Langton Capital – 2018-05-11 – Tracker, JDW, food prices, Cineworld, interest rates etc.:
Tracker, JDW, food prices, Cineworld, interest rates etc.:
A DAY IN THE LIFE:
Don’t you think the first cup of tea tastes the best?
I mean I must be approaching double figures by the time I crawl into bed of an evening but, even when I’ve worked up a bit of a thirst during the day, none of them tastes as good as did that first, steaming brew.
Anyway, I don’t really know where I was going with that so, with the near-frost now clearing from the garden, the steam rising and the temperature gauge edging up from its current 4 degrees or so, let’s move on to the news:
APRIL PUB & RESTAURANT TRACKER:
• April Coffer Peach Tracker shows LfL sales down 1.2% with an early Easter negating the positive impact of mid-month sunshine
• Coffer Peach says ‘Britain’s managed pub and restaurant groups saw sales slip in April.’ It says the ‘earlier Easter holidays [which boosted March numbers – that weren’t actually that good] seen as the main factor.
• March was actually down 3.1%. It was impacted by the Beast from the East but nonetheless stole Easter from April
• Re April, CGA comments ‘Easter, which is always a busy time for the eating and drinking out market, last year fell in mid-April, while this time it straddled March and April. This will certainly have had an effect on sales comparisons, and looks like to have outweighed the boost to trade that the hot-spell at the end of the month will have brought to the pub sector, in particular.’
• Mid April saw temperatures in the middle 20s but this did not rescue the month.
• April Tracker shows London fared better than the rest of Britain. April was +0.2% with the rest of the country down 1.6%
• Managed pubs & restaurants performed similarly with the former down 1.2% and the latter down 1.1%.
• CGA says ‘the only good news is that April trading was much better than the disastrous, snow-hit trading seen in March, when sector like-for-like sales tumbled 3.1%.’
• David Coffer says ‘the results reflect the general feeling of political and economic uncertainty translating into a stay at home mentality. We believe, however, the recent change in the weather and the ‘royal wedding feel good factor’ will lift the mood nationally and hopefully lead into a stronger summer.’ This is a hope rather than a forecast as the NIESR and others are saying that the economy is only growing at around 0.1% per quarter at present.
• Coffer says that bad restaurant stats are impacted by groups that have over-expanded.
• RSM says that ‘a dip of only 1.2% will be viewed with cautious optimism especially when compared with the 4.2% fall in like-for-like retail sales announced for the same period.’ It says the industry wants a ‘sustainable shift in consumer confidence.’
• Underlying LfL growth on a 12mth view is now only 0.4% compared with CPI of around 2.5% and wage and some other cost growth of much more than that. JD Wetherspoon earlier his week said that it needed growth of around 4% in order to stand still in terms of margin.
• Total growth was 1.4% (compared with a LfL decline of 1.2%) showing the continued impact of new openings.
PUB, RESTAURANT & DRINK PRODUCERS:
• Tim Martin Chairman of JD Wetherspoon has said that the ‘jury is still out’ on the group’s trial of a pizza offering. The pizzas are on offer in c150 pubs and are being sold for between £6-£9.
• With 30% of food eating in the UK currently coming from the EU, post-Brexit trade barriers are threatening to interrupt supply. The Brexit Food Prices and Availability Report from the House of Lords’ has stated that even in the ‘best-case scenario’ with no tariffs and few customs barriers, international rules would mean the UK would have to conduct more customs and borders checks that it does now.
• M Restaurants is reported to be considering a bid for Cau. Current owner, Gaucho Grill, is mulling a CVA.
• Sky News has reported that Gaucho has hired advisors to help it examine its options, bringing many to fear the high street restaurant chain could be the latest to file for a CVA. A spokesperson for Gaucho said: ‘As part of a comprehensive strategic review, the group’s new management team with the support of its shareholders, is at the early stages of exploring a number of financial restructuring options.’
• Hull Pie it to close its two shops in the city. The operator told the Hull Daily Mail ‘rising costs of everything from the ingredients to the overheads have forced us out. Trade has fallen too and people do not have as much disposable income.’
• McMullen’s, the brewer and pub operator, has reported managed pubs up 1.6% in LfL sales for 2017. The group recorded revenue of £80.28m, an increase of 2% on last year.
• UKHospitality has called on the government to adopt an approach to planning that encourages growth and stability for hospitality venues.
