Langton Capital – 2018-01-16 – Gregg’s, Brewdog, sugar, delivery, coffee & other:
Gregg’s, Brewdog, sugar, delivery, coffee & other:
A DAY IN THE LIFE:
Things moving a little slowly this morning due, amongst other things, to technical difficulties.
Not least, my printer seems to be ignoring me as, whilst I’m doing exactly the same as I’ve done on other occasions, hit alt-file-print or whatever, it doesn’t seem to be responding.
It has green lights flashing here and there, it’s got paper, it’s got ink and all the rest but will it print, well, no, it won’t.
I must have done something to upset it and, as with most other relationships, be it a marriage, a job or communications with HM Inspector of Taxes, I’ll just have to wait to find out what it is. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Greggs has updated on full year trading saying the year has been one of good growth.
• Greggs to increase rate of store openings.
• Greggs reports total 2017 sales +7.4% with LfL +3.7%. some 131 shops were opened in the year with 41 closures. CEO Roger Whiteside comments ‘we finished 2017 well, delivering our seventeenth consecutive quarter of like-for-like sales growth, and anticipate that we will report full year results for 2017 in line with our previous expectations.’ Mr Whiteside continues ‘in the year ahead, we will continue to focus on delivering the outstanding value and taste that Greggs is famous for. 2018 will be a record year for investment in our supply chain and we intend to increase the rate of new shop openings as we continue to grow Greggs as a leading food-on-the-go brand.’
• Greggs re outlook. Says ‘looking forward we expect industry-wide cost pressures to continue in the year ahead, albeit at a lower level than we experienced in 2017.’ It says ‘2018 will be a record year for investment in our supply chain as we install many of the centralised manufacturing platforms that will provide the capacity for further growth of the business. We intend to increase the number of shops that we open in the year in line with our strategy to continue to grow Greggs as a leading food-on-the-go brand.’
• Allegra World Coffee Portal suggests UK coffee shop market grew by 7.3% in turnover during 2017 to £9.6bn.
• Allegra says UK saw 1,215 new coffee shops open in 2017, an increase of 5.3% in store numbers. Some 71% of coffee executives interviewed by Allegra remain positive about the trading environment. Allegra says that the UK market will expand to some 31,400 outlets by 2022 with turnover of £13bn.
• Allegra suggests that Brexit and other uncertainties mean that LfL sales have slowed at UK’s coffee shops. Sterling’s drop last year meant equipment and other supply costs rose year over year.
• Allegra reports UK’s top three coffee shop chains, Costa, Starbucks and Caffe Nero, have 52.9% of the market in terms of store numbers. Hospitality & Catering News quotes Costa as saying ‘we’re absolutely delighted to be recognised as the UK’s favourite coffee shop for the eighth consecutive year.’ It adds ‘we look forward to inspiring even more customers to be as passionate about coffee and making coffee accessible and interesting for everyone.’
• Allegra reports ‘the UK coffee shop market continues to be robust despite current challenges, laying down modest growth in 2017 amid severe concern over the Brexit impact on jobs and investment.’ It adds ‘as the market matures, and we enter the ‘5th Wave’, we’re seeing a new era of leading brands competing on excellence. Key players are sharpening their focus on customer experience to stay ahead of rivals. If leading coffee shops can do this successfully, the market will remain strong – it’s time for the industry to dig deep and capitalise on the opportunities ahead.’
• All eyes on further potential pre-packs. Particularly before the next rent cheque is due in March.
• Pragma comments on meal kit delivery market. Hello Fresh & Gusto have led the way but others entering the market. The product is convenient but, if the consumer is coming under pressure, is some of the demand about to disappear?
• Pragma says some operators see target demographic for meal boxes is a little older than earlier thought, perhaps customers in their 30s. Pragma says one of the key problems is that ‘delivery is expensive and relies on maintaining the quality of the food whilst out for delivery and trust in leaving the boxes outside houses if nobody is in.’
• Delivery. As always, customer acquisition is expensive and building loyalty is challenging. As Greggs has reported today, some high street operators continue to perform strongly.
• Pragma reports Amazon is set to launch in the meal kit market in the UK.
• Premier Foods updates on Q3 trading saying sales rose 4.0% in the quarter & are now +2.6% in the year to date.
• PFD international sales +26% in Q3. Market share gains achieved & ‘expectations for progress in the full year remain unchanged.’ CEO Gavin Darby reports ‘we delivered another good quarter of growth, with sales up +4.0% in Q3 and +2.6% in the first three quarters of the year. Our International business produced another excellent quarter and our partnerships with Nissin and Mondelez International continue to deliver strong performances, demonstrating their strategic benefits to us. With our leading category positions and commitment to product innovation, our expectations for progress this year remain unchanged.’
• GBK has officially lodged notice that Alasdair Murdoch ceased to be a director of the company on 31 Dec 2017.
