Langton Capital – 2018-08-10 – Coffee, delivery, JDW, the High Street, hot weather etc.:
Coffee, delivery, JDW, the High Street, hot weather etc.:
A DAY IN THE LIFE:
Well, we’ve arrived in Prague (via Dresden where there’s massive rebuilding going on but where it’s already beautiful) which, apart from the irritating human statues and general tourist trap stuff going on in Wenceslas Square, seems like an extremely interesting place.
We’ve not been before, which is a shame, as it would have been very interesting to see how this young country has pulled itself up by its bootstraps, albeit with a few billions of EU money, over the last couple of decades.
The underground works well, the bars, restaurants and the rest are up there with those anywhere in the world and yet a large beer still only costs less than a couple of quid or so.
I might be missing something but there seems to be a feeling of optimism in the air and, as the weather is set to break later today and the temperature drop 10 degrees or so, we might be able to have a proper look around. On to the news:
PUBS & RESTAURANTS:
• MCA has reported that the UK coffee market is set to grow by6.5% in value terms this year to hit £4bn. It says both established players and artisanal brands are expected to grow.
• MCA says Costa, the largest player in the coffee shop market, will grow by 4% to 2,419 units by the end of this year. Starbucks will also grow its estate numbers by 4% to 994 outlets and Caffe Nero will grow by 4.3% to 704.
• Restaurant Group has announced that it will report H1 numbers on 31 August. Given the hot weather, the World Cup and falling retail footfall, they may make interesting reading.
• Wendy’s is expanding its delivery operations in the US & will offer it in around 40% of its US stores. Wendy’s CEO Todd Penegor reports ‘delivery has outpaced our original rollout expectations, and we are very pleased with our rapid expansion, as delivery is another great way to provide access to the brand.’
• Re delivery, Wendy’s says ‘the consumer has an appetite for convenience and we have seen this through our delivery economics. Average check sizes have been 1.5 to two times higher on delivery orders and we continue to see incrementality and customer repeat. In addition, our strongest customer satisfaction scores are coming from delivery, which is very encouraging.’
• Costa is reported set to roll out its Chatty Cafe scheme to 300 stores.
• Meat Liquor is to add a further London site to take its estate to 12 units. It will take over the former Fixed unit on Northcote Road in Battersea.
• Scotch Whisky Chivas is to become the named spirits brand for Manchester United
• JD Wetherspoon is publishing half a million beer mats promoting a hard Brexit. The wordy mats cover 10 contentious points and highlight chairman Tim Martin’s view that ‘nobody has ever become poorer due to free trade’. On the contrary, however, whilst free trade has its merits, many industries in dozens of countries have been destroyed by free trade over the centuries.
• JD Wetherspoon suggests government should not honour any divorce payments agreed to Brussels post March.
• Wagamama has reported full-year UK LfL sales up 7.4% for the year ending 29 April 2018. The group reported EBITDA up 0.4% to £45.7m.
• Molson Coors adds to its senior off-trade team by recruiting Scott Bayliss as its wholesale director and Gareth Crooke as its grocery director. Bayliss previously worked at Campbell Grocery Products and Samworth Brothers whereas Crooke was strategy development controller at PepsiCo.
• House of Fraser sets funding deadline at 20 August alongside planning to close 31 of its 59 shops in January. 20 August is the date when the department store business needs to make payments to its concession customers. The company currently employs 17,500 people including 11,500 concessionary staff.
• Hendersons, an Irish retail family, has agreed a deal in principle to acquire the Poundworld brand, leading to speculation that the brand could be resurrected. However, the BBC reports that the deal would not save the jobs of any current Poundworld staff.
• Card Factory warns on profits saying weak consumer spending and ‘extreme’ weather had caused a fall in sales and profits. Shares in the company fell 10% on the news, adding to a poor last year for the company with the share price down around a third.
HOLIDAYS & LEISURE TRAVEL
• Ryanair has announced that it will cancel 250 flights to and from Germany today, disrupting 3,500 passengers, due to strikes by pilots over pay conditions.
• Research from Expedia has found that 60% of people are unable to afford to take their children away during the school summer holidays, with two-thirds of parents agreed that it is usually more cost-effective to be fined for taking their child out of school during term-time.
• The tour operator Jules Verne has found that travel is the most important aspect of retirement for 55% of people, with the most popular countries being Italy, Portugal, Switzerland, Malta and Austria.
