Langton Capital – 2018-06-15 – Eating out, Rev Bars, Gregg’s, straws, London hotels etc.:
Eating out, Rev Bars, Gregg’s, straws, London hotels etc.:
A DAY IN THE LIFE:
It’s very difficult for people to value (either the benefit or the risk) of very large numbers, remote possibilities etc.
If you mention that the UK deficit is £60bn a year or £600bn a year, the response, a rather blank-eyed stare, is likely to be the same and, research has shown, people tend to value a ten million to one shot (UK lottery) pretty much the same as they would a 100m to one shot (the el Gordo lottery or whatever).
And the problem of keeping things in perspective can be seen in our day-to-day lives.
Because if your investments or the value of your house moves by 1% or 2%, the impact is much greater than it would be if your lawnmower breaks down half way through a cut or if your car fails its MOT and is off the road until the garage has gouged six hundred quid or so out of you.
But it doesn’t feel that way as remoteness softens the blow, either good or bad, such that a person might not nip across the railway tracks (and he/she shouldn’t, of course), which might have a million to one chance of ending in disaster, whilst they still smoke smoking 20 cigarettes a day that might have a 33% chance of ending badly 30yrs down the line.
No answers, just saying. Anyway, after a five-goal feast yesterday there are three matches today so let’s move on to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• The latest data from the MCA’s Eating Out Panel has shown that the hot May weather and bank holiday weekends did not do enough to prevent a year-on-year decline in eating out.
• Harrogate Water has entered into a five-year partnership with Ascot as official water supplier to run from 2018 to 2022. Harrogate Water brand manager Nicky Cain said: ‘The five-year extension speaks volumes about the success of the partnership and the benefits of being associated with one of the world’s finest and most famous social and sporting venues’.
• EAT is believed to be close to finalising plans for its future growth, the MCA has reported. The Lyceum-backed chain called in advisors to assess its options but is set to avoid undertaking a Company Voluntary Arrangement (CVA) after positive negotiations with its landlords.
• Nando’s has launched a pre-order takeaway and delivery service in time for the World Cup.
• The hot weather and royal wedding celebrations contributed to a 1.3% rise in retail sales last month, figures from the Office for National Statistics have indicated.
• A number of analysts have suggested that the good numbers are little more than a weather-related blip.
• Tayto Group has acquired The Real Pork Crackling Company.
• Greene King partners with Chris Kamara as part of its Summer of sport campaign. Un-BEER-lievable, a limited edition 4.1% pale ale, will be brewed to support the campaign and will be available in more than 1,300 Greene King pubs this summer.
• Greggs has lined up two more sites for its drive-thru format with more expected in the pipeline. The company’s third drive-thru will be in Frontier Park in Blackburn, in partnership with Euro Garages.
• Nine-strong coffee chain Notes has now raised £1.01m on Crowdcube. The target had been £600k and the group continues to overfund.
• The Pub Accommodation Forum has launched an event to be held in London discussing maximising revenues from pub accommodation. The group, chaired by Stay in a Pub, will hold the seminar on 4th July 2018, supported by UKHospitality and the BBPA.
• From September, McDonald’s will replace its plastic straws with paper ones in the UK and Ireland. The restaurant chain uses 1.8m plastic straws pare day in the UK. Environment Secretary Michael Gove called it a ‘significant contribution’ to helping the environment, adding that it was ‘a fine example to other large businesses’.
• Which? reports up to 60 bank branches are closing a month, with RBS shutting the most, calling it an ‘alarming’ trend. The consumer group claims 2,868 branches will have closed between 2015 and the end of 2018, with the number accelerating this year.
• Revolution Bar Group yesterday warned on full year profits and its shares fell by over 7% to 145p
• RBG said it ‘has experienced challenging and volatile trading conditions.’ LfL sales in H2 to date are down 1.7%
• RBG says ‘adjusted EBITDA is now expected to be below market expectations and in line with last year.’ New bars are in line and ‘the Board remains confident in the future prospects of the Group as a result of the progress of management initiatives currently underway.’ It says it was impacted by the weather (both too cold & then too hot) and the lack of a CEO. CEO designate, Rob Pitcher, joins the business on 25 June 2018.
