Langton Capital – 2017-11-20 – Oct Tracker, Jamie’s, capacity, delivery, Gym Group etc.:
Oct Tracker, Jamie’s, capacity, delivery, Gym Group etc.:
A DAY IN THE LIFE:
Is it just me or is there less tasty food out there?
Because I think there is and whilst I get that we’re genetically pre-disposed to like fat, salt and sugar – and in a world where evolutionary forces have been put too one side for the moment, too much of a good thing can be less than helpful – why do healthy foods have to taste so bland?
Maybe it’s so that you can feel a bit pious while you’re eating your kale and cardboard pie where the interesting bit is the gluten-free crust? On to the news:
COFFER PEACH TRACKER – OCTOBER 2017:
• Latest Coffer Peach Tracker shows pub & restaurant LfL sales +0.3% in October against inflation of 3.0%.
• Tracker shows UK regions performing more strongly than London at +0.4% and +0.1% respectively. This despite rising tourist numbers in the capital
• Tacker shows pubs better than restaurants at +1.4% versus a decline of 1.5% for restaurants. Benign weather will have favoured the former whilst overbuilding could have hurt restaurant trade at the LfL level. See Langton note on overcapacity in October.
• Tracker: Restaurants in London down 2.1% in October against inflation of 3.0%. Specific costs (labour, business rates) rising faster still. The October number comes after a 3.2% fall in September. CGA Peach’s Peter Martin reports ‘October’s flat trading was at least better than the 0.9% decline the market experienced in September, and is more in line with the trend we have seen across the summer. The truth is that we are seeing little or no growth in the eating and drinking out market.’ Given the fact that trade is well below inflation, there is real decline at the unit level.
• Tracker says people still going out ‘but they are not spending any more or going out any more often. But with more choice of where to go than ever before they are becoming more choosy and trying new places.’
• In real terms and at the LfL level, the UK public would appear to be spending less. But there will still be winners.
• CGA Peach says falling real sales ‘won’t help business confidence in the sector.’ It spells out the issue saying ‘with inflation running at 3%, sales are effectively going backwards, and with cost pressures in the industry, around food inflation and people in particular, still rising, times are tough for operators.’
• Tracker says total sales +4.0% in Oct implying not far off a 4.0% increase in capacity. It says openings ‘have slowed significantly over the past year.’
• Coffer Corporate Leisure reports ‘sales in the drinking-out market showed signs of stability last month, while restaurant sales were under continued pressure. The restaurant market in particular is highly competitive and especially in London. Patterns of trade appear to be changing. The very best operators are trading very well and many outlets have queues, but the market is fickle and is a challenge as we approach the crucial trading period. With costs increasing for many it is a case of ‘battening down the hatches’’.
• RSM adds ‘it’s a second month of poor like-for-like sales for the sector, with casual dining groups being particularly hit. Consumers are continuing to choose to spend on ‘big ticket’ experiences such as holidays and sporting/entertainment events as their budgets get squeezed further. Operators will be desperate to see a reversal of this trend throughout the all-important festive trading season. For some, it could be the difference between survival or failure as we move into the New Year.’
PUB, RESTAURANT & DRINK PRODUCERS:
• Jamie Oliver is to underwrite a debt-for-equity swap at Jamie’s Italian as a part of a wider restructuring. Some £5m of loans are to be converted into equity. The group has 42 Jamie’s outlets. See Langton comments on overcapacity & details on today’s October Tracker.
• Byron may change hands before the end of the month. The selling imperative is clear but it takes two to make a market
• City Pub Co to list this week despite a number of IPOs being pulled recently. The company will use cash raised to double the number of units that it operates over the next 4yrs
• Discounting continues. 40% off mains at Café Rouge, 25% off at Pizza Express & 40% off at Prezzo. It’s December next week. Too many restaurants or too few customers? Or both?
• FT survey of 213 JD Wetherspoon sites shows that the Mardi Gras at the Trafford Centre in Manchester was the most expensive unit surveyed. The cheapest was in Birmingham.
• Young’s CEO Patrick Dardis has said that it is ‘probably about time’ the pub group made an acquisition, adding that it can spend more than £100m. Speaking to MCA, Dardis admitted that the group does not intend to enter the saturated casual dining market, which suggests that Young’s will look at other pub and bar businesses to add to the company.
• A quarter of the UK’s craft beer is now sold in cans, according to figures from research firm Nielsen, implying an increase of some 327% from January to August 2017.
• Thwaites has posted a 14% increase in sales in its hotels and spas division in the half year to 30 September, during which it added three hotels to its portfolio. Chief executive Richard Bailey said the group wants to grow its pubs estate, having sold six ‘poor quality’ units for £900,000 in the period.