• Travelodge has announced a partnership with Itsu to supply its non-bar café hotels, meaning customers will be able to enjoy Itsu sent to their room or to take away. Karen Broughton, Travelodge sales & marketing director, said: ‘We are delighted to be the first UK hotel brand to partner with itsu [grocery] and bring an exclusive ‘eat beautiful’ range of convenience noodles and snacks to our non- Bar Café hotels.’
• A number of companies are now saying they will hit numbers ‘providing there is no further deterioration in UK market conditions.’ We wonder, sometimes, if this suggests that they actually expect that deterioration to happen.
• BT is cutting some 13,000 jobs over the next three years (on top of 4,000 announced a year ago) as part of a restructuring plan to invest in ultrafast broadband and the next generation of mobile networks. Middle management and back office roles are at risk.
• House of Fraser made a loss of £43.9m in 2017, compared to a £1.5m profit the year before, as sales fell 6.3% to £787.8m.
• Farm incomes are said to have risen by 41% last year. DEFRA says total farm incomes rose by £1.68bn to £5.72bn
• The UK’s hospitality businesses have stated they are committed to reducing waste, with the UKHospitality pledging to aid in collaborations to eliminate unnecessary plastic in the sector by 2030.
• Those in their mid forties are now twice as likely to be renting their homes from private landlords than 10 years ago.
• The US restaurant industry reported LfL sales up 1.5% in April, the strongest month in the last 31. Victor Fernandez, vice president of insights and knowledge for TDn2K‘stated: We are seeing an uptick in restaurant revenue beginning with the fourth quarter of last year. Stronger economic conditions and high consumer confidence are certainly factors. However, this performance has to be considered against last year’s soft sales. A longer view suggests there are still significant challenges for the industry’.
HOLIDAYS & LEISURE TRAVEL:
• STR data has indicated that US hotels for the of 29 April through 5 May, occupancy was up 0.5% to 68.2%, ADR grew 2.7% to $130.14 and RevPAR increased 3.3% to $88.77.
• Accorhotels properties have teamed up with Too Good To Go, an online marketplace for surplus food, as the group aim to reduce food waste by 30% by 2020.
• Wyndham Worldwide Corporation has sold its European vacation rental business to private equity firm Platinum Equity for $1.3bn. Wyndham operates more than two dozen local brands, including cottages.com, James Villa Holidays, Landal GreenParks, Novasol and Hoseasons. It is claimed to be the largest manager of holiday rentals in Europe, with more than 110,000 units in over 600 destinations across more than 25 countries.
• Deloitte has recorded a significant fall in consumer spending sentiment on holidays in the last five years. Graham Pickett, senior partner at Deloitte commented on the impact of a the downturn: ‘There will be a bit of extra capacity around and there will be deals. That could be good, it could be bad. This industry is good at responding [to challenges] in fairly quick time. It’s not an industry that struggles with change’.
• Cineworld is to report in US dollars going forward. It says that ‘following completion of the acquisition of Regal Entertainment Group on 28 February 2018, a significant majority of the revenue, costs and cash flow of Cineworld…is now generated in the United States in US Dollars.’
• Cineworld says this will ‘provide a more meaningful understanding of Cineworld’s financial performance’. It says ‘the trading update to be published on 16 May 2018, the interim results for the six months ending 30 June 2018 and the full-year financial report for the year ending 31 December 2018 will be presented in US Dollars and will include all comparative information in US Dollars.’
• The Stars group, the betting group, has reported Q1 results with CEO, Rafi Ashkenazi stating: ‘The Stars Group’s strong first quarter results continued our organic growth trajectory. We are pleased with the performance of each of our verticals, poker, casino and sportsbook, which are benefiting not only from the continued success of Stars Rewards, but also from our strategy of focusing on the customer and continued improvements to our product offerings’.
FINANCE & MARKETS:
• Bank of England leaves rates unchanged at 0.5%. The vote was 7-2.
• Bank now expects growth this year of 1.4%. Langton mentioned last week that, with growth of only a little over 0.1% in the first 4mths of the year, hitting the previous estimated of 1.8% was looking rather challenging.
• Bank says the UK economy has hit a ‘temporary soft patch’. It blames the weather.
• Bank says rates are likely to rise ‘over the course of the next year’. Mark Carney says that households are now expecting this.
• NIESR reports that the UK economy grew by 0.1% in the 3mths to end April. It also grew by 0.1% in the 3mths to March.
• ONS reports UK industrial production rose only 0.1% in March. Manufacturing was down 0.1% with energy increasing output.
