Langton Capital – 2018-05-14 – Weather, City Pub Group, Marston’s, Visa spending etc.:
Weather, City Pub Group, Marston’s, Visa spending etc.:
A DAY IN THE LIFE:
Occam’s razor is the principle in philosophy that the obvious answer is often the correct one.
And this is borne out by the fact that, though some people have suggested I’ve taken to sending them emails in some sort or hlf-rsed shorthand, it’s actually just that the letter ‘a’ on my keyboard is sticking and I’m too mean (and technically incompetent) to change the board for a new one.
Anyway, with the sun shining and one of only two five-day weeks in May to look forward to, let’s move on to the news:
60 SECONDS ON SUN, SNOW… AND VOLATILE TRADING
A tale of two cold snaps…
• What a time to be a meteorologist
• The Beast from the East laid its snow in late February and was succeeded by a period of unseasonably warm weather
• The ‘Mini-Beast’ then came in mid-March, only to be followed by a record-breaking heatwave (including the warmest May Bank Holiday on record)
• How has this volatile combination worked out for operators?
And two months of negative growth…
• Sales for UK pubs and restaurants were down 3.1% in March. The poor weather outweighed any Easter timing difference, per Coffer Peach
• This should have hit pubs more than restaurants, although April was kinder that the ‘disastrous, snow-hit trading seen in March’
• Managed pubs & restaurants performed similarly with the former down 1.2% and the latter down 1.1% in April
It’s all in the share price
• Restaurant and pub company share prices have been hammered
• In the past year, Comptoir shares have halved, as have Fulham Shore’s. Richoux has a market cap of £11m, while Tasty’s 65-strong outfit is valued at just £15m
• Meanwhile, Marston’s and Greene King shares trade at five-year lows
• Contrary to the market’s opinion, many of these companies are resilient and have successfully navigated tough conditions before
PUB, RESTAURANT & DRINK PRODUCERS:
• The City Pub Group has updated on trading for the first 18wks of its current financial period saying that, since listing, the ‘number of trading pubs has now increased from 33 to 36 and the size of the Group’s estate (once exchanged pubs are completed and development pubs are opened) will have increased from 34 to 44.’
• City Pub Group comments ‘total sales for the first 18 weeks of the financial year were up 23% [including new openings] with recent strong trading making up for the snow affected weeks.’
• City Pub Group says ‘we are currently in the process of investing in and developing 6 sites in total (Aragon House in Parsons Green, the Old Ticket Office in Cambridge, our pubs in Cardiff and Reading and, as referred to above, our recently acquired pubs in Oxford and Cambridge).’ CEO Clive Watson says ‘we are pleased that recent trading has bounced back strongly following some tough weeks during the inclement weather earlier this year.’
• City Pub Group comments ‘our pubs have strong and relevant customer offerings which is evidenced well by our continuing growth.’ It says ‘we remain confident in our strategy and execution of our plan. Whilst still early in the year and with exciting events to come such as the World Cup, where we should trade well, we are well placed to meet expectations for the year.’
• Busy week for the pubs with EI Group tomorrow and Marston’s and M&B on Wednesday.
• Marston’s has appointed current senior independent director Carolyn Bradley to replace Roger Devlin as interim chairman of the company with effect from 1 June 2018. A search to find Devlin’s permanent successor is underway.
• Visa has suggested that spending in the UK has fallen for 11 of the past 12 months.
• Visa reports household expenditure, when adjusted for inflation and seasonal effects, was down 2% in April compared with a year ago. Visa says ‘with inflation beginning to fall and wages growing faster than expected in recent months, it would have been easy to assume we might be over the worst of the consumer squeeze. It is clear that consumers remain in belt-tightening mode.’
• Visa reports face to face spending was down 5.4% year on year with online spend some 0.1% lower. This will impact F&B operators with outlets dependent upon retail customer footfall.
• Restaurant Group to update on trading on 23 May. The group will have been negatively impacted by footfall drops outlined above. And below.
