Langton Capital – 2018-06-11 – World Cup, rents, Small Batch, Flight Club, tips & other:
World Cup, rents, Small Batch, Flight Club, tips & other:
A DAY IN THE LIFE:
Whilst catching sight of adventurer & general self-promoting nutcase Steve Backshall on the TV the other day climbing a near-vertical mountain for some unknown reason, it occurred to me that, whilst Mr Backshall must have guts, the real unsung hero is likely to be the cameraman.
Or woman of course but I can’t help thinking that, whilst Mr Backshall presumably has some sort of agenda when it comes to putting his life in danger, the cameraman may have intended a career doing little more than recording weddings and taking cute pictures of puppies.
Yet there he finds himself, at one point above Mr Backshall filming downwards and at another below him getting pelted by stones and lumps of ice. And he knows darned well that any ‘for God’s sake help me out here Trevor’ moments will be edited out and that he should have simply got a bigger lens for his camera and filmed the thing from the ground. On to the news:
THE 2018 FIFA WORLD CUP
Football, football, everywhere…
• For those living in a cave, a reminder that the World Cup kicks off on Thursday 14 June
• It’s not an altogether unknown quantity, of course, but the impact on consumer spending can be considerable
Likely consumer trends…
• Introduction: Most larger leisure operators have a suite of products / services on offer. Some of these will benefit from the football whilst others suffer
• Out-and-out losers are easier to identify but most losses will be temporary and, given England’s form, they may be fleeting
• Winners: Wet led pubs. Particularly if the sun shines. Time zones for matches work well.
• England’s 3 guaranteed matches (M & Th evenings & Sun lunch) will enhance drink sales on ‘nothing-special’ days but disrupt food sales on the Sunday
• Delivery should be a winner. This helps JE, DOM and Deliveroo but should also mitigate (albeit at lower margin) the situation for some restaurants
• Losers: Activity based leisure (bowling, cinema, experiential etc)
• Restaurants, typically, hate football (and Britain’s Got Talent, I’m a Celebrity etc.)
• Holiday sales stall – but they’re delayed rather than lost and, the weekend after England exits (or wins the tournament…) will see a spike in bookings
• Like a period of good / bad weather, the World Cup will be here and then it will be gone
• It doesn’t create money but it does distort the spending of it
• The impact, either good or bad, will be temporary and then the everyday grind will go on
PUB, RESTAURANT & DRINK PRODUCERS:
• JD Wetherspoon boos Tim Martin has bemoaned the fact that, because of the way that comparators are used to set rents, ‘it only takes one optimist to agree a daft rent and every tenant in the town ends up paying something similar.’
• Tim Martin says that the boom in casual dining outlet numbers is similar to that in pubs and bars in the late 1990s. Mr Martin says that a ‘danger of the typical concentration of new restaurants is that a good individual business can be tainted by a failed overall development.’ He says that failed operators can cluster together and create a ‘circle of incompetence’.
• 53.8% Luke Johnson owned Small Batch Coffee has reported numbers to 31 Jan to Companies’ House with retained earnings suggesting that it made a loss of around £390k for the year. Shareholders’ funds are a negative £478k.
• Flight Club has reported numbers to 31 Dec 2017 to Companies House showing that the group generated sales of £7.4m against £4.6m in 2016. It made a loss of £161k in the year compared to a profit of £508k in the prior year. The company says ‘during 2017 Flight Club continued to establish a strong position within the UK social entertainment scene’.
• Flight Club says ‘the second venue, which opened in Bloomsbury in April 2017, quickly gained traction and helped further strengthen the brand’. Flight Club says ‘booking levels remain very healthy across both venues and the business continues to work on additional venue opportunities to exploit strong demand’. Admin expenses rose to £4.1m from £2.1m in the prior year.
• Jeremy Corbyn will pledge to make it illegal for employers to pocket any tips given to hospitality workers, should labour get into government. Corbyn is set to address the Bakers Union on Sunday, saying ‘Labour will make it illegal for rogue employers to make deductions from tips, so staff get to keep 100%, and customers know who their money is going to.’
• Some TGI Friday staff were on strike last week in a dispute over tips. Waiting staff that are members of the Unite union were handing out fliers to would be customers asking them not to cross a picket line.
• TGI waiting staff were complaining that management had changed the tip allocation to pay 40% of tips to kitchen staff (up from 20%) without consultation. Retaining kitchen staff, who often have no interaction with customers and who have to rely on their basic wage, has recently become more difficult. Unite says ‘our strike is also about your right as a customer to decide who you wish to tip and by how much’.
• American drinks company Brown-Forman Corporation has posted an 8% increase in net sales to $3.25bn for the year to 30 April and expects to carry its positive momentum into 2019. Operating income increased 5% to $1.039bn (+8% on an underlying basis) and diluted earnings per share of $1.48 increased 8%.
