Langton Capital – 2018-01-04 – Whitbread, Stonegate, EI Group, Gaucho, Strada & other:
Whitbread, Stonegate, EI Group, Gaucho, Strada & other:
A DAY IN THE LIFE:
Bit of a strange week what, with having no office and with having the family down. Bottom line is that there’s more going on but less time to write about it.
PUB, RESTAURANT & DRINK PRODUCERS:
• Stonegate Pub Co has updated on Xmas trading saying that it has delivered a strong Christmas performance. The 701-strong group says ‘all of the Group’s formats performed well during the core four week festive period with total like for like sales growth up 5.5%, following a strong performance over the corresponding period last year (2016: up 5.3%). Encouragingly, all areas of the country were in growth.’
• Stonegate reports that it ‘operates a multiple format strategy approach, with a portfolio which operates across a wide variety of predominantly drinks-focussed trading formats spanning high-street and suburban pubs, as well as late-night bars and venues.’ Re trading, it says ‘whilst all of the Group’s formats demonstrated growth over the period, Slug & Lettuce delivered an exceptionally strong performance with clear evidence of premiumisation as customers traded up to premium spirits, draught, craft beers and sparkling wines, as well as strong cocktail sales. In addition, pre-booked sales were also strong across the Group.’
• Stonegate CEO Simon Longbottom reports ‘I am delighted to report another strong festive trading period, building on the positive like for like trading momentum which Stonegate delivered in 2017. Our range of pub and bar formats and consumer propositions continue to resonate with customers and win market share, underpinning our success and confidence in our drinks-led, high street strategy.’
• Stonegate concludes ‘we enter 2018 with positive trading momentum. This, together with the leading team in drinks-led pub retailing, a well invested estate and a growing reputation as the consolidator of choice in the high street pub sector, leaves Stonegate well positioned and we look forward with confidence to another year of progress.’
• Whitbread has announced that chairman Richard Baker is to retire after 9yrs on the board. He will be replaced by Adam Crozier. Whitbread reports ‘Adam has extensive and broad experience as chief executive of Saatchi & Saatchi, the Football Association, the Royal Mail and most recently ITV plc, where he served as CEO until June 2017. Adam joined the Whitbread PLC Board in April 2017 and became Senior Independent Director in September 2017.’
• Incoming chairman Adam Crozier comments ‘Whitbread has two great brands in Premier Inn and Costa, with 50,000 colleagues delivering terrific customer service every day. We have a very strong management team and an exciting plan to continue to deliver growth in our core UK businesses, whilst developing our international business through growth in Germany, China and Costa Express.’
• EI Group has bought back 131,717 shares for cancellation at 142.4p.
• Prezzo offering 50% off main courses till 14th, Pizza Express offers 30% off food. Café Rouge offering 40% off till 12 Jan. Bella Italia 2-4-1 on mains, Harvester 40% off. Whitbread getting in on the act with Bogof at Brewers’ Fayre & £5 dishes at Beefeater. It’s January, sure, but margin where art thou?
• Pricing. Pint and a half in a Sam Smith’s pub on the south bank yesterday, £4.80. Price for the same round in an All Bar One not 200yds away? Some £8.20.
• Remarkable Pubs reports that it delivered like-for-sales growth of 9.2% across its 13 comparable pubs in the four weeks of December. The group opened one new pub, the Virgin Queen in Hackney ‘bringing the total thriving quirky London pubs in the estate to 14.’ Group MD, Elton Mouna, reports ‘our sales growth was achieved by the focus, skills and the hard work of a brilliant team of people I love working with. We are now looking forward to 2018 a year brimful with opportunity.’
• McDonald’s staff, who protested over poor pay and working conditions recently, are to be awarded their “biggest raise in 10 years”. Last September, employees from Cambridge & south London went on strike.
• Gaucho Group, the Argentinian themed restaurant group, has appointed former M&B director Oliver Meakin as its new chief executive. Meakin is replacing the group’s founder and CEO Zeev Godik. Meakin commented: ‘Joining Gaucho Group represents an exciting opportunity for me to return to restaurants, a sector which I am particularly passionate about. I believe there are significant opportunities for the Gaucho and CAU brands, which are recognised for offering fantastic Argentinian steak and customer-recognised, industry-leading service’.
