Langton Capital – 2018-08-24 – More on Fulham Shore, cost cutting, no-deal advice etc.:
More on Fulham Shore, cost cutting, no-deal advice etc.:
A DAY IN THE LIFE:
Well it’s quiet and, as it’s a Friday in late August before a Bank Holiday, that’s perhaps to be expected. On to the news:
PUBS & RESTAURANTS:
• Fulham Shore yesterday told its AGM that trading had improved and that, as expected, some fixed costs were rising. It said this was because it had declined to cut costs and diminish service standards as some of its competitors had done.
• Casual diners cutting costs and reducing the quality of their offer are not doing so in a vacuum. Competitors such as Fulham Shore, see above, may well be offering more for the same price.
• Recovering from a dreadful knock whilst walking on a tightrope is never going to be easy. But companies that are struggling also have to trade in a market in which companies that are not struggling are actually shaking the rope.
• Fulham Shore CEO Nabil Mankarious yesterday bought 127k shares in the company at 12p. It takes his stake to 19.94%.
• A paper co-authored by the Institute of Alcohol Studies and Sheffield Alcohol Research Group has accused the drinks industry of obstructing government health policies because it ‘depends on risky drinking’. The study — based on only English consumption and sales data — found that ‘68% of alcohol industry revenue in England comes from consumers drinking at risky levels (over 14 units a week, accounting for 25% of the adult population),’ and that ‘If all drinkers were to comply with the government’s recommended guidelines, alcohol sales revenue would decline by two-fifths (38%), or £13bn.’
• Regarding the government’s publication of the first set of no-deal Brexit technical notices, UKHospitality CEO Kate Nicholls commented: ‘A no-deal Brexit would cause serious problems for many UK businesses, not least of all the hospitality sector… There are still major concerns about food and drink imports upon which hospitality businesses rely to a large degree and we still need substantially more clarity on the exact terms for current EU citizens as well as an idea of what the future immigration system will look like.’
• The weather is set to turn fresher and cooler ahead of the Bank Holiday weekend, with dry and sunny spells interrupted by the occasional shower.
• The World Cup and the summer heatwave together contributed some £300m in alcohol duty to the UK’s public coffers as the public sector recorded its biggest surplus for nearly 20 years. Revenues from duty were up 7.4%, contributing to the biggest July surplus for 18 years.
• BrewDog has reported a 55% increase in half-year revenues to £78m. The group operates 50 pubs in the UK and internationally, after the group bought the 14-strong Draft House estate.
• Comptoir Group has announced four new openings lined up with HSMHost International, the MCA has reported.
• Darwin & Wallace, the London based neighbourhood bar group, has secured its seventh location, opening this winter in Ealing. Mel Marriott, Darwin & Wallace Managing Director commented: ‘We have long held the desire to be part of the ‘London village’ that Ealing is. Finding this superbly located, stand alone, building within the Dickens Yard development has given us the most amazing blank canvas on which to layer on our own interpretation of what a modern pub can be, unique to its location’.
• Former Papa John’s CEO and chairman John Schnatter is promoting a new website to communicate directly with company employees and shareholders after calling his resignation for a racial slur ‘a mistake’. Schnatter insists he is not going away, putting pressure on the pizza chain.
• The CMA has launched an investigation into the proposed Sainsbury’s-Asda merger over concerns the deal will lead to less consumer choice, higher prices or worse service. The combined group would be the UK’s biggest retail chain with 2,800 stores and 31.4% of the grocery market.
HOLIDAYS & LEISURE TRAVEL
• A new VisitEngland survey claims as many as 7.3m Brits are planning a staycation over the August bank holiday weekend, up from 6.9m last year. VisitEngland’s August bank holiday Trip-Tracker survey forecasts an estimated £1.75 billion boost to the economy. A further 8.4 million people are still undecided whether or not to have a staycation with 43% said they are waiting to see what the weather is like.
• STR reports US hotel occupancy up 0.3% to 72.5%, ADR up 2.2% to $129.77 and RevPAR growth of 2.5% to $94.08 for the week ending 18 August.
• Thomas Cook has announced it will remove its customers in Egypt from a resort ‘as a precautionary measure’ after the death of a British couple. There has been a raised level of illness reported from the hotel, however, the reason for couple’s death still remains unclear.
• Gambling software group Playtech has seen its revenue climb 4% to €436.5m, with net profit falling 34% to €83.3m. A crackdown on gambling syndicates in Malaysia last year in effect ended the company’s access to what had been one of its largest Asian markets.
• National Lottery operator Camelot has received a fine for £1.2m from the gambling regulator for incorrectly issuing ‘non-winning’ messages to players.
FINANCE & ECONOMICS:
• Sterling down at $1.2821 and €1.1084
• Oil up at $75.19
• UK 10yr gilt yield unchanged at 1.27%
• World markets: Most markets slightly down. Asia mixed in Friday trade.