• The EU Commission will impose a tariff on imports of Bourbon and American whiskey from July, in response to president Trump’s decision to introduce a 25% tax on imports on steel. This week, the European Commission followed Mexico in ‘rebalancing’ import tariffs on US-made products. Around €2.8bn (£2.5bn) of US imports into the EU will be affected. In comparison, the sanctions imposed by the US are expected to impact some €6.4bn worth of exports from the EU to the US.
• New research published by the European Union’s Intellectual Property Office shows that just under £220m is lost from the UK economy each year due to counterfeit wines and spirits entering the market.
• Pub visits fell in the year to the end of March, with independents bearing much of the decline, according to the NPD Pub Tracker. Weekends and dinner occasions were the worst hit and, worryingly, visits prompted by deals of promotions rose 2.9% to account for 30.9% of all pub occasions.
• London mayor Sadiq Khan has decried Westminster City Council’s ‘betrayal of millions of Londoners’ after the council shelved plans to pedestrianise Oxford Street. ‘This will be seen as a betrayal of the millions of Londoners and visitors to our city who would have benefited from making Oxford Street a safer, healthier and better environment,’ he said, before hinting that he would fight for the proposals, which had been backed by all the main mayoral candidates at the last election.
• FSA, Britain’s food watchdog, reports meat found in some supermarket vegetarian meals. Tesco and Sainsbury’s meals were found to contain traces of meat in ‘meat-free’ meals.
• Monster Beverage announced it is ‘highly likely’ to raise prices for its drinks by the end of this year to combat rising commodity prices. The announcement saw its shares reach a six-week high.
• Remy Cointreau reports sales up 2.9% last year to €1.13bn, leading to operating profits up 14.1%.
HOLIDAYS & LEISURE TRAVEL:
• Liam Royle, 23, of Eccles, Manchester, has been ordered to pay Jet2holidays more than £6,000 in costs relating to a fraudulent holiday sickness claim. Royle was filmed dancing to Gangnam Style when he was supposedly ill.
• Aprirose has acquired a site on Dalston’s Kingsland Street for the development of a £40m aparthotel. Completion of the 121-room site is expected in April 2020.
• Royal Caribbean has been only providing ‘straws upon request’ for the last year and is set to introduce paper straws in 2019.
• Online home-sharing app, Airbnb, is to cancel thousands of reservations in Japan after the country’s government put in place a new law around home-sharing.
• Airlines serving Italy have been forced to halt flights due to a national strike across the country.
• Las Vegas casino workers are looking less likely to call a strike as unions representing 50,000 bar staff, waiters, cooks, housekeepers and porters have reached a new five-year contract with the two biggest casino groups, MGM Resorts and Caesars Entertainment.
• Spotify shares reached a record high of $172.76 due to the company starting to license songs directly from artists and their managers instead of going through music labels.
• Switzerland’s new Gambling Act will see foreign betting sites blocked in the country. The resolution was backed by 72.9% of voters, although opponents said it amounted to ‘censorship of the internet’.
FINANCE & MARKETS:
• Some 59% of businesses surveyed by Smith & Williamson believe that their business will improve over the next year. Around 33% say that they will borrow more and 52% intend to add staff.
• Donald Trump has not signed the end-of-G7 communique. Germany, France and Canada have been critical of this lack of support.
• Brexit supporter & medical doctor Liam Fox has said that the UK is failing to compete in cyber security technology. Whilst rehabilitated after expenses issues and resignation, Dr Fox’s Wikipedia entry is worth a read.
• Sterling down at $1.3407 and €1.1363
• Oil down at $76.27
• UK 10yr gilt yield down 2bps at 1.39%
• World markets: UK down, Europe lower, US up on Friday. Far East mostly up in Monday trade
o Brexit Bill back in the Commons tomorrow. Amber Rudd and Ian Duncan Smith call for party loyalty.
o Bloomberg points out that Cabinet indecision is distracting from the fact that the real debate is with Brussels.
o PM has ‘full confidence’ in Boris Johnson despite the latter’s comments that Brexit was heading for meltdown and that the UK is not tough enough and lacks guts. Mrs May said her Cabinet is ‘working hard to deliver on the will of the people’.
o Michel Barnier has said that the UK’s ‘backstop provision’ re the Irish border ‘raises more question than it answers’.
PRIOR DAY LATER TWEETS:
• Later tweets: Fuller’s current trading arguably a little subdued. Managed LfLs +2.5%, Tenanted Inns +2% beer & cider volumes down 3%.
• Costs an issue. Recruitment & Employment Confeder. says severe staff shortages pushing up wages at fastest rate in 3yrs.
• Just over a quarter of adults in the UK have reduced their spending on alcohol to save money and be healthier
• The good (it’s a sunny Friday), the bad (David Davis hasn’t resigned) & the ridiculous (Boris says Brexit meltdown possible but don’t worry)?
• Time Out says Lisbon performing strongly & has high hopes for Miami, New York etc.
