Langton Capital – 2018-08-28 – Food prices, RTN, gin, vaping, Chilango, safe drinking…
Food prices, RTN, gin, vaping, Chilango, safe drinking…
A DAY IN THE LIFE:
After having satnavs try to steer me into walls and take me the wrong way down one-way streets for some time now, I showed the depth of my technical ignorance by deciding to buy a new one over the weekend rather than try to update the couple that we have.
And here we have an illustration of the problems that the High Street currently faces.
Because I was able to find one on the website of a large, well-known electrical retailer for £89.95. I was then able to find exactly the same device on Amazon, I’m ashamed to say, for £59.95 and then I thought that there was a talking satnav on my phone that I was paying for already and so I didn’t need to spend any additional money at all.
Anyway, I was able to use the money saved on beer and the time rescued from shopping to ponder whether the degree of scorn and ridicule heaped on people and the general nastiness shown by some in the Brexit argument was inversely correlated to the strength of their arguments.
And it’s hard not to conclude that it is. Because there’s often no argument whatsoever (smart move, Jacob) or there’s a blithering wish-list of contradictory hopes (you know who you are). On to the news:
PUBS & RESTAURANTS:
• Meat, vegetable and dairy prices will rise ‘at least’ 5% in the coming months as a result of the UK’s extreme weather this year, according to research from consultancy firm CEBR. Farmers have also recently warned about prices about peas, lettuces and potatoes, while wholesale prices of other vegetables have already grown by as much as 80% since the start of the year. These increases can take up to 18 months for the full effects to be felt by shoppers.
• Hakkasan has paid its outgoing boss $50m and generated a $145m loss as a result. Hakkasan reported that revenues slipped 7% to $314m.
• Expectations are being set ahead of Friday’s H1 numbers from Restaurant Group. Betting at the moment is on LfL sales of perhaps minus 3% or minus 4% with some comment to the effect that the turnaround plan is beginning (or continuing) to bear fruit. The dividend, though it perhaps should be cut, is most likely to be held.
• RTN will have to refer to very poor July trading in its current trading comment. August trade should be less bad. RTN is not being left alone to recover in piece as some competitors are cutting prices, others continue to expand and still others improve their offer in order to tempt away customers.
• Mucho Mas, the company behind the Chilango brand in the UK, has reported numbers to 25 March 2018 saying that sales rose by 6.2% to £10.3m with EBITDA of £0.4m versus a loss of £1.2m last year. The group reported a loss of £1.4m (against losses of £3.2m last year) and has accumulated losses of £14.4m on its balance sheet.
• KAM Media has released an insight report detailing the behaviour of the key 18-24 year old segment in the UK. The report asks who are Generation Z and what do they want out of life? It asks where do they spend their time & their money and looks a purchasing behaviour and how to influence them.
• Chipotle was in receipt of downgrades on Monday that sent the company down by around 4% in terms of its market cap.
• Building work has begun on a brand new £1m gin distillery in Liverpool’s Cavern Quarter as Halewood Wines & Spirits looks to expand. Liverpool Gin Distillery says ‘this is such an exciting time; we can’t wait to get to work on the distillery and see it all coming together. We’re delighted to be offering lots of employment opportunities in the city and are now in the process of training staff to offer a first-class experience for locals and visitors alike.’
• Doozy Vape Co, one of the largest vaping companies in the UK, has reported sales up 40% after expanding its product range
• A paper by the Institute for Health Metrics and Evaluation concludes that there is ‘no “safe” level of alcohol consumption, although the actual risks involved in drinking are not clear. The report linked alcohol to the deaths of 2.8 million people worldwide in 2016 — 2.2% of all deaths in women and 6.8% in men — making it the seventh leading risk factor for mortality and disease.
• The BBPA has responded to the above study by drawing attention to the ‘many scientific studies that support the view that moderate alcohol consumption can form part of a healthy lifestyle.’ BBPA CEO Brigid Simmonds commented: ‘UK brewers have a long-standing record of promoting responsible drinking and enabling consumers to make informed decisions. We believe that for adults of legal drinking age who choose to drink, moderate alcohol consumption can be part of a well-balanced lifestyle and beer, which is typically the lowest strength form of alcohol, is a great way to enjoy responsible drinking and support your local pub. As ever, those with questions about their own alcohol consumption are encouraged to consult a health professional.’
• The House of Commons’ Science and Technology Committee recently stated that forcing vapers into smoking shelters could undermine their attempts to quit and that rules around e-cigarettes should be relaxed. With research into vaping ongoing, there is no clear right or wrong answer and operators have so far been allowed to determine their own policies regarding e-cigarettes.
