Domino’s, Gail’s, CAKE, mobiles, Games Workshop etc.:

A DAY IN THE LIFE:

It will be interesting to see if the Patisserie Holdings debacle changes the behaviour of any other companies.

The collapse is currently front of mind but, being realistic, memories will fade as the company slips from the headlines and complacency is a strong magnet when it comes to human behaviour – and we’re certainly not excluding Langton here.

There could be a little closer examination of pixie-dust stocks, gurus and retail icons etc. Even this may not last very long. On to the news.

PUBS & RESTAURANTS:

• The Telegraph reports that Luke Johnson ‘is facing yet another headache’ in that the sale of Gail’s Artisan Bakery is being ‘delayed by Brexit’.

• The chain has been marketed for some time as there were stories earlier in the year that the chain would be purchased by Patisserie Holdings, the now-suspended operator that is said to have fabricated its numbers, probably over a period of years.

• KPMG is said to be advising on the sale. The idea that the 40-strong chain ‘could be worth as much as £200m’ seems a bit of a stretch. Few retail outlets of any description are worth £5m each, let alone bread shops.

• The Daily Mail reports that Patisserie Holdings may be investigated by the House of Commons Business Select Committee. It says Patisserie Holdings could be a target because ‘its proprietor Luke Johnson is seen as an entrepreneurial guru’ and it would be interesting to know what went wrong.

• Domino’s Pizza Group has announced Q3 results stating, group system sales up 5.9% to £303.3m, with UK LfL sales up 2.2%. The group opened 23 new sites in the quarter, with 20 of these franchise units, taking the group as a whole to 1236 stores.

• Constellation Brands has announced that Bill Newlands will become the group’s new CEO, succeeding Rob Sands in March 2019. Rob Sands commented: ‘Bill understands what it takes to succeed in this rapidly evolving market and he’s the right person to lead our company going forward’.

• Asian KFC rival Jollibee will open its first site in the UK, in Earl’s Court, today.

• Sonic Corp in the US has reported a 2.6% increase in LfL sales in its financial Q4.

• Cabana Restaurants has reported slightly late full year numbers to 31 Dec saying ‘in common with the (sic) most operators in the sector, Cabana faced a challenging period, navigating rising wages, higher input costs resulting from post-Brexit currency changes, business rates revaluation and industry-wide sales pressures’.

• Canana reports sales down 1.7% at £12.03m with underperfomance at some sites masking ‘significant growth at others’. Since the balance sheet date, Cabana ‘has taken action to refocus the business on a core group of seven restaurants’.

• In the year under review, Cabana reports negative EBITDA of £1.1m (2016: loss £665k) and a loss before tax (after impairments of £3.6m) of £5.9m (2016: loss £2.3m). The group has accumulated losses since incorporation of £12.2m. Shareholders’ funds at December 2017 were £1.5m.

• The use of mobile devices by customers to improve their restaurant experience has notably increased in the last quarter, with 17% of takeaway orders now done on the phone. Data from zonal and CGA has found that 41% of customers cite the ability to pay quicker and avoid waiting to settle bills as the main advantage of apps.

• Clive Consterdine, Zonal’s sales and marketing director commented on their Go Technology survey: ‘Hospitality operators can no longer ignore the role technology plays in the eating and drinking out experience.  GO Technology supports the fact that it will never be a replacement for human interaction, but consumers do expect the benefits that mobile technology can deliver in terms of convenience, speed, accuracy and reward’. 

• Consumer confidence has fallen by 3% in Q3 2018, as pessimism rises about disposable income and personal debt, according to data from Deloitte Consumer Tracker.

• The MCA has reported that D&D London have denied the possibility of the group undertaking an IPO.

• The new charity, Only a Pavement Away, is aiming to help homeless, ex-service personnel, ex-offenders and the more vulnerable within society, into employment and reintegrate back into society.

• Ei Publican Partnerships is partnering with Hobgoblin to launch an exclusive ‘Come to the Dark’ pub finder website, which will enable consumers to find their nearest local pub stocking Hobgoblin and enjoy a pint during the Halloween period.

