Langton Capital – 2018-10-26 – Consumer confidence, COMP, RCL, High St, Debs etc.:
Consumer confidence, COMP, RCL, High St, Debs etc.:
A DAY IN THE LIFE:
We asked last week ‘how do you give a bully bad news?’
The answer is carefully, rarely or never at all and that, of course, has consequences in that it stifles news flow and may exacerbate the ‘optimism bias’ and lead to inopportune decisions, a feeling of invulnerability etc.
And information flows will be further interrupted if the potential giver of bad news is either an employee or a paid agent or servant (literally is providing paid services for) the extremely strong minded individual or individuals mentioned above.
Because it’s short-odds that the boss has the answer to whatever question he or she has asked in mind already – and you fail to agree with them at your peril.
This may be one (of the many) reasons why Langton has yet to overtake the big accountancy firms or McKinsey etc in the world rankings for consultancy firms because, if you’re paid by somebody to tell them something, then the temptation is to find out what they think and agree with them as quickly as possible.
Perhaps we didn’t read the script as our inbox fizzes with venom as to how widely we’ve missed the mark on a fairly regular basis. Nonetheless, and this shouldn’t be a stock, the yes-man cometh. On to the news:
PUBS & RESTAURANTS:
• No new news from CAKE yesterday.
• Cautious consumer but some chances of a bounce next year.
• Deloitte’s Consumer Confidence Tracker has reported that ‘following a record high in Q2 2018, UK consumer confidence declined from -4 to -7 in Q3 2018.’
• Deloitte says this was ‘primarily due to a decline in sentiment about levels of disposable income, falling by 8 percentage points, its sharpest fall since the Tracker began in 2011.’
• Deloitte says confidence re jobs is still high but ‘consumer spending is also down on both essential and discretionary categories.’
• The Tracker comments that ‘consumers enter the fourth quarter in a relatively cautious mood. Their confidence will most likely be linked to how the Brexit negotiations progress and the manner of the UK’s departure from the EU.’ Deloitte says ‘for business and consumers the risks of a potentially abrupt and disruptive exit from the EU loom increasingly large. The implication is that a deal that secured an orderly exit could help bolster confidence across the economy.’
• Comptoir Libanais announces the November launch of its flagship site in Tooley Street, London Bridge. The 100-cover restaurant will take the group to 26 restaurants. November will also see the launch of the group’s fourth franchise operation in Cheshire Oaks.
• Lynx Purchasing warns operators to renegotiate coffee contracts with suppliers as commodity prices look to be on the rise.
• Debenhams plans yesterday confirmed fears that the High Street is in a bit of trouble. CEO Sergio Bucher says ‘it has been a tough year for retail in 2018 and our performance reflects that.’
• FT reports that market expectations are for a sharp fall in the value of High Street properties as operators continue to struggle. REITs are trading at discounts that suggest the asset values could drop by 16% to 19%. KPMG tells the paper that, during the financial crisis, a drop in market values for Reits preceded a fall in asset values.
• Amazon shares slid in the US as Christmas sales forecasts were edged back.
• Famous Brands, the South African-based owner of GBK has commented that the better burger chain has seen trade fall y-o-y with LfL sales down 8.2%, the MCA has reported.
• The fact that some of its most recent openings are included in its CVA would suggest that the group either pushed on too far with openings or was hit by higher rents. Or, likely, both.
• The Society of Independent Brewers (SIBA) has urged the Chancellor to think of the millions of people who brew, serve and enjoy the UK’s national drink when he delivers next week’s Budget. Mike Benner, Chief Executive of the Society of Independent Brewers, said: ‘The Chancellor has an opportunity on Monday next week to give a boost to UK pubs and brewers. Pubs are closing at an alarming rate and this hostile business environment is impacting on UK brewers, too. Unlike wine, the vast majority of the UK’s beer is made right here, in every constituency in the UK so this matters to every MP, too. The community pub and the local brewery are vital institutions, creating jobs, social spaces and helping to tackle important problems like in society like loneliness’.
• The average cost of a 25ml measure of ‘standard’ gin cost more than 500% more in the on-trade than it does in the off-trade, according to data from The Morning Advertiser.
• AB InBev’s shares have fallen 11% this month after the Belgian brewing giant slashed its dividend in half. The group have reduced their dividend in an attempt to reduced its debt following its SABMiller acquisition.
• In the US, the restaurant industry saw a three-week downturn at the end of September with industry traffic down 1.5 percent in Q3. Industry LfLs were down QoQ to +1.1% YoY in Q3.
• Sodexo partners with Taylor St Baristas to roll out coffee shop concessions to its clients, eventually to up to 400 sites worldwide. Coffee Business Week earlier this week reported that ‘opening sites that would combine a small espresso bar and training centre would be key to facilitating the barista training it had undertaken to provide to Sodexo. It would also allow the Taylor St business to grow, with a mix of retail locations and a wholesale coffee offer, served either from the London roastery or a new roasting solution set-up locally.’