• BrewDog has achieved its crowdfunding target of £10m but has decided to extend the deadline in the hopes of attracting more cash. The brewer raised more than £11.4m in 90 days from a total of 24,000 investors.
• The introduction of the sugar tax this April has led to Coca-Cola deciding to cut the size of a 1.75l bottle to 1.5l and raising the price by 20p in March.
• Iceland Frozen Foods plans to eliminate or drastically reduce plastic packaging of its own label products by the end of 2023.
• Just what we’ve all been crying out for, even more intrusive advertising. Marketing week reports that the addressable TV market (whereby different ads can be addressed to different viewers watching the same TV programme – perhaps even in the same household) is ‘set to skyrocket in 2018.
• Addressable TV should mean smaller & even micro brands can afford to advertise. It used to be just Coke and Persil but soon it may be hairspray in one room, screwdrivers in the next and local tattoo removal services in another. Marketing Week quotes contributors as saying directed advertising ‘enables you to think about targeting discreet messages to different audiences.’
• A third of the lowest-income households in the UK have negative net worth reports the IFS. It says debt in these households exceeds their assets. Unsecured borrowing levels in the UK have been rising at around 10% per annum.
• Joseph Rowntree Foundation reports ‘the government, regulators and lenders need to not only look at increasing access to affordable credit, but also at the financial pressures that can lead families to take on debt in order to get by.’
• The MCA has reported that Brewhouse and Kitchen is set to close its £7.7m equity raise after hitting its extended target within three weeks. Chief Executive of the group, Kris Gumbrell said: ‘We have been very pleased with the level of interest in our latest fundraise and the speed at which it ran. The board have agreed to increase the target of fundraising by 10% to £7.7m as we believe 2018 could be an interesting year for further leasehold and freehold investment to grow our brand’.
• The ALMR has backed the Home Affairs Committee’s call to the Government to provide a greater consensus and trust on immigration as part of immigration policy.
• The Alderley Edge Hotel has opened its new bar and restaurant, marking the first phase of a £2.5m refurbishment.
• Ei Group has announced that it will partner up with Yext in order to maximise discoverability and improve the customer experience across the digital ecosystem.
• According to data from Him retailers face a ‘bleak’ generational decline in convenience store visits, with only 27.8% of 18-24 years visiting convenience stores five times a week compared to 45.8% of over 75-year-olds.
• The ALMR has welcomed steps taken to reduce plastic straws in venues, and has been actively encouraging its members to cut them out.
• Asda has seen LfL sales climb 5.3% during the Christmas period, with new CEO Roger Burnley said the retailer had beaten its targets ‘by some way’.
• Network Rail retailers have recorded strong results over the Christmas period, taking over £110m in sales from the 18th November to 23rd December.
• Beverley’s White Rabbit Chocolatiers has recorded a record-breaking year, and is looking to take on new staff for 2018. Business manager Ed Hawkes said: ‘Our online order book has been full to bursting, and we’ve been fortunate to have a constant stream of customers visiting the shop to choose some seasonal treats or take a bit of time out from the stresses and strains of Christmas shopping at our café’.
HOLIDAYS & LEISURE TRAVEL:
• The Sunday Times reports that Travel Counsellors could be sold for up to £200m and the group’s private equity owner, Equistone, has appointed investment bank Rothschild to oversee the process. Chief executive Steve Byrne was quoted last summer as saying the company was ‘looking at our options’ regarding the next stage of growth. This could involve strategies including engaging another private equity fund to invest in the business or to list on the stock market. ‘An IPO is a consideration,’ he said.
• The Association of Independent Tour Operators has criticised the government and banks over new credit card rules and hit out at misleading reports of a ‘rip off travel industry’. Abta members claim the ban on credit card fees could see their annual costs rise as much as £20,000 and the body has reiterated ts call to the government for a review of the card payment market ahead of the implementation of the Payment Services Directive.
• The £30m acquisition of AllClear Insurance Services, an insurer that sells travel cover to over-55s, by Synova will make its founders a fortune. Mike Rutherford and Chris Wacey founded AllClear and own a majority of the shares.
• A Travelzoo poll has reported increased demand for cruise holidays, with 36% of the sample planning to take a cruise this year, up 11% since 2015 and slightly up on 34.5% last year.
• The UN World Tourism Organization (UNWTO) reports that Spain will replace the US as the world’s second most popular tourism location. In 2016 both the US and Spain received around 76m tourists but in 2017 Spain grew the figure by 8% to 82m.
• A joint venture between Thomas Cook and Fosun International focusing on outbound tourism for Chinese tourists from Shanghai is set to start soon. This follows the fine-tuning of laws and regulations which is opening up China’s Free Trade Zones, benefitting firms such as Thomas Cook.
• Gym Group updates on 2017 trading saying total membership rose by 35.5% in the year to 607k. Revenue rose 24.3%. Gym Group reports ‘following another strong performance, the Company has created an excellent platform for the coming year. The business is in great shape to achieve the substantial growth in profitability included in its 2018 plans, as it benefits from the significant expansion of the past 2 years.’
