Langton Capital – 2018-08-23 – Fulham Shore, Jamie, av. earnings, defining summer etc.:
Fulham Shore, Jamie, av. earnings, defining summer etc.:
A DAY IN THE LIFE:
I think that satnavs are brilliant but, if you disengage your brain at any point and take their word as Gospel, you could be in trouble.
Because many a time when in the Netherlands, Germany, Czechia or wherever, the satnav had us apparently driving through a field and, on at least one occasion, it instructed us to make a U-turn in the middle of a one-way tunnel and on others it had us turn left or right into brick walls, dykes or various store-yards full of agricultural machinery.
And, whilst I do tend to go rogue and ignore the thing from time to time (if I want to head north and its morning, for example, it’s a good idea to keep the sun to your right), I do occasionally find myself being led down side roads and the like often accompanied by a number of other cars that are almost certainly being guided by the same software.
Anyway, time’s getting on so, without further ado, let’s move on to the news:
FULHAM SHORE UPDATES ON TRADING:
Trading currently ‘encouraging’, more sites available etc.
• The Fulham Shore, operator of the Franco Manca and Real Greek chains of restaurants, has updated on trading.
• FUL says ‘there have been encouraging revenue increases in both Franco Manca and The Real Greek in the first 21 weeks of the financial year.’
• It says ‘the increased revenue has been generated predominantly from a slightly greater number of transactions in both of our businesses and is driven by menu innovation, the quality of food, the value of our propositions and dedication of our team.’
• FUL adds ‘in the 2019 financial year to date, Fulham Shore has opened two Franco Manca pizzeria, in Bath and Cambridge, and closed one Franco Manca in Brighton Marina. This takes Fulham Shore’s restaurant portfolio to 58 restaurants in the UK, comprising 16 The Real Greek and 42 Franco Manca, as well as one Franco Manca franchise in Italy.’
• FUL reports ‘we are in the final stages of negotiations for a number of locations for the current and coming financial year. As previously announced, we will continue to fund new restaurant openings largely through internally generated cash flow.’
• FUL says ‘we are seeing more properties coming to the market as a result of the current conditions in the wider retail and dining out sectors. We will continue to assess these opportunities and respond accordingly.’
• Langton comment: FUL bears out our regular comment that, despite the widely-reported problems being faced by a number of casual diners, there are winners in the market.
• Whilst the future is hard to predict in a changing market, FUL is commenting on 21 week numbers suggesting that the green shoots are not a transitory figment.
• FUL does not publish LfL numbers but it would appear that these are currently positive.
• The group is annualising a lurch downwards around a year ago.
• But others are still reporting negative numbers. RTN will update next Friday, for example, and to generate more sales per site at this stage in the cycle is no mean feat.
• Furthermore, retail woes have meant that occupancy costs are falling.
• Here FUL says that it is seeing more opportunities and that it is assessing these accordingly. The group is selling the right things to the right people from the right sites at the right prices and, at the end of the day and in a world where externalities will occasionally bite you in the rear, you can’t really do much more than that. Drop us a line for further details.
PUBS & RESTAURANTS:
• Moody’s has reported that PepsiCo’s SodaStream purchase is credit positive. It says ‘the transaction, which PepsiCo plans to fund with cash on hand, is credit positive because it will expand PepsiCo’s growth opportunities while not materially increasing financial leverage.’
• Moody’s reports ‘Coca-Cola FEMSA’s sale of stake in Philippines operation supports deleveraging, but highlights industry challenges.’ It says ‘the company estimates enterprise value at $700 million. Considering that the company will use at least part of the proceeds to reduce debt, the sale is credit positive for KOF because it further supports its plan to de-lever.’
• Jamie Oliver has commented about the pressure restaurants are facing on the high street, after Jamie Oliver restaurant Group had to close a third of its stores this year, stating: ‘The world’s changed in the restaurant industry in the last year and a half. It’s like any other business on the high street, it’s just really, really tough. We’re in a changed time and obviously there’s lots of pressures even for good businesses, so how can we bring four walls to life more? How can we curate a space? Is it a restaurant or should we think of it more like a gig venue or a museum?’.