• easyJet announces 21 new routes for the winter season with four new destinations including Aqaba in Jordan, Rovaniemi in Finland, Warsaw in Poland and Pau Pyrenees in France. The new routes will provide over 800,000 additional seats across the entire easyJet network.
• TUI shares fell c9% yesterday on the dawning reality that the hot weather in Northern Europe has not been good for the overseas tour operators. The company says ‘TUI is in good health, we are flexible, deliver a strong operational performance and invest in our growth segments while maintaining our cost discipline.’
• STR reports that the UK hotel industry has higher occupancy levels than does the holiday rental sector. STR says ‘in 2017, U.K. hotel occupancy was 35.5% higher than holiday rental occupancy, but holiday rental rates were 25% higher than hotel average daily rate.’ The analyst says ‘STR has previously conducted research using data from Airbnb on the newer, urban rental segment of the home rental sector.’ It adds ‘what we found is that hotels greatly outpace traditional holiday rentals when it comes to occupancy. On the other hand, holiday rental ADR is higher than hotels due to larger unit size and expanded product offerings.’
• New York City has approved a cap on the number of licences issued to ride-hailing services such as Uber and Lyft
• STR reports the U.S. hotel industry occupancy rose 1% to 75.3% during the week of 29 July to 4 August. ADR increased 3.1% to $132.88 and RevPAR rose 4.1% to $100.07.
FINANCE & ECONOMICS:
• Sterling weak on no deal issues. Trading at $1.2816 and €1.1163
• Oil $71.98
• UK 10yr gilt yield down 2bps on slowdown concerns to 1.30%
• World markets all lower yesterday
• CBI says immigration caps should be scrapped after Brexit as UK will need labour from areas other than the EU in order to prosper
START THE DAY WITH A SONG:
Yesterday’s song was Float On by Modest Mouse. Today, who sang:
Let them all pass all their dirty remarks,
There is one question I’d really love to ask,
Is there a place for the hopeless sinner
RETAIL NEWS WITH NICK BUBB:
• Trade Press (1): The front cover of Retail Week magazine today flags up the main feature on “Navigating No Deal: how Retail is preparing for a hard Brexit”. RW also have features on the “DNA of the new CEO: What it takes to become a next generation leader” (illustrated by a photo of Gareth Southgate!), “Trillion Dollar Ideas: After the iPhone, what new tech will revolutionise retail?” and “Continental Alliance: Lessons for Tesco as it begins Carrefour venture”. And the Editor looks at House of Fraser’s battle for survival in his column and thunders “Don’t blame Amazon for High Street hardship”, although he concludes by saying there must be a fairer tax contribution from Amazon: “Do Amazon and its staff not beneﬁt from the services that Business Rates cover?”
• Trade Press (2): Drapers magazine today is focused on the Lingerie market, but it has plenty on the fast-moving House of Fraser situation. In her column the Editor asks “Is Philip Day the new driving force of department stores?”, noting that “few people have had such a big impact on the fashion industry while keeping such a low profile as Philip Day” and speculating that, having opened Days Department Store in a former BHS site in Carmarthen in May 2017, regional House of Fraser store locations such as Skipton, Altrincham, Grimsby or Lincoln could work well for his concept. The main News story is that “the clock is ticking” on a House of Fraser rescue deal, with funds urgently needed to pay concession partners next week…Drapers also flags that Philip Day, the owner of Edinburgh Woollen Mill (EWM) Group, has added Calvetron Brands (Jacques Vert etc) to his growing portfolio of
• BDO High Street Sales Tracker: We flagged on Wednesday that sales at John Lewis wilted yet again in the continuing heatwave last week and today’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains for last week, w/e Sunday Aug 5th, is also weak, despite its relatively low exposure to “indoor”/household goods. The BDO figures are unweighted…but, for what it’s worth, BDO Fashion Store LFL sales were 4.0% down and, including Lifestyle and weak Homewares sales, Total Store LFL sales were down by 3.9%. Overall Online sales (which are separately reported by BDO) were up by only 10.3% (albeit against a very strong comp), with Online Fashion sales alone up by 10.5%.
• News Flow Next Week: Things are relatively quiet next week, although the fate of House of Fraser should soon become clear. Wednesday brings the interims from the Motor dealer Lookers, whilst on Thursday we get the Kingfisher Q2 update, the Asda Wal-Mart Q2 results and the ONS Retail Sales figures for July.