• Brexit, politics etc.:
o Brexit Secretary Dominic Raab has given some advice in case the UK leaves the EU with no deal saying that travellers could face extra charges, businesses could face delays in the delivery of products and certain medicines could run out.
o BBC calls government advice ‘a vast swirling porridge of detail.’
o Mr Raab says he is still confident of a deal. The bookies (where actual money rather than words are the currency in play) disagree, and still have no-deal as the 6-4 on favourite outcome.
o Food & Drink Federation says the release ‘hardly inspires confidence’ and says ‘the Government’s laudable decision to publish these Technical Notices…confirms what a grisly prospect for UK food and drink a no-deal exit from the EU would be.’
o Organic food exporters may face a Euro ban on the sale of their produce.
o Chancellor Philip Hammond has said that a no-deal Brexit could see the UK economy shrink by around 10.3%. Jacob Rees Mogg has said that this is nonsense. Other Brexiters say free trade never made anyone poorer. There must be some fake news in the above as not all those statements can be true.
o Chancellor to outline impact of both the Chequers deal and no-deal to parliament at some point.
o Tory Nikki Morgan comments ‘the chancellor has confirmed that the government forecasts a disastrous hit to our economy and living standards in the event of a ‘no-deal’ Brexit.’
o Labour has said that it wants to retain access to the free market and curb labour flows. This has been deemed impossible in a number of quarters. Nonetheless, the party continues to make hay as the Brexit debacle rolls on.
PRIOR DAYS LATER TWEETS:
• Later tweets: Fulham Shore has seen an improving trend in sales over last 21wk. The period is long enough to be meaningful
• Fulham Shore upturn means really are winners out there on the high street amongst the many losers. E.g. Jamie Oliver says things are grim.
• US restaurant numbers down 1% to in year to this Q1. Perhaps a lesson to be learned?
• HMG releases advice on no-deal Brexit (now 6-4 on with bookies). FDF says prospect is ‘grisly’ & piecemeal release ‘hardly inspires confidence’
START THE DAY WITH A SONG:
Yesterday’s song was ‘Smoke on the Water’ by Deep Purple. Today who sang:
We’ve come a long long way together,
Through the hard times and the good
I have to celebrate you baby
RETAIL NEWS WITH NICK BUBB:
• CMA Watch: You might well have thought that the notoriously picky merger regulator, the CMA (the Competition and Markets Authority), was already well under way with its investigation of the controversial Sainsbury/Asda merger, but all it has been doing since April 30th has been “gathering information” and it only announced yesterday that it is formally now starting its Phase 1 detailed assessment of how the deal could affect competition for UK shoppers. Sainsbury’s and Asda have asked the CMA to move more quickly to the in-depth (Phase 2) part of the inquiry through a ‘fast-track’ process and the CMA is minded to agree, but it appears to taking a tough line in its early sparring with the companies about the merger and it even said yesterday that “We will not allow it to go ahead unless any concerns we find are fully dealt with”.
• CBI Watch: We were asked yesterday why we think that the CBI Distributive Trades survey is silly and so we have been given an excuse for one of our periodic rants about this long-running but useless non-quantitative measure of retail sentiment…All the CBI does every month is ask a few retailers whether their sales volume has been up or down on last year and measures the difference between those saying “yes” and those saying “no” (the infamous “percentage balance”). You might well think that a pretty silly question to ask and, given the low sample of retailers surveyed and the doubts about the quality of the information supplied, it is a constant irritation to us that City economists still give the survey a lot of attention, as the first reading on monthly Retail Sales. For what it’s worth, the headline of yesterday’s CBI survey for “August” was “Heatwave keeps High Street sales riding
• Trade Press (1): The striking front cover of Retail Week magazine today is a lifelike photo of a robot carrying a parcel in a warehouse, to flag up the main feature on “The robots are here”: a special report on how robotics will disrupt the retail business. RW also has a big feature on the Sports Direct takeover of House of Fraser: “What House of Fraser will be like under Ashley”. The Editor’s column is headlined “‘Present, not involved’ – HoF’s leadership failure” and he thunders that the collapse of both House of Fraser and Homebase was ultimately down to “bad owners and poor leaders”, contrasting the management failure at HoF and Homebase with the success of leaders like Paul Marchant at Primark, Malcom Walker at Iceland and Nick Beighton at Asos.
• Trade Press (2): In Drapers magazine today the Editor praises the enthusiasm and ambition of the CEO of the luxury etailer Farfetch, Jose Neve, In her column and thunders that “Neves’s dream of integrated retail is not so farfetched”. The main News story in Drapers is about the huge losses suffered by suppliers to House of Fraser (“HoF suppliers brace for more pain”), but Drapers also flag that “High Street hopeful for cool Bank Holiday”. Drapers also highlight the good trading results reported by Crew Clothing and Fat Face. There are also features on “Is this the death of the Department Store?” (including the views of industry experts on what department stores need to do to survive) and “Fast Fashion’s Love Affair with Reality TV” (noting the success of TV shows like “Love Island” and “TOWIE” in driving fashion sales).
• BDO High Street Sales Tracker: We flagged on Wednesday that sales at John Lewis did not exactly bounce strongly last week, despite the helpful shift to more autumnal weather, and today’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains for last week, w/e Sunday Aug 19th, is also subdued, given its relatively low exposure to “indoor”/household goods. The BDO figures are, it should be noted, unweighted…but, for what it’s worth, BDO Fashion Store LFL sales were 3.9% down and, including Lifestyle and Homewares sales, Total Store LFL sales were down by 2.8%. Overall Online sales (which are still separately reported by BDO) were up by as much as 17.4%, however, with Online Fashion sales alone up by 13.1%.
• News Flow Next Week: Things are quiet again next week, after the Bank Holiday weekend, but good old WH Smith will be issuing a year-end trading update on Thursday and the Homebase CVA creditors vote is on Friday.