START THE DAY WITH A SONG:
Last Friday’s song was Computer Love by Kraftwerk. Today, who sang:
We’ve come too far to give up who we are,
So let’s raise the bar and our cups to the stars
RETAIL NEWS WITH NICK BUBB:
Saturday Press and News (1): The revelation in the Sainsbury Annual Report & Accounts on Friday that CEO Mike Coupe’s pay package jumped to £3.4m last year got lots of coverage in the Saturday papers, with the inevitable headlines about him singing “I’m in the money” and the City Editorial in the Daily Mail thundered that this was the second “Coupe blunder”, given the current row about Sainsbury’s supermarket staff pay. The trading update from the high-flying Games Workshop also got a fair amount of coverage, with the Times highlighting the £5m staff bonus (“Games are win-win for workforce”) and seizing the “Warhammer“ photo opportunity, whilst the Telegraph noted that Games Workshop’s market cap had nearly reached £1bn, before the 6% fall-back on Friday.
Saturday Press and News (2): In other news, one of the main Business headlines in the Times was “Huge areas of retail space returned to landlords in High Street crisis” (highlighting a Colliers report that 11.6m sq ft of space has been “lost” so far this year) and its Economics Editor wrote an interesting column about why “Consumers are not able to ride to the rescue of the High Street any more” (given high debt and low savings). The Money section of the Times also featured QUIZ as its “Share of the Week”, concluding that the shares are a Buy. The Daily Mail flagged that the latest High Street chain to go bust is the Henri Lloyd sailing fashion brand (7 stores, plus lots of House of Fraser concessions…). The Times’ market report noted the downgrade on Pets at Home by Berenberg on Friday.
Saturday Press and News (3): The Honours system in the country has become very discredited, with many knighthoods and more minor honours handed out like confetti , but perhaps a shout-out is in order for the knighthood awarded in the Queen’s Birthday Honours List to the Retail veteran Tim Waterstone, the founder of Waterstones, “for services to bookselling and charity” (as noted by the Times).
Sunday Press and News (1): The embattled House of Fraser was in focus in the Sunday papers, with the Sunday Times flagging that landlords are plotting a legal challenge to the CVA plan, on the basis that creditors are not being treated equally. The Observer had an article headlined “House of Fraser’s survival bid creates anger and fear” (flagging that the planned cull of stores by House of Fraser has infuriated landlords and alarmed retail consultants), whilst the Business editorial in the Sunday Telegraph mocked House of Fraser’s presentation to investors on Thursday, thundering that “If this is a plan House of Fraser is a lost cause” and that “the current crop of senior managers are clueless in the face of severe technological disruption”. The City Editor’s column in the Sunday Times mused about whether an Online sales tax would help level the playing field for struggling High Street
Sunday Press and News (2): On a happier note, the Sunday Times had a feature on the growth of the Cheshire-based Online retailer The Hut Group and the ambitions of CEO Matthew Moulding to dominate the Beauty market: “The Internet’s answer to Estee Lauder – from Northwich”. Oliver Shah, the Sunday Times Retail guru, also flagged that Julian Dunkerton, the founder of Superdry, has trademarked the “White Shirt Company” brand.
Sunday Press and News (3): The Mail on Sunday had several interesting Retailing snippets, noting, for example, that Mike Ashley has written £11m off the value of Sports Direct’s stake in House of Fraser and that the hedge fund manager Crispin Odey is building short positions in many consumer-facing businesses (including the Motor dealer Lookers, as well as the likes of Intu Properties and Debenhams). The Mail on Sunday also highlighted that the discredited Marc Bolland and Laura Wade-Gery of Marks & Spencer have still received share option payouts (despite their role in the botched Castle Donington ecommerce warehouse development) and that Asda faces a £100m staff pay row, as its staff are on worse wage contracts than Sainsbury.
Today’s Press and News: Thin pickings today, although the Daily Mail picks up the Sunday Times story about landlords (said to include Westfield) planning a legal challenge to the House of Fraser CVA plan and the Telegraph has a useful “SWOT” analysis on Kingfisher ahead of tomorrow’s AGM. The Times and the Telegraph have previews of Tesco’s Q1 on Friday and the Telegraph also has a preview of the Majestic Wine finals on Thursday, whilst the Daily Mail highlights a broker Buy tip on DFS. And the Drapers website picks up the latest BRC-Springboard footfall numbers showing an easing in the decline in May (from -3.3% in April to -0.4%).
News Flow This Week: The World Cup gets under way in Russia on Thursday, but there’s plenty going on in UK Retailing this week, kicking off tomorrow with theBoohoo Q1 update, the Motorpoint finals, the Ted Baker AGM trading update and the Kingfisher AGM. On Wednesday we get the Mulberry finals and the M&SAutumn/Winter range preview. Thursday then brings the Majestic Wine finals, the Morrisons AGM, the N Brown Q1 update and the ONS Retail Sales figures for May. And on Friday we get the Tesco Q1/AGM and the JD Sports EGM on its US deal. In Euroland, Wednesday brings the Inditex Q1 results and Friday brings theH&M Q2 sales update.