• Residents of Qing Dao, the home of China’s most exported beer Tsingtao, have taken to drinking beer out of plastic bags. The practice is thought to have come about as Tsingtao brewery workers are often paid partially with freshly brewed beer, which they then sell on the street. Buyers then pour this beer from keg or barrel into a branded plastic bag, which is then poured into a mug or a can as they wish.
• Pubs have grown their share of breakfast and snacking occasions according to data from the MCA Pub Brand Monitor, from 9.8% in Q2 2017 to 12.1% in Q2 2018 for breakfasts and from 6.4% to 8.5% for snacking. Average spend across lunch, dinner and snacking was flat during the period.
• San Miguel Corp, a Philippine conglomerate, announced the sale of a $2.7bn stake in its F&B unit San Miguel Food and Beverage Inc. The price represents a 75% premium, sending shares of both firms up to multi-year highs.
• In the US, the Centres for Disease Control and Prevention reports 507 confirmed food illness cases tied to McDonald’s salads across 15 states so far. At least 24 people have been hospitalised with no deaths reported.
• The new owner of Homebase aims to reverse a 10% fall in sales in the year to June by bringing back popular brands and products which were phased out by its previous owner Wesfarmers. Newly released documents report 70% of its 241 stores were loss making.
• Alibaba reports Q1 revenue up 61% yoy to $12.23bn with the number of Chinese annual active users up 24m to 576m. Net income excluding a one-off charge relating to share price compensation packages was up 33%.
• Payday lender Wonga is considering ‘all options’ after a surge in compensation claims against the firm and resulting rumours that it is close to collapse following a government clampdown.
HOLIDAYS & LEISURE TRAVEL
• The government backed ‘One Too Many’ campaign warns travellers that drunken and abusive behaviour is ‘totally unacceptable’ with offenders facing up to five years in jail. Before the summer season began there were more than 200 incident reports about disruptive passengers according to Civil Aviation Authority data.
• Thomas Cook has confirmed that it does not have any evidence that the deaths of two of its customers at a hotel in Egypt were down to carbon monoxide poisoning.
• Luton Airport has been named the worst airport in the UK for the third year in a row. London Luton was rated one star for its baggage drop queues, shops, seating, toilets and staff in the Which? study.
• The ride hailing app, Grab has announced plans to add 200 electric vehicles to its fleet.
• STR has reported that Europe’s hotel industry has seen occupancy increase 0.8% to 78.6% in July, with ADR rising 6.2% to €123.11 and RevPAR up 7% to €96.82.
• Uber plans to concentrate more on its electric scooter and bike business and less on cars, despite a potential hit to profits. Boss Dara Khosrowshahi said that individual modes of transport were better suited to urban travel and predicts users will make more frequent shorter journeys in future.
• Chinese ride-hailing company DiDi Chuxing has suspended its carpool service after police arrested a driver who allegedly raped and killed a female passenger. The Beijing-based company has apologised, stating it has ‘inescapable responsibility’ for the incident.
• Chelsea has appointed the US merchant bank Raine, to value the football club after receiving multiple offers from potential buyers.
FINANCE & ECONOMICS:
• New Fed chair Jerome Powell has confirmed that the ‘consensus view’ at the Fed is that gradual interest rate rises remain the best course of action. Powell says the Fed will do ‘whatever it takes’. President Trump has recently spoken out against rate increases.
• There has been little progress in Sino-US trade talks. China has said that it will continue to hit back as the US installs barriers to trade.
• Fewer mortgages were approved by British banks in August compared with a year earlier.
• Sterling up vs dollar at $1.2877 but down vs Euro at €1.1028
• Oil up a dollar or so at $76.19
• UK 10yr gilt yield unchanged at 1.27%
• World markets: UK closed yesterday but other markets higher. Far East up in Tuesday trade.
• Brexit etc.:
o Philip Hammond criticised for telling it like he sees it.
o Labour under pressure to back a second referendum
PRIOR DAYS LATER TWEETS:
• Later tweets: Fulham Shore has said it is not cutting certain costs, as rivals are. The quality of service is coming through & trade is improving
• F&B players cutting service & quality find others, e.g. FUL, doing the opposite. Leads to discounts, failure to recover, etc…
• UKHospitality says ‘no-deal Brexit would cause serious problems for many UK businesses, not least of all the hospitality sector’
• D Raab ‘still confident of a deal’. Bookies (where money rather than hot air is at risk) disagree with no-deal 6-4 on favourite
• CBI August retail sales comment ‘heatwave keeps High Street sales riding high, but outlook is less bright’.