• Wetherspoons will be banning all dogs from its UK branches, after being lenient with the rule in the past few years.
• US restaurant numbers have fallen 1% to 660,755 in spring 2018, the NPD Group Recount, who conducted the census stated: ‘The primary source of the decline in U.S. restaurant units was a 2 percent drop in independent restaurant units compared to a stable restaurant chain count’.
• The Redpath’s Yard distillery is to be redeveloped and turned into a multi-million -pound distillery and visitor centre in Northumberland.
• Inflationary expectations in the UK are at their highest levels since December next year. The public expects prices to rise by 2.7% in the next year (up from expectations of 2.5% and compared with actual last year inflation of 2.3%).
• ONS data shows that service sector profitability has fallen to its lowest level in four years due to a poor performance from retail companies. The ONS says that the ‘net rate of return’ for services companies fell to 17.2% in the January-March period from 18.4% in Q4 last year.
• The chief executive of Pizza Hut Restaurants UK says the industry is too focused on like-for-like growth and does not do enough to protect margins. Speaking to MCA, Jens Hofma said Pizza Hut Restaurants UK will not be drawn into the discounting wars affecting many eating out operators and is ‘prudently’ searching for new sites.
• Real average earnings are £13 a week lower than they were a decade ago and job insecurity is ‘widespread’, according to research by the Resolution Foundation. The economic think tank did note the employment rate provided ‘a much-needed bright spark amidst the gloom of the pay squeeze’ and that ‘lower income families have accounted for the majority of Britain’s jobs growth, showing that pushing for full employment can boost living standards.’
• Analysis by Bank of England economists suggests that scrapping 1p and 2p coins in the UK would not cause shops to round up prices as far fewer products are now priced ending in 99p.
• PepsiCo has launched a new unit called The Hive, which will focus on developing emerging brands within the company’s portfolio. The new entity aims to stay ahead of what consumers want and carry out ‘rapid new product development, iterative prototyping and marketplace deployment’.
Per MCA, Chop’d has opened a new store in Selfridges’ Manchester site taking the salad bar chain to 16 sites.
• Hungry Horse has launched a nationwide vegan range in its pubs mimicking classic dishes such as fish and chips and bakewell tarts.
• A survey commissioned by food-tech company GoKart has found 53% of Brits prefer to eat out at independent establishments with 42% thinking the Government should introduce limits on the number of national or multi-national chain restaurants on the high street.
• Vietnamese brewer Saigon binh Tay Beer plans to quintuple the production of its low-alcohol ‘Sagota’ brand to 1bn litres by 2025 as the government plans to ban sales of higher strength drinks after 10pm.
• BrewDog announces a ‘painful setback’ to its new beer launch at its OverWorks taproom in Ellon, Aberdeenshire saying ‘It was discovered that about one in 10 of the bottles has a catastrophic manufacturing defect compromising their structural integrity.’
• Londoners are tending towards more cocktails but less alcohol, with low-abv events becoming increasingly popular.
HOLIDAYS & LEISURE TRAVEL
• A TV advert for Tui holidays has been banned for promoting summer package holiday offers available in October. The advert featured a voice-over which said: ‘It’s not too late to discover Turkey with Tui from £279 per person this summer … Perfect summer holidays that put you in the middle’.
• The director of Cruise Industry body Clia UK & Ireland, Andy Harmer, has stated that no-one acting responsibly has ever fallen off a cruise ship. Mr. Harmer defended the safety of cruising after a woman fell off a ship into the Adriatic and was rescued 10 hours later.
• US hotel data has indicated occupancy fell 0.2% to 73.6%, with ADR rising 2% to $133.44 and RevPAR up 1.8% to $98.17.
• Comcast Corp has stated that it has received valid acceptances for shares representing just 0.21% of Sky Plc after its £14.75 per share offer to buy 61% of the European broadcaster.