• JD Wetherspoon has initiated a new poster campaign calling on Theresa May to remove tariffs after the UK leaves the EU.

• Lynx Purchasing warns hospitality and catering operators to ‘Brexit-proof’ their businesses. Advice includes protecting supply chains and product availability, by wherever possible using suppliers who source from either within the UK, or from outside the EU.

• The Wine & Spirit Trade Association urges Philip Hammond not to rise duty by 3.4% in the Autumn Budget. British gin makers could take a hit of over £16m extra in duties on last year if Hammond enacts the rise. 

• Per MCA, the CEO of Timothy Taylor, Tim Dewey, says the company will focus on tenanted pub acquisition, forgoing its previous plan to grow its managed house division.

• Instacart raises $600m, valuing the grocery delivery service at $4.2bn. The placing comes eight months after a $200m round.

HOLIDAYS & LEISURE TRAVEL:

• Peel Hotels has reported interim results, declaring sales down 6.4% to £8.1m, with operating profit falling 63.4% to £221.5k. The group stated that Revpar and occupancy declining by 3.1% and 6.4% respectively and average room rate up 3.5%.

• The Cypriot airline, Cobalt Air, cancelled all its flights last night, leaving many passengers stranded.

• A survey by the Association of Bonded Travel Organisers’ Trust (Abtot) rated its members’ concerns about Brexit out of 10. The impact on exchange rates ranked at 7.7, with restrictions on free movement of staff and falling out of the open-skies pact at 5.9, and 5.5 for restrictions on free movement on travellers.  

• The Seasonal Business in Travel lobby group warns of dire consequences in a no-deal Brexit scenario. Respondents estimated there will be a 31% increase holiday prices post Brexit compared to pre-referendum levels.

OTHER LEISURE:

• Games Workshop has updated on trading saying ‘following on from the Group’s update in September, trading to 7 October 2018 has continued well.’

• GAW says ‘compared to the same period in the prior year, sales are ahead and profits are at a similar level to the prior year.’

• GAW concludes ‘however, the Board remains aware that there are some uncertainties in the trading periods ahead for the rest of the 2018/19 financial year. A further update will be given as appropriate.’

• The Pakistani-American billionaire Shahid Khan has retracted his £600m offer for Wembley Stadium after concluding the FA could not secure support among members to sell the venue.

• Tilman Fertitta, the owner of Golden Nugget Casinos, has approached US casino group Caesars Entertainment Corp about a possible merger. Currently Caesars has a market cap of $6.3bn whereas Fertitta’s net worth is $4.5bn.

• Zytronic, the touchscreen manufacturer, has reported H2 sales up 10% to £11.7m, in line with expectations. The group has seen margins decline however, and announced PBT of c£4.2m-4.25m.

FINANCE & ECONOMICS:

• The UK inflation rate fell to 2.4% in September. Wages, growing at 3.1%, are now healthily ahead of rises in costs. The ONS says ‘food was the main downward pull on inflation as last year’s September price rises failed to reappear, while ferry prices dropped after their surprisingly high summer peak.’

• The NIESR comments on UK inflation saying the slowdown in price rises extends across a wide range of goods, services and regions. It believes inflation will fall further saying ‘our analysis suggests that CPI inflation will return to the Bank of England’s target over the next 12 months.’

• If inflation falls below 2% and wage growth remains above 3% then, with GDP growth of 1.5% or so, there is only room for corporate profits to grow at 0.5%.

• House price growth is at a 5yr low reports the ONS. It says that prices rose by 3.2% in the year to August.

• Sterling lower at $1.3095 and €1.1387

• Oil down at $80.07

• UK 10yr gilt yield down 2bps at 1.59%

• World markets all down yesterday, Far East lower in Thursday trade.