START THE DAY WITH A SONG:
Last week’s song was Praise You by the inimitable Fatboy Slim — well done to those who got it! Today, who sang (or rapped):
Thou shalt not question Stephen Fry,
Thou shalt not judge a book by its cover
Thou shalt not judge Lethal Weapon by Danny Glover
RETAIL NEWS WITH NICK BUBB:
• Saturday Press and News (1): The main focus in the Saturday papers was the not very surprising revelation in the creditors report from Hilco about Homebase (designed to strike fear into the landlords ahead of the upcoming CVA vote) that 70% of the stores are losing money and that the business will go into administration if the CVA is not approved. The FT claimed to have an exclusive on the report and noted that several landlords will not support the Homebase CVA, but the Daily Mail also had a big splash about it (“Homebase on the brink”) and the Times and the Telegraph also featured the story. The main news in the Times was that the discredited ex-Chairman of House of Fraser, Frank Slevin, has also stepped down as Chairman of Hamleys, the other UK retailer owned by the shadowy Chinese company C Banner, whilst the Telegraph flagged up the news first broken by the Drapers website that
• Saturday Press and News (2): In other news, the Times flagged that Tesco has had to close 13 stores in Poland because of poor trading conditions (“Tesco wields poleaxe on 13 stores and 2200 jobs”) and the Daily Mail highlighted that Tetley’s tea has become the biggest victim of Tesco’s move in the UK to cull brands and move towards more own-label ranges. The Daily Mail’s “Big Shot of the Week” profile was of Judith McKenna, the British boss of Walmart International and “the biggest thing to come out of Middlesbrough since Paul Daniels”. But the veteran City commentator Neil Collins lashed out again at the Sainsbury/Asda merger plan in his column in the FT, on the back of the news that the CMA has started its long-awaited investigation, thundering that “today’s CMA might just ignore the smokescreen of store disposals and the specious nonsense about lower prices and block this dismal
• Sunday Press and News (1): Homebase remained in focus in the Sunday papers with the Sunday Times revealing that a group of landlords is preparing a legal challenge to the rents cuts in the CVA plan and the fact that the hapless new owners Hilco will only inject new equity if the plan goes ahead. The growing anger amongst Homebase landlords about the CVA plans was also the main Business story in the Observer (“Homebase holds out for a rescue as bill for struggling High Street falls to landlords”). Oliver Shah of the Sunday Times turned his guns on the “The Chinese puzzle left at House of Fraser”, noting that the western empire (House of Fraser and the US chain Brookstone) of the discredited Yuan Yafei is now in ruins and that questions are being asked about the way his Sanpower business in China was run and its secret links to other companies and the Communist Party. Oliver Shah also
• Sunday Press and News (2): The other big story in the Sunday papers was, bizarrely, a copyright row between Superdry and Jack Wills about a bomber jacket design. The Mail on Sunday went to town on the situation, with profiles of the key protagonists, whilst the news was also picked up by the Sunday Times, given that Superdry founder Julian Dunkerton has been in the news recently.
• Bank Holiday Monday Press and News: Relatively thin pickings today, but the Times has kicked off a week-long series of reports on the rise of Amazon, by highlighting the view of former Tesco boss Terry Leahy that “Amazon will pass Apple as the biggest world business” because it has “reinvented shopping”. The Times also has articles on “How Amazon’s sphere of influence just keeps on growing” and “The dizzying rise from humble bookseller to global retail behemoth”, including a chart of the astonishing rise in the Amazon share price. The Daily Mail picks up on the copyright row between Superdry and Jack Wills and the Sunday Times report that Homebase landlords are preparing a legal challenge to the CVA plan, whilst the Guardian profiles Darren Bailey of Angling Direct (“How Angling Direct’s boss tackled the High Street”.
• Today’s Press and News: Even thinner pickings today, after the Bank Holiday, but the Times continues its week-long series of reports on the rise of Amazon, with articles on the acquisition of Whole Foods and the push into Grocery (“Whole Foods helps Amazon sink teeth into $800bn market”) and the checkout-free convenience store trial in Seattle (“Shopping with no cash, cards or even a checkout”). The Times also flags the view of property consultants Colliers International that VAT should be reformed “to create a two-tier system for online and physical retailers in an attempt to save the country’s dying high streets”.
• News Flow This Week: Things are quiet this week, after the Bank Holiday weekend, but WH Smith will be issuing a year-end trading update on Thursday and the Homebase CVA creditors vote is on Friday, whilst the monthly GFK Consumer Confidence index will be out first thing on Friday.