Domino’s, pub prices, Sportech, hotels, Brexit & other:

A DAY IN THE LIFE:

Went out yesterday evening and paid £5.75 for one pint and then £5.90 for another. The pub was empty.

Probably a coincidence it being a pre-payday, dark and damp, January Monday but what’s going on with price?

I mean Sam Smiths, which isn’t a bad pint when all said and done, is £3.20 in London and about £2.50 back home and JD Wetherspoon, which must be doing something right if its LfL sales are still at +6%, sells decent beer for not much more so what kind of margin do these other London operators work on?

Well low to mid 70s in terms of gross margin is the bald answer. And that’s even after you’ve stripped the VAT out and, if you brew as well, this could be in the low to mid 80s which suggests that the punter, me in this case, is getting around 12p worth of beer for every pound they spend after they’ve paid the VAT and the brewers’ margin.

Of course, in the real world (where Yorkshiremen can’t have 2018 beer at 1970s prices) there are some pretty horrible things going on between the spots for the gross and the net margins. Business rates, NMW, NLW, apprenticeship levies, utility price rises and all the rest but come on, these are hardly boom times, are they? We were asked for nearly £14 for fish and chips last week and that shop, a take-away to all intents & purposes, was also empty. On to the news:

LANGTON RESEARCH:

• Langton has put together a compendium of around 3 dozen 60-seconds pieces (c200 words or so each) for distribution at £200 plus VAT, free to clients. Please let us know if you would like a copy.

PUB, RESTAURANT & DRINK PRODUCERS:

• Domino’s Q4. Co resilient, figures will slightly exceed market expectations’.

• Domino’s updates on Q4 trading saying it is seeing a ‘good trading performance, boosted by record new store openings.’

• Domino’s reports Q4 sales +18.2% or +10.1% organically (not LfL). UK is +10.1% and +9.9%. UK LfL sales +6.1%. Group is seeing ‘strong growth in both established and newer markets’. Company has 1,192 stores group-wide with 43 net new stores opened in Q4, and a record 95 UK openings for 2017.

• Domino’s CEO David Wild says ‘we are pleased to report a good performance in Q4, completing another year of significant progress and growth for Domino’s. With a record year for new store openings and continued like-for-like sales increases, the UK business has demonstrated its resilience in a challenging economic and competitive environment. Our international operations are growing in scale and benefiting from our expertise in supply chain and digital. We expect full year underlying profit before tax to be slightly above the current range of market expectations.’

• EI Group yesterday bought back 172,098 of its own shares for cancellation at 144.2p per share

• UK restaurants brought in over £40bn in turnover last year as restaurants outside of London outstripped the capital, with Coventry, Edinburgh, Sunderland, and York all performing well. London restaurants saw a 7% increase in takings, but contributed a substantial £11bn as a whole to the restaurant industry in 2015, more than any other UK region, per consultancy firm Moore Stephens.

• ‘Restaurant sector growth has been faster in the regions as they seek less crowded markets’, said Simon Fowles, Director at Moore Stephens. ‘Whilst disposable income is lower outside London, there is a far lower presence of modern, highly branded restaurant chains’. He added: ‘As there is a slight lag in the most recent data, it will be very interesting to see how trends in the restaurant sector will progress, particularly with regards to the continuing impact of Brexit on consumer sentiment.’

• One in four diners (equal to some 2.8 billion visits per year) will pick a restaurant because they ‘regularly go there’. Global information company the NPD Group writes that ‘habitual’ visits account for £12.6bn of out-of-home consumer spending per year and is a trend that has grown at over double the rate of overall out-of-home spending. Loyalty cards and point schemes are currently the central ways to secure repeat custom, although order-ahead apps are rapidly becoming more important.

• Elliott Advisors is in talks to buy a majority stake in bookshop chain Waterstones, which last changed hands in 2011, when Russian oligarch ALexander Mamut bought it from HMV Group. The Sunday Times writes that Mr. Mamut hired Rothschild to explore a £250m sale last year.

• Coca-Cola is launching three new drinks products in the UK as it looks to mitigate the impact of the forthcoming sugar tax. Mr Woods said the launch of ice tea drink Fuzetea, ready-to-drink cold coffee Honest Coffee, and dairy-alternative smoothies brand AdeZ, would mean that 30% of UK sales would be still drinks in the next few years – double today’s level.

• Marston’s premium division, Revere, has announced two new The Lost & Found sites in Leeds and Bristol and is also refurbishing its original Birmingham site this year. Managing Director of Revere, Colin Sadler says: ‘We are delighted to be expanding The Lost & Found brand and building on our success as a destination venue. Leeds is thriving with young professionals who are a key demographic for us, and with Bristol recently being named best city to live in the UK – thus drawing in many new people to the area – we are sure the new sites will be perfect for our growth strategy.’

• Keurig Green Mountain Inc will buy soda maker Dr Pepper Snapple Group Inc in a deal worth more than $21bn (£15bn).

• Expanding noodle bar chain Chopstix Group has appointed ex-Punch and Whitbread man Jon Lake as managing director. Lake will work closely with Chopstix Group founders, Sam Elia and Menashe Sadik, who will now on focus the development of the group’s portfolio of brands.

• The Lakes Distillery has placed on the list of ‘eight whisky distilleries to see before you die’ by the organisation that promotes World Whisky Day. Nigel Mills, one of the three founders of the distillery said: ‘Being named alongside such prestigious names as Glenfiddich is great testament to the work we have done promoting our products and English whisky as a whole’.