• Strada has closed up to seven restaurants after Christmas eve, including its sites in Blackheath, Newbury, Cobham, Clapham, Horsham and Harpenden. The Italian restaurant chain has blamed rising costs of rent, wages and business rates for the closures.
• The experience economy grew 12.2% in 2017 according to data from Barclaycard, the PMA has reported. Consumer spending on travel climbed 3.3% whereas the household category fell by 0.4%
• Durham Distilleries has announced its intentions to produce a single malt whisky as the group commits to expansion plans this year.Head distiller, Jessica Tomlinson, commented: ‘We’ve really honed our craft over the last four years widely establishing our gin and vodka, seeing it positioned on shelves in stores and venues next to brands which have been around for decades. The chance to be part of whisky history is a limited opportunity for fans of the spirit as well as those interested in the region’s heritage, with reservations now open’.
• Refresco’s proposed £935m takeover of soft drink maker Cott has been referred for full investigation by the UK’s competition regulator over concerns it could push up prices. Refresco chief executive Hans Roelofs said the company was willing to look at ways to reduce that problem.
• Surcharges on credit and debit cards in retail stores will be prohibited from the 13 January. A survey by the Association of Convenience Stores shows that around 13% of retailers still have a surcharge for card payments. However, it will remain legal to have a minimum spend for card transactions – 33% of retailers currently adopt this policy.
• Influential MP’s are calling for a deposit return scheme for plastic bottles.
• The Met Office has said that recent stormy conditions have now passed and the weather will gradually turn drier and colder over the weekend.
• So how was it? There may not be many readers fully back at their desks this week but please take a moment to let us know. And, perhaps more importantly, how does January feel? Results & feedback later in the week.
ADMIN UPDATE, RESEARCH ETC.
• Langton is between offices. The new office (on London Wall) should be functioning shortly. Please use email with details of phones, address etc. to follow.
• We are putting together a compendium of 60-seconds pieces for publication this month. Suggestions for topics (e.g. delivery, discounting, input prices, cinema attendances, High Street malaise etc.) welcome. The doc will be available for £200 plus VAT, free to clients. Please let us know if you would like a copy.
• Re MIFID II, which will be in force from today, we’re done talking about it. If you believe you shouldn’t be receiving research that you don’t pay for, then either pay for it or hit the unsubscribe button.
HOLIDAYS & LEISURE TRAVEL:
• US hotel industry data analysts, STR have commented on the potential of the market during Q1 2018, stating: ‘STR is projecting a continued healthy demand environment for the U.S. hotel industry, setting another room demand record for the most rooms sold—ever. Supply growth will tick up to outpace the demand increase, and we expect occupancy to slightly decline in 2018’.
• Retailers will no longer be able to charge customers to use credit or debit cards in store from 13 January. The Association of Convenience Store’s latest Voice of Local Shops survey shows that about 13% of retailers currently surcharge for card payments. ACS chief executive James Lowman said: ‘These rules were introduced mainly to stop excessive card payment charges by on line retailers and service providers, but they also apply to shops including convenience stores. Retailers need to be aware of this, and the small minority of retailers who currently charge customers to use cards will have to stop doing this after 13 January.’
• Jet2holidays is increasing capacity to Turkey by some 600,000 seats in 2018 as the country rebounds from political unrest and terrorist attacks.
• Airline passengers faced delays yesterday as Storm Eleanor swept the nation with winds of up to 80mph.
• Spotify has filed confidentially with US regulators for an initial public offering, targeting a direct listing in the first half of 2018. Spotify was recently valued at as much as $19bn last year.
• Google has begun exploring the possibility of selling its restaurant review guide, Zagat, which the group had purchased in 2011 for $151m.
FINANCE & MARKETS:
• UK construction PMI fell from 53.1 in November to 52.2 in December. Any number above 50.0 still implies growth.
• NIESR reports that ‘despite Brexit, growth in the UK economy beat expectations in 2017 and is likely to do so again this year.’ It says ‘the consensus of economists will almost certainly be wrong.’
• NIESR says ‘annual growth probably did slow in 2017, to around 1.7%, from 1.9% in 2016.’ It says this is relatively insignificant.
• NIESR says ‘any easing of uncertainty about Brexit should allow investment to accelerate once more. Pessimists assume that the drag on business spending will only worsen as contingency plans are put into effect, but the survey evidence suggests otherwise.’
• US Fed minutes show it believes that recent tax changes could boost consumer spending.
