Langton Capital – 2018-08-01 – AG Barr, Hakkasan, consumer confidence, economy etc.:
AG Barr, Hakkasan, consumer confidence, economy etc.:
A DAY IN THE LIFE:
We’ve had birds in the little strip of urban concrete that we call a yard in London’s sunny E1 and, whilst none of us could be classified as ‘twitchers’, we’ve narrowed the field and decided that they are not pigeons or seagulls.
And nor are they eagles, owls or penguins.
And they sing a lot, meaning that they’re not mute and they eat bugs and seeds but, then again, apart from the aforementioned penguins, owls, eagles etc., most birds do.
And they’re brown and, well, they’re about the size of a small bird.
Anyway, Langton was discussing global dominance yesterday and, as a first step, we decided that we should alight on an industry.
And here we decided that, if you’re going to corner a market, it would better be telecoms, technology or motor cars rather than strive to become the biggest player in the shoe-lace or decorative coal scuttle industries.
That’s as far as we got before we broke for a beer and a curry but, as Chairman Mao said, a journey of a thousand miles begins with but one step. On to the news:
PUBS & RESTAURANTS:
• AG Barr has updated on H1 trading to 28 July saying that ‘revenue increased 5% in the period and Group on track to meet full year profit expectations’
• AG Barr reports ‘we are pleased to report continued strong sales momentum.’ The group says sales will be up 5% in H1 and adds ‘this is especially positive given the 8.8% growth reported for the corresponding period in 2017.’
• AG Barr reports ‘the soft drinks market was up 4.5% in value terms and increased 1.4% in volume…recovering from the impact of severe weather in the first quarter and benefiting from hot early summer weather across the UK, along with the value increase associated with the implementation of the Soft Drinks Industry Levy.’
• AG Barr says ‘the external landscape remains volatile’ but says ‘during this period of uncertainty we will continue to invest behind our brands, innovation and people which, while having a moderate impact on margins in the current financial year, will support the delivery of our growth strategy.’ CEO Roger White says ‘we have delivered strong top-line growth in a period of considerable marketplace volatility and change. Our growth across core brands is especially encouraging and our strong second half brand and sales development plans give us confidence that we can deliver against our profit expectations.’
• Deliveroo is suggesting that the UK government should ‘give restaurants a break and simplify burdensome business rates.’
• CGA consultancy has begun collecting sales data from 84,498 eating out outlets nationwide through EPOS. CEO of the group, Phil Tate said: ‘In isolation, any single data source will have its limitations and can only provide a partial view. CGA harmonises and extrapolates all our data sources to deliver a definitive ‘One Truth™’ of market, brand and consumer performance. It’s a market first’.
• Record numbers of tourists have visited Scotch whisky distilleries in 2017, with 1.9m trips being made. Spending at centers was up 15.6% to £60.9m.
• The BBC has reported that alongside weaker demand and rising overhead costs, people not turning up for bookings is beginning to hurt the restaurant industry. The report found that 5-20% of total restaurant bookings across the country result in no-shows, costing venues thousands of pounds.
• Over 100 people have become ill after eating at a Chipotle Mexican Grill restaurant in Ohio, with shares in the group tumbling 9% on the news.
• Bloomberg has reported that Hakkasan Group may be for sale. The operator, currently owned by Alliance International Investments, is said to have attracted interest from the Spain-based hospitality company Pacha Group and investment firm Certares. Hakkasan Group has around 60 restaurants and clubs worldwide.
• Denny’s has reported LfL sales down by 0.7% in the US. Both company-owned restaurants and franchise stores saw numbers fall by o.1% and 0.8% respectively.
• JD Wetherspoon has revealed that it is relaunching its Tax Equality Day, the group will be cutting all food and drink prices by 7.5% on September 13. The initiative aims to highlight the benefit of a VAT reduction in the hospitality industry.
• The Chief Executive of the BBPA, Brigid Simmonds has commented on new licensing rules stating: ‘There is considerable support for pubs in boroughs like Hackney, where local pubs are often at the heart of the community, providing a responsible place to drink whilst also contributing to the local economy. “Even if the licensing hours for existing businesses in Hackney remain unchanged, local pubs will still be affected by the new licensing policy. It will sadly change the character of Hackney as less favorable trading conditions will mean fewer pubs and hospitality businesses open in the borough, making it a less vibrant and exciting place to visit and live in’.