FINANCE & MARKETS:
• Oil over $70 at $70.03 per barrel
• Sterling up again vs dollar at $1.3787
• Pound weaker vs Euro at €1.1242
• UK 10yr gilt yield unchanged at 1.33%
• World markets: UK & Europe down yesterday, US shut. Asia mostly up in Tuesday trade
• UK CPI for December 9.30am
• Seasonally-adjusted EU trade surplus up to €22.5bn n November vs surplus of €19.0bn in Oct
• Brexit, government etc.:
o A turning point in definitions, making the unacceptable acceptable, turning untruths into truths etc.
o President Trump tells reporters ‘I am not a racist. I’m the least racist person you have ever interviewed.’
o Henry Bolton says he didn’t dump alleged racist girlfriend for political reasons. Far from it, he says.
o Despite Carillion, multiple resignations, Brexit debacle, Northern Ireland stitch-up etc. UK government is ‘strong & stable’. This, it maintains, is its version of getting on with the job. It is definitely not being pinged from pillar to post by events like some mindless ball in a pinball machine.
ADMIN UPDATE, RESEARCH ETC.
• Langton is between offices. Please communicate via email. MIFID II is now in operation.
• We are putting together a compendium of 60-seconds pieces for publication this month at £200 plus VAT, free to clients. Please let us know if you would like a copy.
PRIOR DAY LATER TWEETS:
• Later tweets: Byron’s CVA, Jamie’s closures. New Look to exit sites, Ed’s, BHS, Phones 4 You etc. Where now the High Street?
• Discounting. Where’s the road back? Why pay full price? Half price mains (either 50% off or BOGOF) seems to be the going rate
• NFD says foodservice is dog-eat-dog world. Market share gains the only way to make progress.
• Premier Foods says no talks with Nissin re selling its Batchelors unit have gone ‘beyond an exploratory stage.’
• Labour still worried re UKIP? Really? 3x married UKIP leader under pressure. Girlfriend alleged racist. Are these voters you want to keep??
• Sterling at post Brexit vote highs vs dollar. Not so much vs Euro. Oil near 3yr highs. Interest rates rising. UK CPI tomorrow.
• New Look & Game. List, take private. List, struggle, close shops, perhaps go private and list again? Where’s the idiot in that room?
• Deconstructed crash as retailers/F&B struggle. Tough out there. Ask Byron, Mr Oliver etc. M&S says consumers acting in recessionary way
• If I had £1 each time an e/m told me it was ‘not such a Blue Monday’ today (and offered me a voucher), I’d be about eight quid richer
START THE DAY WITH A SONG:
Yesterday’s song was Simple Minds with Alive and Kicking. Today, who sang:
Who broke my heart, you did, you did,
Bow to the target, blame Cupid, Cupid
RETAIL NEWS WITH NICK BUBB:
• JD Sports: Today’s update from JD Sports is short on detail, but the message seems good enough, as LFL sales growth has been maintained at 3% in the second half to date and the company has edged up its full-year profit forecast: “We are now confident that our headline group profit before tax for the year ended 3 February 2018 will reach around £300m. Prior to this announcement the range of market expectations was £270m to £295m”.
• Dunelm: The Q2 update today from Dunelm covers the 13 weeks to Dec 30th and the news is satisfactory, with LFL sales up by 3.4% (split 1.1% for Stores and 30.5% for Online), although there has been an adverse sales mix impact on gross margins of 180bps (80bps from the Worldstores Online acquisition and 100bps from the higher/planned participation of seasonal and end of season products). The overall message is “We are well positioned to deliver good full year profit growth, after a small reduction in the first half, largely due to the consolidation of Worldstores losses”.
• Greggs: The Q4 update today from Greggs flags that LFL sales grew by 3.0%, slightly slower than the 3.7% cumulative outcome for the year, “reflecting the particularly favourable trading pattern in the final quarter of 2016”. But Greggs say that the full year results for 2017 will be “in line with our previous expectations” and say that cost pressures will ease in 2018. As usual, there are some interesting snippets about new products: “Our classic favourites continued to perform well and customers enjoyed seasonal products such as our Festive Bake and fresh-baked mince pies. Hot options such as hot sandwiches and our gluten-free ‘Balanced Choice’ soup also proved popular. We have further extended our popular hot drinks range to include a caramel latte and, in the New Year, have introduced a new focaccia-style pizza”.
• News Flow This Week: Tomorrow brings the Burberry Q3 (the Hotel Chocolat update is actually a week tomorrow). Then on Thursday we get the Halfords Q3 update and the ABF (Primark) update, as well as the Ocado new segmental reporting update. And on Friday we get the Bonmarche update and the Pets at Home Q3 update, as well as the ONS Retail Sales figures for December.