• BBC reports Springboard as saying that ‘not since the depths of recession in 2009 has footfall over March and April declined to such a degree.’ It says town centre vacancy rates are now running at 9.2%. Small sample but Coney Street in York now has 13 empty shops including a two-year empty BHS. Springboard says that even in the recession, sales dropped by only 3.8%.
• A note of optimism for some F&B operators in that Springboard reports ‘the parlous state of retail trading is highlighted by the fact that footfall post-5pm recovered in the last two weeks of the month, rising by 5.9%, whilst daytime footfall dropped by 0.1%.’
• Overall, Springboard says ‘it is clear that retail trading is doubly challenged by a thrifty consumer, in concert with a continuing predisposition towards leisure rather than retail spend.’
• TUC says UK’s real wage squeeze is the worst in 200yrs. That may be statistically correct but it is partly because wages in 2008 and 2009 were an illusion. Growth in the years running up to the credit crunch had been boosted by unsustainable lending etc.
• EY Item Club says next week’s Royal Wedding could help tourism & leisure but it says ‘we suspect there will be a very limited, temporary boost to the economy focused on some sectors, notably retail, tourism and, possibly, catering and pubs.’
• David Coffer of Coffer Corporate Leisure said last week that better weather ‘and the ‘royal wedding feel good factor’ will lift the mood nationally and hopefully lead into a stronger summer.’
• We can’t build an economy on this but EY says ‘the retail sector will benefit from people buying royal wedding souvenirs, such as plates, cups and magazines’. Really?
• Nightclub operator Deltic has suggested in its latest Nigh Index that spending on a night out has risen 6.9% over the last year. Over 69% of consumers below the age of 30 are said to have a night out at least once a week.
• 3i is thought likely to bid for motorway service station operator Welcome Break.
• Deliveroo and Uber Eats said in some quarters to be a threat to canteens operated by Compass & Sodexo as well as to restaurants.
• The BBPA has welcomed the proposed revisions to the National Planning Policy Framework (NPPF) but is also calling for more flexibility in town centre developments. BBPA Chief Executive Brigid Simmonds comments: ‘I warmly welcome the proposed changes to the NPPF in relation to pubs, I am pleased to see the government giving further consideration to rural tourism and leisure. The inclusion of the Agent of Change principle will be in vital in protecting pubs.’
• The BBPA has also called on the government to revise how low and non-alcoholic drinks are described following a consultation from the Department of Health and Social Care (DHSC). In its response to the DHSC Consultation on Low Alcohol Descriptors, the BBPA has called on DHSC to change the definition of ‘Alcohol Free’ from 0.05% ABV to 0.5% ABV, to bring the UK in line with the rest of Europe, the USA, Australia and New Zealand, define ‘low-strength’ alcohol as between 0.5% ABV and 1.2% ABV.
• Fast food advertising could be banned from the Transport for London network as part of a drive to tackle childhood obesity. The proposals target food and drink high in fat, salt or sugar, with Khan already proposing a ban on new hot food takeaways opening within 400 metres of schools.
• Everards plans to build a 200-plus capacity beer hall and distill its own gins, vodkas, rums and Japanese-style sakes.
• Kona Grill has reported a LfL sales drop of 8.3% in Q1 with revenue down 7.1%. The group plans to start franchising domestically and in China. The group says ‘traffic was down double digits as we left the honeymoon periods of restaurants opened in the second half of 2016.’
• Moody’s reports Nestlé’s transaction with Starbucks is credit negative. It says ‘Nestlé’s credit metrics, which are already weak for its current Aa2 rating, will deteriorate.’
• Mothercare is reported set to issue shares this week. It says it is ‘in constructive dialogue with our financing partners’.
• easyCoffee’s chief executive Nathan Lowry has told MCA that the budget concept will reach 100 sites after signing a series of regional development deals. The group is looking at units in Manchester, Liverpool, Edinburgh, Glasgow, Swindon, Orpington and Milton Keynes.