• Over a million credit card users who are struggling financially have had their credit limits increased without asking, according to Citizens Advice. The charity is calling for a ban on such unsolicited increases in credit card limits, which can exacerbate vulnerable households’ financial problems, in Chancellor Hammond’s upcoming Budget. Citizens Advice said its research, based on a sample of 1,300 people with credit cards, suggested as many as six million cardholders may have had their credit limits put up without their consent in the last year. Some 1.4 million of those would be struggling financially.
• Brewhouse & Kitchen has embarked on another round of fundraising and has £7m committed so far, per MCA. Co-founder Simon Bunn said the 17-strong group is gearing up for its ‘next burst of acquisition’.
• Brakspear has reopened its Dog & Duck pub in Wokingham, taking the group’s managed estate to 10.
• Philip Hammond is believed to be considering a new tax for single-use plastics, such as takeaway cartons and packaging.
• New data from Visa suggests that festive spending could decline for the first time in five years, after shoppers are expected to splurge on Black Friday and rein in on purchases in December. Visa has forecast a 0.1% fall in Christmas spending, as inflation squeezes households.
• The Government is being pressed to close loopholes around the treatment of self-employed workers, after intense scrutiny of gig-economy companies such as Deliveroo and Uber.
• Camelot, the operator behind the UK’s National Lottery, is expected to announce new plans to take the group back into growth. The group has suffered steep declines in revenue in recent years with many speculating that ticket prices will be reduced.
• Research from Beacon has indicated that half of UK diners would be willing to pay up to 25% more for British provenance food.
• Deliveroo has raised $98m (£74m) in its series F funding round, taking the group’s total raised capital to $482m (£365m). The funding is expected to be channeled into: the growth of Deliveroo Editions; further investments into technology developments and rapid expansion into new towns and cities.
HOLIDAYS & LEISURE TRAVEL:
• Administrators for the recently bust Monarch have been refused permission to appeal after losing a High Court battle over ‘valuable’ runway slots it wants to exchange with other carriers to raise cash for creditors.
• EasyJet has announced it will alter the weight allowance of its bag check-in, from 20kg to 23kg.
• EasyJET Holidays is offering up to £40 off it’s holidays in a Black Friday promotion.
• The family market is leading demand for upmarket hot tub breaks, according to data from Hoseasons. Booking form families increased 20% Y-o-Y for the self-catering specialists.
• Escape Hunt has announced that it is to open a venue in Bristol next year.
• Wm Hill has updated on trading for the 17wks & 43wks to 24 Oct saying it is seeing ‘continued momentum in 2017’
• Wm Hill reports ‘online net revenue up 6% with wagering up 13% despite rolling over EURO 2016 and gaming net revenue up 14%.’ The group sees ‘retail net revenue up 3% with growth in both Sportsbook and gaming.’
• Wm Hill is ‘on track to deliver previously announced £40m of annualised cost efficiencies by end of 2017, for reinvestment.’
• Wm Hill full year should be ‘in line with market expectations assuming normalised margins.’
• Wm Hill group revenues +4% in H2 to date and +3% in the year to date. CEO Philip Bowcock reports ‘we have delivered good financial and operational progress so far in the second half. Our Online business has performed particularly well, with UK wagering 14% ahead of last year, in spite of the absence of a major football tournament, and an acceleration in gaming growth.’ Mr Bowcock says ‘overall, I am encouraged by the huge amount of progress the William Hill team has made this year in improving our customer proposition and delivering on our strategy. We remain on track to deliver on market expectations for 2017.’
• Spotify is the latest tech company to commit to London following Brexit, planning to double its current 200 staff in the UK over the next two years.
• Gym Group reports that it is considering offering part-time employment to some of its self-employed personal trainers. It says ‘the rationale for this potential change to our operating model is to deliver an even more compelling offer to members ensuring we can deliver consistently high standards of service in all our gym locations.’ CEO John Treharne comments ‘we constantly review our business to determine the best way of operating The Gym as it continues to grow.’ He says ‘we plan to pilot the new model before potentially rolling it out more widely across the Company’s portfolio.’