• Peter Backman has reported that emerging high street brands are offering something different to consumers. Mr Backman’s ‘Ones to Watch’ report suggests that, whilst small operators are in growth, the bulk of the casual dining market is going backwards.
• Mr Backman says ‘the numbers in Ones to Watch have grown significantly year after year until May 2017 and then they went into reverse. The number of emerging brands has fallen by a huge 38% over the last 18 months and unsurprisingly, is continuing to fall, echoing the closures we’ve seen in recent months amongst larger restaurant chains.’
• Mr Backman says that ‘coffee shops continue to grow and we are seeing sweet snack offers re-emerge.’
• Unilever, which is currently one of the largest constituents of the FTSE100 index, may leave the index when it re-bases in Rotterdam. CFO Graeme Pitkethly says ‘we’ve been engaging extensively with FTSE Russell over the last few weeks and months and from this it is clear that it is extremely unlikely that the ‘New NV’ shares after simplification will be included in the FTSE UK series.’ He says ‘we will be maintaining a premium listing in London and we would hope those investors who are impacted have sufficient flexibility in their portfolios to continue to hold Unilever.’
HOLIDAYS & LEISURE TRAVEL:
• London hotel market suffering from overcapacity. Not really a surprise.
• STR reports that preliminary May data for hotels in London reported occupancy decreased 1% to 82.3%, ADR decreased 4.1% to £146.51. REVPAR was down some 5% or so.
• STR says ‘May was the 12th consecutive month with a year-over-year occupancy decline in the market. The month also was the third in a row with an ADR decrease after 16 straight positive months in the metric. As of April, London’s 12-month average supply growth was 3.0%.’
• STR reports no significant increase in hotel demand in May despite Royal Wedding.
• For the week ending 9 June, STR reports US hotel occupancy down 0.2% to 72.9%, ADR up 2.5% to $131.38 and RevPAR up 2.3% to $95.82.
• Vue delays its IPO plans after Alberta Investment Management Corporation announces its plans to sell off its 37% stake in the cinema chain, with JPMorgan handling the sale. The move comes after Vue reported market admissions in March were down more than 10% on the same month in 2017.
• Gym Group placed 9.6m shares yesterday at 248p per share, raising gross proceeds of approximately £24m. The placing represents roughly 7.5% of the issued ordinary share capital of the company at a discount of approximately 0.6% to the closing price of 249.5p on 13 June 2018.
FINANCE & MARKETS:
• The ECB has said that it will shut down its bond purchasing programme by the end of the year. It has not signalled a rate rise yet.
• IMF says Donald Trump’s import tariffs threaten to undermine the global trading system. Christine Lagarde reports ‘let us not understate the macroeconomic impact.’
• Der Spiegel reports the ‘G-7 summit once again made it clear that U.S. President Donald Trump is intent on treating America’s allies worse than its enemies.’ It suggests ‘Europe must draw the consequences and seek to isolate Trump on the international stage.’
• Der Spiegel reports Mr Trump could preside over ‘the demise of the West. The end of the post-war world order. The beginning of a new era.’ It says at the moment these are just dramatic claims but says ‘all of them are both correct and incorrect at the same time.’
• Sterling down at $1.3251 but up vs weaker Euro at €1.1448
• Oil down to $75.89
• UK 10yr gilt yield down 6bps at 1.31%
• World markets: UK & Europe up yesterday with US down. Far East mostly higher in Friday trade.
• Brexit etc.:
o Labour in disarray over single market as Mrs May heads off rebellion by offering meaningful vote.
o Industry calls for certainty still falling on deaf ears.
PRIOR DAY TWEETS:
• Later tweets: JD Wetherspoon dumps champagne in move away from EU products but keeps the much-bigger-selling prosecco
• Deliveroo rattles JE and DOM share prices as it says some restaurants can use their own delivery fleets
• Overall employment stats good but RR cutting 4,500 jobs & N Brown to dump all of its physical stores etc.
