Langton Capital – 2018-04-04 – Escape Hunt, Younger consumers, tariffs, trade & other:
Escape Hunt, Younger consumers, tariffs, trade & other:
A DAY IN THE LIFE:
Why is it that your dog is always on the wrong side of a door?
If he’s out, he wants to come in and, well, you’ve guessed it, if he’s in, he wants to be outside and ours is somewhat worse because, if it’s raining when you open the front door to let him out, he’ll look at you as though you are some kind of moron and then paddle to the back door in the hope that the weather will be better.
And here he’s often disappointed because, though our house is by no means small, the front and back doors are definitely in the time zone and, as they’re separated by only 30’ or so, the weather is almost always identical no matter which way you face.
Still, the hound lives in hope. And there’s a lesson to be learned there – on to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Food prices fell 0.5% in shops in March and the 0.4% year-on-year was the slowest annual rise in just over a year. ‘With inflationary pressure receding in the food supply chain, we can now expect supermarkets to focus on lowering prices and to use promotions to drive visits as part of the battle for gaining share of wallet,’ said Mike Watkins at Nielsen. ‘With 27% of the value of the shopping basket being discounted by offers or short term price cuts, which is a 10-year low, shoppers will take advantage of any increase in discounting as they seek out the best value for money.’
• NPD Group is predicting a fall in eating out spend by younger consumers. It says the 25-34 age-group will spend less between now and 2022.
• NPD’s The Future of Foodservice survey says younger people will be responsible for only 18% of spend (now 20%) in eating out by 2022.
• NPD says younger consumers will make 155m fewer visits annually to F&B outlets as they struggle with other costs.
• On a brighter note, NPD reports over 50s will spend more on eating out. NPD says this demographic is wealthier, more active and more experimental when eating out than prior generations. NPD reports ‘foodservice operators seeking growth in the next five years should be aware that business coming from the 25-to-34 age band, which includes many ‘millennials’, is likely to drop. Visits from this age group have been dropping since 2007.’
• NPD says ‘one reason is that millennials typically need new experiences and sources of inspiration that the foodservice industry does not necessarily provide. The 25-to-34s are also facing higher living costs than ever, especially in housing and childcare, and this is prompting them to cut back on foodservice purchases. Operators and suppliers will have to work hard to determine what could bring the 25-to-34s back to the market. But now is also the right time to think more about the needs of the over 50s. There are huge differences in levels of fitness, mobility and prosperity as people move beyond 50 and into their 60s and 70s. But this is still a big opportunity for the foodservice industry.’
• Over 50s could spend more on delivery. Younger consumers are more experimental – but they are increasingly relatively poorer than older consumers.
• BBQ restaurant Smokestak has reported limited accounts for the year to end-June 2017 showing retained profits rising by around £180k on the year.
• Payment facilitator Flypay has shown its retained losses for the year to end-June 2017 increased by around £2.5m.
• China has introduced punitive tariffs on American wines, adding an extra 15% on top of the existing 14% import tariff. Wang Xuwei, head of the China Association of Imports and Export of Wine Spirits said: ‘In a few years time, China is set to become the world’s second biggest wine market. During that period, China’s wine imports are going to grow at warp speed. In a time like this, it means basically that the US has lost its chance. From this point of view, it has a very significant impact on the American wine industry, especially for its long-term strategic development’.
• Crowdcube is looking to double equity crowdfunding deals in under five years by partnering with six supporters of regional SMEs: BGF, G by Grant Thornton, Harper Macleod, IdeaSquares, Techstart Ventures, and Virgin StartUp.
• The head of food development for Las Iguanas is considering a shift to centralised kitchens as a way of offsetting rising costs but will still focus on skilled chefs due to the brand’s menu demands. Glenn Evans, head of food development for Las Iguanas, said the group’s kitchens are reliant on cooks that know exactly what they are doing. ‘I am proud to say we have got a really good set of skilled chefs in our business and I want to maintain that for as long as I can, so at the moment we produce everything in-house. Our percentage of fresh is probably 75% to 80% and we buy in complex manufactured ingredients products to complement those fresh ingredients.’
• US operator Dave & Buster’s Entertainment Inc.’s same-store sales fell 5.9% in the fourth quarter to 4 February, halting a run of 14 consecutive quarters of positive same-store sales. The Dallas-based parent to big-box entertainment and restaurant venues told analysts: ‘Recent sales trends in our comparable stores have been disappointing, and we are working diligently to rebuild momentum by evolving the brand.’
• JW Lees has installed 36 Tesla electrical car charging points at its hotels’ and inns’ car parks.
HOLIDAYS & LEISURE TRAVEL:
• Thomas Cook has appointed Ingo Burmester as its chief of the UK source market. Burmester is currently the group’s chief of hotels and resorts.
• Travellers across Europe faced disruption yesterday after the failure of a continent-wide flight plan processing system. The breakdown of the ETFMS system at European network manager Eurocontrol also came on a day when travellers in France were hit by strikes by rail workers and Air France employees. Approximately half of the European network’s 29,500 flights were put at risk of delays.
• Chinese investors are pulling out of high-profile developments in Los Angeles as ‘leaders in Beijing constrict the flow of money out of the country’.
• Data from the Russia Federal Security Service shows there was a 25% increase in arrivals from foreign travelers to Russia between January and September 2017, with arrivals from the US up 18%.