FINANCE & MARKETS:
• Oil price up $1.40 or so over the weekend to $1.6261
• Sterling down vs dollar at $1.3204 but up vs Euro at €1.1251
• UK 10yr gilt yield unchanged at 1.3%
• World markets: UK down on Friday with Europe & US also lower. Far East lower in Monday trade
• Brexit, politics etc.:
o Philip Hammond will announce his second Budget on Wednesday
o Mr Hammond says there are ‘no unemployed people’. What he meant was that technological changes, such as the widespread use of computers, had been absorbed – and unemployment is still at 42yr lows
o Mrs May has 2wks to put more money on the table. It is thought possible that she will double the UK’s offer from €20bn to €40bn. The existence of a divorce bill was little mentioned during last year’s Brexit campaign
o Co-working spaces such as WeWork are reported to be targeting banks in London that might wish to remain a little more ‘fluid’ with regard to the number of people they employ in the UK
PRIOR DAY LATER TWEETS:
• Later tweets: DP Poland opens 50th site. Says 2nd commissary now fully operational. Has capacity to handle 150 stores
• Tax raid on self employed next week? Dropping the VAT registration threshold would be a major loss to smaller operators
• Byron to change hands by year end? KPMG soliciting offers this month. Doesn’t feel like a seller’s market. New entrants abound etc.
• Canada-style Brexit deal would exclude services. Could lead to big visible deficit with no compensating surplus in services
• BDO High Street Tracker has week to 12 Nov sales down 6.5% despite colder weather. Comps tough, though
START THE DAY WITH A SONG:
Last Friday’s song was ‘The Passenger’ by Iggy Pop. Today who sang:
She hid around corners and she hid under beds,
She killed it with kisses and from it she fled,
With every bubble she sank with a drink,
And washed it away down the kitchen sink
RETAIL NEWS WITH NICK BUBB:
• Saturday Press: Fashion retailers were the main focus, in varying ways, in the Saturday papers, with the Guardian highlighting that ASOS at last overtook Marks & Spencer in market cap terms on Friday, to symbolise the changing of the guard in UK Retailing, whilst the News pages of the Times had a prominent article about a survey from Westfield on the targeting of “Generation Rent” by pay-as-you-wear fashion firms like Rent the Runway and Style Trial. The Daily Mail flagged that a small new Online fashion business called Sosandar has recently obtained an AIM listing and also noted the strong first half results from Mountain Warehouse and the prediction from the UK Online industry body IMRG that the expected Black Friday weekend spending of £7bn will require a record level of product returns to be processed. Finally, in terms of the market reports, the Times highlighted the push from
• Sunday Press on the Budget: By tradition, the most eye-catching measures in the Budget are leaked to the Sunday papers, with the Sunday Telegraph highlighting the likely increase in nurse’s pay and the Sunday Times flagging the target to increase new house building to 300,000 a year and the attempt to boost North Sea oil and gas production, but the Mail on Sunday noted that the “self-employed face a new onslaught”. The Observer had a double-page spread on the difficult economic background to the Budget on Wednesday, whilst its Political editor highlighted that whatever the embattled Chancellor says his enemies on the right-wing of the Tory party will be out to get him…
• Other Sunday Press stories: The other big spotlight in the Sunday papers was on Black Friday, with the Sunday Telegraph running a big feature article on “The curse of Black Friday returns”, as well as a Business editorial thundering that “It’s time to shut shop on this Black Friday frenzy”. The News pages of the Observer had a feature on the rise of Online shopping and the decision of Amazon UK to set up a pop-up-shop in Soho for Christmas, whilst the Mail on Sunday flagged the pressure on many High Street retailers ahead of Christmas (“Big stores brace for profits rout”) and noted that M&S CEO Steve Rowe feels that the recent rise in interest rates has had a bigger psychological impact on consumers than expected. The Mail on Sunday also highlighted that after the recent sale of the Coast, Oasis and Warehouse fashion chains was called off it has been revealed that their profits all
Bonmarche: Today’s interims (for the 26 weeks to end Sept) from the struggling Bonmarche are encouraging, despite the difficult clothing market. Thanks to strong Online sales, overall LFL sales were up 4.3%, gross margins were held and with costs tightly controlled, PBT climbed back from £2.0m to £4.2m. New CEO Helen Connolly says; “I do not expect the clothing market to become any less challenging in the near future, and therefore remain focused on continuing to grow by profitably gaining market share”. There is no specific current trading update, but despite a poor October and the uncertainty about High Street discounting over Black Friday, the overall message is that “the group’s PBT for the 52 week period ending 31 March 2018 is anticipated be in line with the Board’s expectations”.
News Flow This Week: This week is dominated by that annual discounting bonanza imported from the US called “Black Friday”…and this evening the MD of Amazon UK, Doug Gurr, is holding a briefing for analysts on his plans in their Soho pop-up shop. Tomorrow we get the Kingfisher Q3 update, the AO.com interims and the Signet Q3 (in the US). Wednesday brings the Quiz interims and the Budget and then on Thursday we get the Majestic Wine interims, the Mothercare interims and the Hotel Chocolat AGM.