• A report from MPs on RPI as a benchmark for interest rates on student loans says the measure it ‘flawed’, ‘absurd’, and should be ‘abandoned’. The rise in RPI will push interest rates on student loans for tuition fees up to 6.3% in the autumn. Nicky Morgan, who chairs the committee, said the use of RPI for loan repayments, which ‘normally gives a higher rate of inflation’, appears ‘grossly unfair’.
• Budweiser has announced the launch of its biggest integrated campaign to celebrate its sponsorship of the FIFA World Cup 2018.
• Joshua Tetley & Son is launching Tetley’s No.3 Pale Ale, inspired by the original recipe for Pale Ale, which was initially brewed 150 years in 1868.
• Majestic Wines claims Provence rosé is at risk of running out after the bank holiday weekend, a poor harvest and ‘higher-than-average’ winter sales.
• Ice in soft drinks from 30 Cineworld, Odeon and Vue cinemas was found to have high levels of bacteria by BBC’s Watchdog programme. A leading supplier of the machines said the message is ‘not getting through’ to operators.
• Suntory, the Japanese drinks giant, is launching non-alcoholic beer in a plastic bottle aimed at office workers.
• Hollywood Bowl announced plastic straws will no longer be served with drinks, instead biodegradable paper alternatives will be offered.
• Npower is raising energy bills by £64 (5.3%) on average for 1 million customers. The move follows earlier rises by its ‘Big Six’ rivals.
HOLIDAYS & LEISURE TRAVEL:
• Hostelworld announces CEO Feargal Mooney will stand down on 11 June. It says ‘after 16 years with the Group and 10 years as Chief Executive Officer, Feargal Mooney will step down as CEO and director effective Monday, 11th June after the Company’s AGM.’
• Hostelworld appoints Gary Morrison as new CEO. It says ‘Gary joins the Group from Expedia where for the last seven years he served in a number of roles, most recently as Head of its Retail Operations.’
• The parent company of Turkey holiday specialist Parade Travel has gone into administration.
• STR’s preliminary April 2018 data for London, England, indicates lower occupancy levels (-0.9% to 82.2%) and room rates. (-1.1% to £141.87). This marks the 11th month in a row of year-on-year occupancy decline in London.
• A survey of Airbnb hosts in the US has found that most properties lack fire extinguishers and first-aid kits, and nearly 50% don’t have carbon-monoxide detectors.
• Passengers traveling through Heathrow fell by 2.2% to 6.6m in April over the same month last year.
• Newcastle International Airport has announced ambitious goals in its Masterplan for 2035. The airport looks to expand on its 5.35m passengers that traveled through it in 2017.
• Google Pay has added support for boarding passes, peer-to-peer payments and online payments on all browsers.
• Thousands of employees represented by the Culinary Union will vote on 22 May on whether to strike in Las Vegas. ‘On May 22, thousands of union members will show casino employers that workers are going to fight for security and that they are not going to be left behind as companies are making record profits and getting windfall tax breaks,’ Geoconda Arguello-Kline, the union’s secretary-treasurer, said in a statement.
• Dropbox has performed better than expectations with in its Q1 results, with revenue at $316.3m up 28% year-on-year.
FINANCE & MARKETS:
• Sterling up a shade vs dollar at $1.3562 but down vs Euro at €1.1341
• Il down to $76.73
• UK 10yr gilt yield up 2bps at 1.42%
• World markets: UK up on Friday but Europe lower. US up and Far East mostly higher in Monday trade.
• Brexit etc.:
o Crackpots vs Experts row continues. Both sides somewhat discredited but, on balance, would you want your dentist or your heart surgeon for that matter, to be a crackpot or an expert?
o Mrs May running out of road down which she can kick the can. House of Lords amendments push some questions back to Commons
o PM Theresa May says she can be trusted to deliver Brexit but declines to (or cannot) spell out what that means
PRIOR DAY LATER TWEETS:
• Later tweets: April Tracker: LfL sales down 1.2% after down 3.1% in March. May should be better but trading remains tough.