• Fairfields Farm has announced its acquisition of fellow UK crisp brand Ten Acre. Ten Acre co-founder Tony Goodman stated: ‘We have a synergy with Fairfields Farm, both believing in great taste and premium quality. Export is to be a focus at Fairfields – this is great for Ten Acre, as we recently received the award for Export Champion from the Department for International Trade’.

• The SWA has announced its plan to phase out the use of plastic straws as part of its ‘continuing commitment to environmental stability’ and bringing its a step closer to achieving its target of product packaging being 100% recyclable by 2020.

• Nielsen reports Champagne sales down 20% in terms of volume and 11% down in value in the UK for 2017. The amount of bottles dropped from 16.7m in 2016 to 13.3m 2017.

HOLIDAYS & LEISURE TRAVEL:

• HotStats reports a 7.0% increase in profit per room for European hotels in December. The region saw occupancy up 0.4% to 59.8%, ADR up 4.2% to €145.26 and RevPAR up 4.9% to €86.87.

• Go-Jek, an Indonesian ride-hailing firm, has received funding from Google reported to be worth $100m.

• Tourist boats in Paris have been taken out of service amidst the ongoing River Seine flood in the city. The river through the French capital rose to 19.2ft early today and is not expected to begin receding before Tuesday.

OTHER LEISURE:

• Sportech has announced that the formal sale process that it announced on 19 October 2017 is continuing. The group says ‘following an initial round of discussions, the Company continues its engagement with selected interested parties regarding the sale of the group. These discussions are continuing with a timetable for seeking valid offers extended through the first quarter of 2018.’ The group adds ‘current discussions may be altered or terminated at any time and, accordingly, there can be no certainty that an offer will be made, nor as to what the terms of any offer may be. The Board will continue to update shareholders further as appropriate.’

• Electronic Arts (EA) has agreed a major esports deal with ESPN and Disney, which will see the TV networks broadcast the upcoming EA Sports Madden NFL 18 Championship Series.

• CVC Capital Partners, the majority owner of Sky Bet, has reportedly hired Rothschild and is aiming to raise £3bn from an initial public offering.

FINANCE & MARKETS:

• US spending rose in December but the savings rate fell to a 10yr low

• Sterling down vs dollar at $1.4035

• Pound weaker vs euro at é1.1352

• Oil down a dollar & a half at $68.98

• UK 10yr gilt yield up 1bp at 1.46%

• World markets: UK mixed yesterday with Europe & US down. Asia mostly lower in Tuesday trade

• Brexit, politics etc.:

o UK official government forecasts suggest that the UK will be poorer outside the EU, no matter what deal it strikes on trade

o Buzzfeed suggests the government believes the UK could be 8% worse off over 15yrs when it leaves the EU. It would be then 0.5% to 1.0% poorer every year thereafter with the result cumulating.

o Eight percent of the UK economy amounts to some £150bn or around £2,200 per person

o Liam Fox has said that some leave supporters will never be able to get the deal that they want

o Britain will have to accept EU law during any transition period says Michel Barnier. It will have no vote but will have to pay in.

o Reuters suggests that ‘swamped by Brexit and weakened at home’ the government is falling behind in attracting Chinese investment. Reuters quotes trade sources as saying ‘there is a feeling that Brexit means that the government has taken its eye off the ball’.

ADMIN ETC.

• Langton is between offices. Please communicate via email. MIFID II is now in operation.

LATER TWEETS:

• Later tweets: DP Poland reports 21st quarter of >10% LfL system sales growth. TV ads now live. Some cost pressures but should abate this year

• Prezzo appoints turnaround specialists. Reversal (i.e. store closures) could be the first part of any change of direction??

• EasyHotel updates on trading saying ‘the strong trading experienced in the prior year’ has continued

• Milk price slightly lower in Dec at 31.66p per litre (farm gate). Down from highs but still +58% from 2016 lows. Further drops likely in Jan

START THE DAY WITH A SONG:

Yesterday’s song was was Bohemian Like You by The Dandy Warhols. Changing the pace today, who sang:

Some people want diamond rings,

Some just want everything

But everything means nothing

RETAIL NEWS WITH NICK BUBB:

Superdry: The management team at Superdry have some punchy long-term share option targets, but so far this year the shares have been a bit weak and the founder Julian Dunkerton didn’t exactly help matters by dumping 1m shares at 1780p on Friday (as announced at 7.15am yesterday), even if he does still have a chunky 20.7m shares in Superdry (a 25.4% stake)…

Ingvar Kamprad Watch: There were plenty of obituaries in yesterday’s papers of the great, but famously mean, Ingvar Kamprad, who founded the hugely successful Ikea business in 1943, at the age of 17. The Guardian pointed out that his thrifty nature stemmed from his upbringing in the notoriously conservative farming region of Småland in Southern Sweden: “You can perhaps take the farmer’s son out of Småland, but in Kamprad’s case you can’t take Småland – a harsh, agricultural and punishing region – out of the boy”. The Guardian noted separately that he said in a documentary released in 2016 that “It’s in the nature of Småland to be thrifty” and that “If we want to be cost-conscious, we should do it, not just talk about how cost-conscious we are”.

Hoover Watch: We are indebted to the Telegraph yesterday for flagging up that the iconic “art deco” Hoover Building in Perivale, in West London, opened in 1933 and which was a Tesco superstore in the 1990’s, is now being converted into 66 luxury apartments…

News Flow This Week: With the end of the month coming up fast on the horizon, tomorrow brings the monthly GFK Consumer Confidence index, the ScS trading update and the Joules interims, whilst on Thursday we get the Apple Q1 and the Amazon Q4 out in the US. And Friday is Groundhog Day!