• Yesterday’s GfK consumer confidence numbers showed that confidence in the UK had slipped one point to minus ten. GfK reports ‘despite the World Cup, Wimbledon and warm weather playing front and centre in the nation’s psyche this July, the barometer again reveals a decline in consumer confidence.’
• The joint managing director of the family brewer Robinson, William Robinson, has told the MCA that the group has come to the end of its disposal programme.
• Germany is preparing for its earliest grape harvest on record, with the ongoing heatwave expected to push picking forward in the Rheinhessen to as early as next week.
• Starbucks has opened the first of at least three standalone Princi bakeries planned for the US, in Seattle’s Westlake neighbourhood, as part of the group’s plan to develop premium stores around the world. It joins other Princi locations operating internationally in Milan and the United Kingdom.
• Black Sheep Coffee has four new London openings lined up for the coming months. Following the launch of its site on Bow Lane earlier this month, the rapidly growing coffee chain is to open a site on Ariel Way in Shepherds Bush on 3 August, followed by a site in Wembley at 2, Olympic Way on 24 August.
HOTELS & LEISURE TRAVEL:
• Hyatt Hotels has ‘backed away from launching a takeover of NH Hoteles, days after rival bidder Minor International revealed it controlled 44% of the Spanish group,’ per Reuters. An updated statement from Hyatt President and CEO Mark Hoplamazian reads, ‘After reviewing the disclosures there were made by NH Hotel Group’s largest shareholder shortly after the submission of our letter of interest, we believe that the path to a successful tender offer by Hyatt has now narrowed to a point of being impractical.’
• Dubai Parks and Resorts records more than 1.4m visitors in H1 2018, up 46% yoy. Hotel occupancy rose 55% compared to 24% last year. Dubai Parks and Resorts said the warmer second and third quarters of the year ‘typically deliver lower visitation than the cooler months of the first and fourth quarter’.
• Flybe appeals for common sense in the UK’s Brexit negotiations with the EU, with CCO Roy Kinnear claiming that the big fear is that flights could be stopped if there is no agreement next year.
• HNN’s Terence Baker reports Schroders has entered the hotel industry with its purchase of Algonquin. Schroders plans to roll out a hotel portfolio in the UK, adding to Algonquin’s properties in Europe.
• Silversea Cruises, the ultra-luxury and expedition cruising group has officially joined the family of Royal Caribbean Cruises. Richard D. Fain, Chairman and CEO of Royal Caribbean Cruises Ltd said: ‘This is a dynamite combination and we can’t wait to work with Manfredi, Roberto and the entire team as together we take Silversea to the next level’.
• Games Workshop reports pre-tax profits up 94% to £75.4m for the year to 3 June, with revenue up to £219.9m from £158.1m last year. The company also confirmed plans to expand its production facility in Nottingham.
• Apple has beaten Wall Street expectations with its latest earnings by increasing the prices of its products. The group missed total phone sales expectations of 41.8m units selling instead 41.3m.
FINANCE & ECONOMICS:
• US reported to be considering 25% tariffs on the next $200bn of Chinese imports, up from the supposed 10%.
• NIESR reports ‘global economic growth strengthened last year to its fastest pace since 2011.’ It says ‘despite a temporary soft patch in the first quarter of this year in some advanced economies, we continue to expect robust annual growth over the coming year or more at around a 4 per cent pace.’
• Sterling down vs dollar at $1.3102 but up vs Euro at €1.1218
• Oil down at $74.02
• UK 10yr gilt yield down 2bps at 1.33%
• World markets: UK, US and Europe up yesterday with Far East mixed in Wednesday trade.