• Majestic Wine: Market ‘to remain tough, possibly even tougher than last year.’ Says early months of this year ‘harder than prior year in UK’
• Revolution warns on profits in ‘challenging & volatile trading conditions.’ LfL down 1.7% in H2. EBITDA will ‘be below market expectations’
• Revolution: ‘sales have fallen short of expectations’. Blames weather. Both hot & cold. Both brands impacted. Also lack of a CEO.
• Vegan trend continues, becoming less peripheral? Netflix said to be helping. More necessary than ever to offer a veggie alternative
START THE DAY WITH A SONG:
Yesterday’s song was Three Lions on a Shirt by Baddiel Skinner and the Lightning Seeds – in honour of the World Cup kickoff! Today, who sang:
Drunk, she stumbles down by a river,
Screams calling London (London!)
None of us heard her coming,
I guess the carpet weren’t rolled out
RETAIL NEWS WITH NICK BUBB:
• Tesco: Ahead of today’s AGM, Tesco has issued its Q1 update (for the 13 weeks to May 26th), with Dave Lewis, the CEO, saying “Our growth plans are on track and we are pleased with the momentum in the business”. Tesco UK sales were up by 2.1% LFL, which is broadly what was expected, with the company saying that performance improved through the quarter and that at the end of the quarter it invested more in cutting fresh food prices. Tesco also say that it opened a second trial concept ‘Chef Central’ store last week within the Tesco Extra store at Beckton. But the standout performance is remarkably good Booker LFL sales growth of 14.3% including tobacco (12.4% growth excluding tobacco), “driven by a strong underlying performance and new business wins”. Dave Lewis says “We are delighted with initial progress on Booker, and are focused on delivering the synergy benefits that our
• Trade Press (1): The cover of Retail Week magazine today is a graphic with the headline “High street SOS – how to rescue our town centres”, to flag up the main feature on the outlook for the High Street in the wake of the Poundworld and House of Fraser news. And in the light of the escalating High Street crisis the Editor flags that the Government Minister for Retail has gone AWOL: “Calling Andrew Griffiths…are you receiving?”. RW also have articles about “Sitting Pretty” (The Hut’s Matthew Moulding on the secrets of its success), “The Department Store 2.0” and “Tech Giants Do Stores” (How JD.com and Alibaba are reinventing the supermarket).
• Trade Press (2): In Drapers magazine the Editor looks at the House of Fraser store closure news in her column and thunders that “Tough decisions are needed to survive”. In terms of News stories, the main focus is that House of Fraser suppliers fear a ‘knock-on effect’ from the CVA plan on fashion brands and concession partners. Drapers also have a feature on the 2022 World Cup in Qatar, flagging that as the World Cup kicks off in Russia this week, retailers like Harvey Nichols are already looking towards the 2022 host Qatar and making plans to capitalise on the event.
• BDO High Street Sales Tracker: We flagged on Wednesday that John Lewis did a bit better last week, thanks to price-matching the Debenhams Sale and World Cup TV demand, and today’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains for last week, w/e Sunday June 10th, is also better. BDO Fashion Store LFL sales were up by 4.6% (against a soft pre-Election comp last year) and, including Homewares and Lifestyle sales, total Store LFL sales were 2.7% up. And overall Online sales were up by 15.2% (with Online Fashion sales alone up by 17.8%).
• News Flow Next Week: As the World Cup gets into gear next week (with England’s first game on Monday evening), on top of the start of the Queen’s Club tennis tournament (now sponsored by FeverTree!) on Monday and the start of Royal Ascot on Tuesday, there is plenty going in the sector to keep us otherwise engaged. Monday is a “red-letter day” for mighty Ocado, as it starts life in the prestigious FTSE 100 index. Tuesday brings the long-awaited Footasylum finals, as well as the Bonmarche finals. On Thursday we get the Dixons Carphone finals and the QUIZ Capital Markets Day. And then Friday is “D-Day” for the landlords, via the much-awaited House of Fraser CVA vote…