘significant’ financial distress. The accountant’s Red Flag research shows that a quarter of a million companies finished Q3 with negative net worth. London was the worst-performing region in the UK.

• The US Fed has held interest rates. It is expected to raise them next month.

• Nationwide reports UK house price inflation was an annual 2.5% in October.

• Agents JLL have reported that the “golden age” of booming house prices in London is over.

• Nationwide reports that the impact of a small rise in interest rates is likely to be modest for most UK households.

• Oil down a shade at $60.53

• Sterling up vs dollar at $1.3284

• Pound down vs Euro at €1.1395

• UK 10yr gilt yields up 2bps at 1.35%

• World markets: UK mixed yesterday with Europe and US higher. Far East mostly down in Thursday trade

• Brexit:

o Telegraph reports PM Theresa May’s quest for a “Canada plus” deal in Brexit talks is proving difficult & may be impossible. It quotes trade lawyers as saying that the EU could not legally offer the UK a special deal

o NIESR reports the Brexit vote has thus far cost UK households around £600 per year. Presumably c£1,000 so far and counting. The NIESR says ‘it is almost certain that the relative deterioration in the UK economy and the accompanying fall in living standards over the past year are a consequence of the vote by the British people to leave the European Union.’

o City AM has quoted reports as saying a hard Brexit could cost the UK’s car, tech and healthcare businesses £17bn per annum. Mrs May is after a red, whit & blue Brexit & Michael Gove is sick of experts.

PRIOR DAY’S LATER TWEETS:

• Later tweets: Too many shops. To say rents should fall isn’t same as saying rents will fall, however. Could be some beneficiaries as expansion plans slow

• Deloitte’s Leisure Consumer tracker shows eating & drinking out in sharp fall. All areas of leisure spending down except live events

• Deloitte says young consumers hard hit. Add in bitter on Brexit, forgot to get out of bed, somebody else’s fault & Mr Corbyn could benefit

• NIESR trims numbers for UK growth. IEA denies majority of leave voters are of limited intelligence. Denies all were misled by lies

• Next points to sharp in store sales slowdown. Will exit stores. Relatively short lease profile. Oh, to be a major property owner!

• NXT, Lloyds Chemist, banks, phone shops, CDs, bookshops etc. leave high street. Enough F&B already. More poodle parlours, cash for gold etc?

• Next Retail down 7.7% in Q3 with Directory up 13.2%. Not good enough & shares slide. Says sales ‘volatile’ & impacted by weather

• Manufacturing PMI rise to 56.3 from 56.0 in Sept. Markit says UK manufacturing made ‘impressive start to Q4’. Rate rise tomorrow likely

START THE DAY WITH A SONG:

Yesterday was of course Queen with ‘Bohemian Rhapsody’, but today, who sang:

The city’s a flood, and our love turns to rust,

We’re beaten and blown by the wind,

Trampled in dust.

RETAIL NEWS WITH NICK BUBB:

Morrisons: Today’s Q3 update from Morrisons (for the 13 weeks to 29 October) was expected to maintain the run of decent-looking quarterly sales growth figures and it has, with LFL sales up by 2.5% (up by 2.1% in Retail, with 0.4% coming from Wholesale). Dave Potts, the CEO, says: “We are pleased with a further step up in our competitiveness and another period of positive like for like sales growth. I am confident our plans to keep serving customers better will enable us to continue the strong momentum of the year so far, into the important fourth quarter”.

Howden: Given the gloomy vibes about the housing market and big ticket retailing, nobody could really have expected the kitchen retailer Howden to be bullish in today’s Q3 update (for the 20 weeks to Oct 28th), but the news is surprisingly reassuring: “Howdens has seen a good trading performance, including during the important October trading period (Period 11). The company remains on track to meet the Board’s expectations for the full year”. Total sales were up by 8.2% (over 6% up LFL) and so after 11 periods (44 weeks) of 2017, total revenue is running up by 6.3% and by 4.4% on a same depot basis, while gross margin performance is said to have been in line with management expectations.

Intu Properties: Today’s Q3 update from the shopping centre giant Intu (the owner of Lakeside, Trafford, Metrocentre etc) is also reassuring, reporting strong tenant demand from international and national brands (e.g. Victoria’s Secret, Inglot, Footasylum, Nespresso, Primark) and anticipating a third year of positive like-for-like net rental income in 2017, in line with guidance. David Fischel, CEO of intu, says: “Although retailers continue to be selective with their expansion plans in the challenging consumer environment, our 20 prime centres are the first port of call because of their strong catchment, reliable footfall and differentiated leisure content. This leaves us well positioned to take advantage of this demand and we are confident of delivering further growth in like-for-like net rental income in 2018 and at a level of 2% to 3% over the medium term”. Intu has also announced
today that it has exchanged contracts to introduce a 50% joint venture partner, LaSalle Investment Management, to intu Chapelfield (Norwich) for a net consideration of £148m.

Today’s Press and News: The shock resignation of the Defence Secretary dominates the front pages, eg “Fallon quits as Westminster sex scandal claims its first scalp” in the Telegraph, but the disappointing Next Q3 trading update gets plenty of coverage on the Business pages: the Business editorial in the Guardian notes that back in March Next modelled a supposedly gloomy 6% LFL long-term decline in Next Retail sales, but that the current run-rate is much worse, at over 10%…

News Flow This Week: Today brings the first dealings in the Footasylum IPO (FOOT), with the cautious Next trading update yesterday likely to dampen the hopes of the stags at the placing price of 164p for a quick flip…The much-awaited MPC interest rate decision comes at mid-day (with a rise from 0.25% to 0.5% priced in) and the Apple Q4 results in the US are out this evening. Tomorrow brings a Kingfisher Capital Markets Day. And one day soon the CMA will issue its provisional findings on the Tesco bid for Booker. Finally, by tradition, the much-hyped Christmas TV ads get going in early November, with Sainsbury one of the few retailers to wait until after Remembrance Day.