• Brexit etc.:

o Mrs May insists her plan is not dead. She met with EU leaders last night. It appears that the transition period could be extended. That has angered Brexit supporters & could further postpone industrial investment decisions.

o Housebuilder Crest Nicholson has warned on profits saying ‘political and economic uncertainties’ were dampening demand. Gail’s has postponed its sale until after Brexit.

o FT suggests no agreement until December. Mrs May reported by BBC to have asked EU to ‘give ground and end the current Brexit deadlock.’

o Government advisor Alan Manning has said that ‘privileged’ access to cheap labour could end for farmers after Brexit. He says fruit and vegetable farmers would probably ‘go backwards’ but says that this would not be a big deal for the economy as a whole.

o Reuters quotes Labour’s John McDonnell as saying that, if Labour were to take power, they could seal an EU deal quickly. Talk’s cheap.

o Brexit Secretary Dominic Raab seems to have suggested that the ‘meaningful vote’ could just be ‘take it or leave it.’

PRIOR DAY LATER TWEETS:

• Later tweets: CAKE shares not to re-list until financial position is clarified. Valuation metrics all much-changed. Forensic accountants still at work on site.

• CAKE. Is rehabilitation possible? Or even desirable? Directors would need to go but a break up and a sale would be quicker.

• Duncan Garrood has stepped down as CEO of Bill’s restaurants less than a year after joining the company.

• Wage growth in the UK has risen to 3.1% in September from 2.7% in August. Good for spending power, bad for inflation

• UK inflation down to 2.4% in September. Wages rising at 3.1% suggesting squeeze on margins is replacing squeeze on incomes

• Kantar & J Lewis numbers show upmarket food-retailers M&S & Waitrose are down 3.2% and c1% LfL in recent weeks. Discounters booming

• Thomas Cook shareprice down again. Stands at 45p. Was almost 150p back in May. Brexit is an issue but group is majority non-UK

START THE DAY WITH A SONG:

Yesterday’s song was ‘I will Survive’ by Gloria Gaynor. Today who sang:

Oh, my friend you haven’t changed,

You’re looking rough and living strange

And I know you got a taste for it too oh-oh-oh

RETAIL NEWS WITH NICK BUBB:

• Games Workshop: It’s only a month ago that high-flying Games Workshop put out a trading update at its AGM that trading was in line with management expectations, despite tough comps, so it’s not clear why it has issued another update today, bar the fact that its shares have been under a bit of pressure… And the news is not exactly a triumph for clear language: “…trading to 7 October 2018 has continued well.  Compared to the same period in the prior year, sales are ahead and profits are at a similar level to the prior year. However, the Board remains aware that there are some uncertainties in the trading periods ahead for the rest of the 2018/19 financial year”. Make of that what you will…

• Intu Properties: The embattled shopping centre giant Intu has issued a “leasing update” today, to show that, in the words of CEO David Fischel, that “Despite wider industry challenges, exciting, innovative brands are choosing our prime locations which offer a compelling mix of retail, leisure and experience, and deliver reliably high footfall”. However, although Mazda, Shortlist Media, Monki, Oliver Bonas and Typo are among some of the latest brands to sign new leases with Intu, they do not exactly sound like “A-list” retail celebs and though Intu also trumpet the highly successful opening of Debenhams at the new intu Watford extension there is no mention of any other retailers yet opening in the extension…

• Planet ONS Watch: The hit to clothing sales last month from the warm weather and the slowdown in supermarket sales was enough to push the overall BRC-KPMG Retail Sales figures for September just below the line, on a LFL basis, but we will find out at 9.30am what “seasonally adjusted” life was like last month on the High Street on that strange parallel world, the Planet ONS (aka the Office of National Statistics), via their official Retail Sales figures…City economists generally expect a 0.3% dip in month-on-month seasonally adjusted sales volume, although Capital Economics have pencilled in a 1.0% fall (to give year-on-year volume growth of 3.0%), for what it’s worth. We will be looking, as usual, at the year-on-year non-seasonally adjusted sales value figures and the split in Non-Food between Large Businesses and Small Businesses, as the ONS persistently thinks that the latter are
outperforming …

• News Flow This Week: The new John Lewis Cheltenham store opens this morning and will be the last new John Lewis department store opened for some time…Ironically, it replaces the old 1980’s Beechwood Shopping Centre (of 140,000 sq ft)  that used to be anchored by Debenhams…