• China’s largest bike-sharing app, Mobike, has been bought by Meituan-Dianping. Both companies are backed by tech company Tencent. Meituan, which was valued at $30bn at its last funding round last year.
• Spotify shares are having a strong debut with latest prices at 21-25% higher than Monday’s reference price of $132 per share. The shares opened at $169.90 a piece before slipping to $149.01.
• Model railway maker, Hornby, has been forced to appeal to Barclays for relief on its financial covenants due to falling profits. Barclays agreed to waive a financial covenant test on Hornby’s debt.
• Murdoch’s Fox said it would sell off Sky News to Disney or ring-fence it regarding the company’s proposed acquisition of Sky. The comments show Fox trying to allay regulatory concerns that the £11.7bn deal was not in the public interest.
• Merlin Entertainments has lost a claim to pay less tax after visitor numbers fell due to a rollercoaster crash at Alton Towers in which two teenagers lost a leg. President of the Valuation Tribunal Service, Gary Garland, said it was not known to what extent this was a result of changing attitude to thrill rides or the weather, better alternatives, pricing or a possible lack of confidence in the park’s owners.
FINANCE & MARKETS:
• Beijing has said that it will retaliate after the US produced a list of over 1,000 Chinese products on which it will impose 25% tariffs. Beijing ‘strongly condemns and firmly opposes’ the tariffs. It says ‘such unilateralistic and protectionist action has gravely violated fundamental principles and values of the WTO.’
• UK manufacturing PMI for March shows a slight increase to 55.1 from 55.0 in February. Any number over 50.0 implies growth and March was the 20th consecutive month of growth. Around 55% of respondents reported their belief that output will be higher still in 12mths’ time. HIS Markit reported ‘although the pace of output expansion ticked higher in March, which is especially encouraging given the heavy snowfall during the month, this was offset by slower increases in new orders and employment.’ Orders are now at 9mth lows.
• Final manufacturing PMI for the Eurozone for February is unchanged from earlier estimates at 56.6.
• Sterling up a little vs dollar at $1.4088 and a shade higher vs euro at €1.1469
• Oil up 20c or so at $67.93
• UK 10yr gilt yield up 2bps at 1.36%
• World markets: UK and Europe down yesterday with US higher. Far East down in Wednesday trade
• Bitcoin down at $7,300 odd.
o All fixed.
START THE DAY WITH A SONG:
Yesterday’s song was DNA by Kendrick Lamar. Today who sang:
You’ve been here seven years longer than me
Don’t you know you supposed to be the man?
Not pale in comparison to who you think I am
RETAIL NEWS WITH NICK BUBB:
• Superdry (1): We flagged yesterday that, given the flagging morale in the General Retail sector, Superdry did not pick a good time last Tuesday to announce that co-founder Julian Dunkerton has decided to step back from his role as Product and Brand Director, “to devote more time to his other business and charitable interests”. Investors, not surprisingly, took umbrage at this sudden news and the shares fell back sharply, closing last week at £15.60 (capitalising the group at just over £1.25bn), compounding the big drop in the shares after the interims on January 10th, from a near £21 peak. Yesterday saw a flurry of further announcements from the company, with the news first thing that UBS has been brought in as joint brokers, alongside the embattled Investec, and the confirmation that the CFO Designate Ed Barker will join the company on April 16th. Even so, despite the recent
• Superdry (2): But after the close yesterday Superdry also announced, embarrassingly, that the other co-founder, James Holder (who stepped down as Design Director in May 2016), sold a chunk of his shares last Tuesday, reducing his holding from 10.4% to 9.8%. Funnily enough, our first thought on hearing the news about Julian Dunkerton last week was that it didn’t exactly reflect well on the grand announcement last September that the two co-founders were setting up “an innovative long-term incentive scheme under which they will share their wealth with all 4,500 colleagues in the business worldwide”. At the conclusion of the 3 year scheme, in Sept 2020, Julian Dunkerton and James Holder will transfer into a fund 20% of their gain from any increase in the group’s share price over a threshold of £18 (“Each £5 increase in the share price over the £18 threshold would see the founders putting
• Management Watch: With the beginning of the month/Q2 coinciding with the end of Easter/Q1, a couple of other management moves were confirmed yesterday: at the beleaguered Game Digital the CFO Mark Gifford stood down, as scheduled, to be replaced by the company turnaround specialist Martin Hopcroft as Interim CFO. And at mighty Howden Joinery, the estimable Matthew Ingle retired as CEO, to be replaced by ex-Screwfix boss Andrew Livingston.
• Today’s Press and News: On a quiet news day, we can’t see much in today’s papers apart from reports of the BRC Shop Inflation survey, showing that High Street prices fell by 1.0% last month, as inflationary pressures following the weakness of sterling began to ease. The main story in yesterday’s papers was the Press Association analysis that over 21,000 Retail staff have already been made redundant this year or had their role threatened, the bulk of them at established High Street chains.
• News Flow This Week: The Topps Tiles pre-close update is out this morning, followed closely by the latest Kantar/Nielsen grocery market share figures (for the 4/12 weeks to March 24/25th). Tomorrow the embattled Hammerson has a Q1 trading update. And on Friday the Motor dealer Motorpoint has a Q4 update.