FINANCE & ECONOMICS:
• Sterling lower at $1.2873 and €1.1138
• Oil up a buck and a half at $74.58
• UK 10yr gilt yield unchanged at 1.27%
• World markets: UK & Europe up yesterday but US down. Far East mixed in Thursday trade.
• Brexit & Politics:
o Even by Teflon President Trump’s standards, yesterday was a challenging day.
o Re Brexit, the government is to issue the first of a number of advice papers to business on what to expect in the event of a Hard Brexit
o Brexit secretary Dominic Raab says he is ‘confident a good deal is within our sights, and that remains our top, and overriding, priority.’
o Bookies disagree and have no Brexit deal as the 6 to 4 on favourite outcome.
o Labour, playing the odds, says ‘a no-deal Brexit would be a complete failure by the government to negotiate for Britain. These documents should not distract us from that.’
o Mr Corbyn is keeping his head down and hoping / expecting that Brexit failure will shoe in his party to government
o Labour says ‘no deal would be catastrophic for people’s jobs, the economy and for the border in Northern Ireland. It is irresponsible for anyone to casualise no deal.’
PRIOR DAYS LATER TWEETS:
• M&B JV with 3Sixty Restaurants & acquires Luke Johnson’s stake. Will look for other sites in which to install the business
• Mr Johnson has sold a number of leisure assets since the Brexit vote incl. Laine Pub Co, Draft House & Neilson. Gails sold to Pat Val
• UK government finances in July surplus of £2bn. This represents the larges surplus for July in 18yrs
START THE DAY WITH A SONG:
Yesterday’s song was Everlong by The Foo Fighters, today who sang:
They burned down the gambling house,
It died with an awful sound
Funky Claude was running in and out
Pulling kids out the ground
RETAIL NEWS WITH NICK BUBB:
• Today’s Press and News: The weak results from Laura Ashley provide plenty of photo opportunities and headlines for today’s papers eg “Profits wilt after Laura Ashley loses its allure” in the Times. The Bloomberg feature on the results quoted our view that it is hard to understand why the Malaysian company that controls the company (with just over 60% of the equity) still retains the London listing and noted that it has been a penny stock for 20 years…There is also plenty of coverage of the news that Debenhams has recruited the ex-Domino’s Pizza FD, Rachel Osbourne, and that he Pensions Regulator has accused the wretched Dominic Chappell of knowing that BHS was bust before he bought the business, whilst FT highlights that Mike Ashley faces yet another shareholder revolt at next month’s AGM of Sports Direct.
• Oxford Street Department Store Watch: Although all the attention has been on the deal that Sports Direct has struck with the hapless landlord to save the apparently doomed House of Fraser Oxford Street store (assuming it has any stock in it to sell…), good old John Lewis has been getting on with the refurbishment of its nearby flagship, ahead of the name change to John Lewis & Partners and the launch of the new John Lewis & Partners Womenswear range in early September.
• Retail Sales Watch: We pointed out yesterday that the Retail sales experts, the consultancy group Retail Economics (RE), which was founded by Richard Lim (who used to run the monthly BRC-KPMG Retail Sales survey) believes that the BRC-KPMG retailer sample understates Online sales growth, as it excludes the likes of Amazon, although the wretched ONS does include their sales…In in its latest detailed monthly Retail Sales overview, RE looked at the impact of the Amazon Prime Day promotion on the outcome for July and noted that as Amazon must account for a big chunk of the Large Businesses component of the increasingly important ONS Non-Store Retail category (ie pure play Online and Mail Order companies) Amazon can’t have done that well last month, as the ONS only reported 8.6% sales growth for Non-Store Large Retailers…The mystery remains how the ONS came up with its estimate that
• News Flow This Week: There has been more going than expected so far this week, in terms of company news ahead of the Bank Holiday weekend, but there is no more news scheduled. However, the silly CBI Distributive Trades survey for “August” is out at 11am this morning and it will doubtless get the usual uncritical coverage in tomorrow’s newspapers…