• Brexit etc.:
o FT reports ‘the EU is willing to “fudge” crucial Brexit negotiations — and offer Britain a vague blueprint for future ties with the bloc — if it helps Theresa May avoid a “no deal” outcome and win parliamentary backing for a withdrawal treaty.’
o Government now on holiday. Dominic Raab threatening to put a bit of work in and meet Michel Barnier ‘some time in August’
o NIESR says government’s Chequers’ plan would cost around £500 a year per person per year. It says that GDP would be around 2.5% lower.
o NIESR says Chequers’ plan will raise inflation by around 1.4% as Sterling weakens further
o NIESR says any decline in productivity could double the impact of Brexit on Sterling, GDP and income per capita
o Sky says numbers favouring a second referendum versus not running one currently 50:40
o NFU says ‘simply upping production [of food in the UK post Brexit] to quickly offset any reduction in food imports isn’t feasible.’
o Government still unclear on stockpiling food and medicines.
o Sky reports plans to use 13 miles of M20 as a lorry park post Brexit will run until “2023 at the earliest”
o City calls upon government to ensure a trading passport post Brexit as exports of financial services hit a record high in 2017. Equivalence in services is not currently on the table
PRIOR DAY TWEETS:
• Later tweets: BBPA Q2 Beer Barometer shows beer sales up in supermarkets, down in pubs. Says ‘cut in beer tax is still needed to help pubs’
• TCG hit by hot weather, World Cup, says ‘we now expect growth in FY underlying op. profit to be at lower end of market expectations’
• SMMT reports the number of cars made in the UK fell 5.5% last month due to a drop in demand and a “perfect storm of events”.
• Unsecured lending up 8.8% last month. Rates may rise Thursday. GfK says consumer confidence slipped in July to minus 10
• Gregg’s shares bounce on cautious update. Flat profits etc. Shares been weak, though. Still on c15x earnings.
START THE DAY WITH A SONG:
Yesterday’s song was This is the Day by The The, today who sang:
I’m waking up, lost in boxes outside Tesco,
Look like a bum sipping codeine Coca-Cola
Thought that I was northern Camden’s own Flash Gordon
Sonic raygun, gonna be a superstar
RETAIL NEWS WITH NICK BUBB:
Next: Given the boost to the Fashion trade from the hot weather, expectations were quite healthy for today’s Q2 trading update from Next, but they have not exactly smashed things out of the park with a 2.8% overall increase in full-price sales (up 12.5% Online and down 5.9% in Stores). That is ahead of the cautious company guidance of 1% growth for the rest of the year issued after the 6% growth in Q1 (which was flattered by very soft comps), but the weekly sales graph for Q2 shows that it owed a lot to a very strong Week 12 and, as Next say themselves, the strong July has almost certainly pulled business forward from August. So the company is keeping its feet on the ground and is holding its full-year guidance, with no further comment on the outlook for the second half, ahead of the interims on Sept 25th (which are a bit later than usual).
Dignity: Life goes on for the hard-pressed funerals business Dignity, despite increased Online competition, and it claims that today’s interims are ahead of market expectations (with revenues up 3% and PBT down 15%), helped by the number of deaths being significantly higher in Q1 than last year and Increased funeral market share.
Waitrose Watch: Conditions again remained extremely favourable for sales of picnic and barbecue fare last week and yesterday’s weekly sales overview from JLP flagged that, as the amazing heatwave continued, gross sales at Waitrose were 5.3% up in w/e July 28th (c5.2% up LFL). After that strong end to the first half, the cumulative sales picture for the last 26 weeks is now +2.3% gross for Waitrose (c2.2% up LFL), which is not bad and justifies the management confidence about recovering gross margin after last year’s slump.
John Lewis Watch: Over at John Lewis, trade wilted again as the heatwave continued last week…w/e July 28th saw gross sales dip by 2.2% (c4% down on a LFL basis, on our calculations). Home sales were down by 7.8% gross and Fashion sales were down by 2.0% gross, but Electricals were up by 3.9% gross, helped by strong sales of electric fans…After that weak end to the first half, over the last 26 weeks, John Lewis is now running up cumulatively by only 0.3% gross (over 1.5% down LFL), which is disappointing, given the pounding that gross margins have taken (through price-matching House of Fraser’s and Debenhams’ distress Sale promotions).
News Flow This Week: Tomorrow brings the much-awaited MPC interest rate meeting decision at mid-day and then the Pets at Home Q1 is on Friday.