• Sterling down a shade vs dollar at $1.3518
• Pound down vs Euro at €1.1244
• Oil up around $1.40 at $68.15
• UK 10yr gilt yield down 7bps or so at 1.22%
• World markets: UK up yesterday with Europe & US also higher. Far East mostly up in Thursday trade.
o FT (admittedly a committed remainer) reports Dept to Exit EU Whitehall staff are 4x more likely to leave their jobs than are civil servants as a whole. Some 9% are thought likely to leave every quarter. Dept boss David Davis is also reported by some to be frustrated in his role.
PRIOR DAY TWEETS:
• Later tweets: Discounting ahoy. Prezzo 50% off mains, Pizza Express 30% off food. Café Rouge 40% off, Bella Italia 2-4-1, Harvester 40% off etc. etc.
• Discounting. It’s January, sure, but margin where art thou?
START THE DAY WITH A SONG:
Yesterday’s song was ‘Psycho Killer’ by the Talking Heads. Today who sang the following:
I get down on my knees and pray,
I’m waiting for that final moment
You say the words that I can’t say
RETAIL NEWS WITH NICK BUBB:
• Debenhams: We said yesterday that there was no sign so far of anybody having to bring forward their scheduled Christmas trading announcements from next week…but poor old Debenhams has stepped up to the plate today, to warn that weak gross margins and a poor Sale last week have hit the bottom-line. Full-year profits (to end August) are likely to be down to £55m-65m, versus a modest consensus forecast of about £83m, despite finding an extra £10m of cost savings… Sergio Bucher, the new CEO of Debenhams, wails: “The market has been challenging and particularly promotional in some of our key seasonal categories and we have responded in order to remain competitive for our customers, which has impacted our profit performance”. The conference cal at 9am with analysts should be interesting
• John Lewis Watch: We said two weeks ago that over the 20 weeks to Dec 16th John Lewis sales had cumulatively been up by 1.3% gross (about flat LFL) and that they would do well to hold that run-rate over the last 6 weeks of the financial year. Well, over the last 2 weeks, according to the figures released yesterday morning, the cumulative run-rate has actually improved, to +1.8%, despite a weak time last week…Given the calendar shift, with Christmas Day falling on a Monday, the 2 weeks really have to be taken together, but the final week before Christmas saw sales jump by 8.9% to £191m, with business strong across the board, although we don’t know how much was driven by discounting (in the light of what Debenhams have said about how promotional the market was) and by Online growth…Last week, w/e Dec 30th, saw gross sales slip by 0.4%, not helped by snow disruption, but the 2 weeks
• Waitrose Watch: Over at Waitrose, trading was less strong over Christmas, with the 2 weeks combined up by 1.4% or just over 0.5% LFL, although that is actually bang in line with the run-rate, which over the previous 20 weeks was also up by 1.4% gross. Sales in the busy w/e Dec 23rd were up by 0.5% to £247m and then w/e Dec 30th (which included Christmas Eve) was up by 3.5% to £114m
• New Year Tip Watch (1): Having flagged up the press 2018 share Tips yesterday, it’s time, as promised, to unveil our own much-awaited 2018 Tip. And we again have a very hard act to follow, because, following the success of our 2016 Tip of an Online retailer, Boohoo.com, (+264%) we also did pretty well in 2017, with a Food Retail specialist, in the form of good old Greggs, which rose by 44%, from 970p to 1399p. Funnily enough, we thought at one point that we should have stuck with Boohoo, as that continued to soar away in the first half of 2017, peaking at 266p, whilst Greggs took time to get going, but in the end Boohoo was “only” up by 40% over the year, at 189p, so the tortoise beat the hare…
• New Year Tip Watch (2): As for 2018, we expect this to be a tough year for Non-Food retailers, notwithstanding the hope that consumer real incomes recover in the second half, so picking a winner won’t be easy. And notwithstanding the quiet confidence shown by Simon Wolfson today we are not going for Next…It’s tempting to go with a recovery play like Debenhams and hope that the bears can get squeezed, but although the shares may well be oversold in the short term at 34.5p we’re not sure they will last the pace throughout 2018. A fruitful approach is often to go with a long-term growth stock that is temporarily out of favour, much as Greggs had lagged in 2016, but we can’t find an outstanding candidate. Boohoo might be one, funnily enough, but perhaps it’s best to find a new name. JD Sports (at 336p) is one that is interesting, having lagged for no particularly obvious reason of late,