• The UK’s trade deficit with the rest of the world widened in March to £12.3bn from £10.4bn in February
• Sterling down a little vs dollar at $1.3526 and more materially against the Euro at €1.1351
• Oil down a little at $77.40
• UK 10yr gilt yield down by 5bps on no-rate-rise to 1.42%
• World markets: All up yesterday with Far East up today
• Brexit etc.:
o PM said to be urging her inner cabinet colleagues to get behind her idea of a customs’ partnership.
o The fudge is being widely derided by both leavers (it isn’t really leaving) and remainers (what are you playing at?)
o Bloomberg reports ‘even the best possible trade deal with the EU after Brexit may not be able to save Britons from paying more for their food, as new customs checks will push up prices according to a report from a House of Lords committee.’
o Tim Martin and others have recently said that food prices should go down post Brexit
PRIOR DAY LATER TWEETS:
• Later tweets: JDW’s Tim Martin never uses his app, never will & thought it was a ‘silly idea’. Withdrawing from social media etc. may lose some customers
• JDW potentially at risk from supermarket competition should prices fall post ASDA/Sainsbury. Low margin & low prices
• Shares in Greggs down 15% as shareholders digest idea that a pie company maybe shouldn’t be on a rating of 17x plus
• Goals Soccer impacted by weather. Unrelated, SIG also hit by snow. Says should make estimates ‘providing there is no further deterioration…’
• When companies say ‘assuming no further deterioration’, do they mean they expect to see a further deterioration??
• Bank of England do decide on rates. Finely balanced decision, circa 50:50. Recent weak data put a rise in doubt
• Next beats estimates, directory +18% and shops less bad than feared. Shares +6% or so on the news
• Micro-beat: Hull Pie (pies in Hull) shuts its doors. Hit by weather, cost increases, slack demand etc. Says disposable income has fallen
START THE DAY WITH A SONG:
Yesterday’s song was Anarchy in the UK by the Sex Pistols, but today who sang:
All this time to make amends,
What do you do when all your enemies are friends?
Now and then I’ll try to bend
Under pressure, wind up snapping in the end
RETAIL NEWS WITH NICK BUBB:
hilip Green Watch: The big feature in the Sunday papers will be the annual Sunday Times Rich List, with the most interest in where the increasingly embattled Philip Green is positioned. Last year his estimated fortune fell to just £2.87bn, which put him a mere 41st on the list (he was 4th in 2004). Of course, you may say that Philip Green hasn’t released his y/e August 2017 Accounts for his beleaguered fashion empire Arcadia yet, so any estimate of his dwindling wealth is very speculative and you would be right. Last year he didn’t release his y/e Aug 2016 results until early June 2017, just after the official 9 months Companies House limit on filing company accounts. If history repeats itself, the estimable Oliver Shah of the Sunday Times will be able to capture the latest results for Arcadia, which are obviously expected to be very poor, in his much-awaited book “Damaged Goods: The
Trade Press: Retail Week magazine only comes out every fortnight now, to save money, and it hasn’t been published this week, but the team is still dining out on the success of their feature interview last week with the former Tesco boss Terry Leahy. The RW website, however, has a feature on “The apps that could save the High Street, as well as a video of the opening of Smiggle’s biggest-ever store on Oxford Street. Drapers magazine is also not published this week, alas, because of the Bank Holiday, so the cupboard is bare today…But the Drapers website has had several exclusive Online features throughout the week, including “Countdown to GDPR: are you ready?” (with only two weeks to go until the new data protection laws come into effect) and “Future retail: the resurgence of the store”.
BDO High Street Sales Tracker: We flagged yesterday that John Lewis enjoyed mixed fortunes last week, given the impact of the hot weather, the earlier fall of the May Day Bank Holiday a year ago and the House of Fraser Sale. And today’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains for last week, w/e Sunday May 6th, also makes mixed reading. BDO Fashion Store LFL sales were up by 1.3%, but, including Homewares and Lifestyle chains, total Store LFL sales were 3.4% down. However, overall Online sales were up by 11.4%, with Online Fashion sales 20.4% up.
News Flow Next Week: The Dignity Q1 results are on Monday. Wednesday bring the Burberry finals and the Moss Bros AGM update. The Mothercare finals, the British Land finals and the Walmart/Asda Q1 results are on Thursday. Then Friday is expected to see the launch of the Carpetright £60m equity fund-raising.