• April Tracker: CGA says ‘only good news is that April trading was much better than the disastrous, snow-hit trading seen in March’
• Food prices will rise post Brexit says H of Lords. Tim Martin & others disagree. Is it experts versus opinion rather than expert opinion??
• Bank cuts UK growth forecast to 1.4%. We’ve only achieved about 15bps in 1st 4mths. Need to pull our socks up to hit even reduced numbers
• Oil up 50% in 9mths yet Bank of England says inflation will fall quickly. Says a lot about underlying economic strength (or lack of it)
START THE DAY WITH A SONG:
Last Friday’s song was Monkey Wrench by Foo Fighters. Today, who sang:
As I walk through the valley of the shadow of death,
I take a look at my life and realize there’s nothin’ left ‘Cause I’ve been blastin’ and laughin’ so long,
That even my momma thinks that my mind is gone
RETAIL NEWS WITH NICK BUBB:
• Saturday Press and News: The news that Carpetright has had to borrow £15m on punitive terms from the Meditor fund management group got the attention of several of the Saturday papers (including the FT, the Times and the Telegraph), but the main focus was on the news that the Zoopla Online property website has been bought for £2.2bn by a US private equity group. Following the Zoopla news, the Times flagged up speculation that Amazon could scoop up the likes of ASOS, Ocado and Zalando. The City editorial in the Daily Mail flagged that the “threat of grocery upstarts” like Amazon is likely to help the CMA approve the Sainsbury’s/Asda merger, but it also highlighted research by a consultancy group called Maximise showing that up to 245 duplicate supermarkets may have to be axed. Finally, the front page story in the Telegraph was that WH Smith has been found charging as much as £8 for
• Sunday Press and News: The big feature in the Sunday papers is the annual Sunday Times Rich List, with the most interest in how far the increasingly embattled Philip Green has fallen. Last year his estimated fortune fell to £2.87bn, which put him a mere 41st on the list (he was 4th in 2004) and this year he has slumped to £2bn (and joint 66th place), on the basis that his Arcadia fashion empire is now worth no more than £1bn. Two up-and-coming retailers highlighted in the List are Carol Kane of Boohoo and Angus Thirlwell of Hotel Chocolat. Oliver Shah of the Sunday Times, the scourge of Philip Green, also sticks the boot in on Waitrose, with a big feature headlined “Did Chubby Grocer Mark Price let his appetite run riot at Waitrose?” and a separate article flagging that “a controversial restructuring” has cost 700 Waitrose manager jobs over the last 2 years. The main Retail story in
• Peach Watch: It’s not just Greggs who have noticed a weakening in spending on eating out and we are grateful to the Leisure sector experts at Langton Capital for pointing out that the (oddly-named) monthly Coffer Peach Tracker survey of pub and restaurant sales came out on Friday, with April seeing sales down 1.2% LFL, despite the boost from the hot weather, given the loss of Easter trading compared to last year (although March was still down by 3.1% LFL…because of the cold weather).
• The Grocer Watch: The widely followed Grocer “33” weekly supermarket pricing survey in Saturday’s The Grocer magazine saw guest retailer Aldi win convincingly. The Aldi basket (of mainly own-label goods) cost only £33.14, which was £4.41 cheaper than Asda and although the 13.3% gap was less than the 16.5% gap back in January, when Aldi last appeared in the survey, The Grocer opined that this shows why Sainsbury is so keen to merge with Asda. Sainsbury actually managed to grab third place, on £39.51, with Tesco fourth on £40.70 and Morrisons fifth on £41.68. Waitrose came last, as usual, on £48.00, nearly 45% more expensive than Aldi. The separate Grocer “Mystery Shopper” weekly survey on Store Service and Availability was won by Morrisons, breaking the winning streak of Sainsbury, as its 21,000 sq ft supermarket in Bangor top-scored, with 85 points out of 100 (the Aldi in Crawley came
• News Flow Next Week: The Dignity Q1 results are on Monday and the Land Secs finals are on Tuesday. 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.