• Taylor St says ‘we’re looking up and down the East Coast of the US and at the Benelux region as our core area of focus. We’re keeping our plans fairly fluid at the moment, as much will depend on where we activate sites with Chapter & Verse.’
• In further news, Taylor St is working with Detpak to deliver Precision, fully recyclable cups to its 10 coffee shops.
• Halfords ends talks over rescuing Evans Cycles, allowing Mike Ashley or someone else to take control.
HOLIDAYS & LEISURE TRAVEL:
• Royal Caribbean reports Q3 net income of $810.4m giving EPS of $3.86 per share, with gross yields up 1.9% in constant-currency. Gross cruise costs per APCD was up 0.2% yoy in constant currency.
• STR data shows US hotel occupancy up 0.4% to 73.2% for the week ending 20 October, with ADR up 3.2% to $135.67 and RevPAR increasing by 3.6% to $99.32.
• The CAA confirms travel agency Lee’s Travel has ceased trading. The company was licensed to carry almost 5,000 Atol-protected passengers in the 12 months to March 2019.
• Iata urges the UK and EU to provide certainty to three ‘critical’ air transport issues, these being the uninterrupted continuation of air connectivity, the framework for regulating safety and security, and the policies and processes needed for efficient border management.
• Trivago reports Q3 net income of €10.1m compared to a €7.7m loss last year. Shares rose by as much as 2% to $6.25 on the news.
• WPP shares fell by as much as 22% after warning on growth in the business, slashing its full-year outlook. The firm is currently fighting off increased competition from Google and Facebook in advertising.
• Fast Feet Academy, a Sunderland-based football training company, will become a franchise business in a move to expand nationally.
• Elon Musk claims Tesla will remain profitable after Tesla reports earnings of $311.5m in Q3.
FINANCE & ECONOMICS:
• The NIESR has said, conditional on a ‘soft’ Brexit, the Chancellor will have the room to borrow an additional £16bn per year between 2019 and 2022. The NIESR says ‘the UK economy has recently gained momentum with quarterly GDP growth expected at 0.7 per cent in the third quarter after more or less stalling in the first.’
• NIESR says growth should be 1.4% this year and 1.9% next year in the event of a soft Brexit. Under an ‘orderly’ hard Brexit, 2019 growth would be 0.3%. It cautions ‘there is an enormous amount of uncertainty around these forecasts.’
• The NIESR says there is a 2% ‘gap’ between spending plans and incomes under a ‘soft’ Brexit. The gap is considerably larger under any other scenario.
• US growth came in at an annualised 2.9% in the 18mth period since April last year.
• ECB keeps reates unchanged and sticks to plans to calw back QE. ECB boss Mario Draghi says businesses on the Continent need to prepare for a no-deal Brexit.
• Sterling down at $1.2819 and €1.1276
• Oil up at $78.36
• UK 10yr gilt yield unchanged at 1.44%
• World markets up yesterday. Far East mixed in Friday trade.
• Brexit limbo persists.
PRIOR DAY LATER TWEETS:
• Later tweets: Busy day for Pat Val yesterday. Winding up order gone, options incorrectly reported, Luke on board at Stonebeach
• CAKE CEO & CFO made profits of £4.5m on this-year share sales. Directors & family sold £42m of stock in IPO at 170p.
• GBK CVA has large number of recent restaurants to close. Co didn’t even tap the brake pedal, drove full pelt into brick wall
• GBK opened too many, too quickly. Add in ‘high rent, generic offer, discounting’ and we have today’s CVA becoming inevitable
• Markets steadying as the ‘drop from an edge or from a ledge’ debate continues. Will only all be clear with hindsight.
• ScS says its concession business in H of Fraser down by no less than 52%. What future the department store? Debenhams dumping 50 of them
• Debenhams’ upbeat comments on food sales, both own and concessions, suggests operators there are helping keep footfall up
• Does appointment of Luke J to board of Stonebeach mean search for smoking gun is narrowing? Looks like a good place to start
START THE DAY WITH A SONG:
Yesterday’s song was The Drugs Don’t Work by The Verve. Today, who sang:
So many days you passed me by,
You saw the tears standin’ in my eye
You wouldn’t stop to make me feel better
By leavin’ me a card or a letter
RETAIL NEWS WITH NICK BUBB:
• Today’s Press and News: The bombshell that the beleaguered Philip Green is alleged to be the litigious businessman behind the gagging of the #MeToo revelations in the Telegraph obviously dominates today’s papers, overshadowing both the Debenhams store closure news and the news that ScS is pulling out of its House of Fraser concessions. Despite his vigorous denials of any wrong-doing, the front page headlines range from “Named and Shamed” in the Daily Mail to “MPs call for Green to be stripped of knighthood” in the Times and there are plenty of photos of a furtive-looking Philip Green, although the Guardian is surprisingly restrained.
• Pendragon: The UK’s biggest car dealer Pendragon (aka Stratstone and Evans Halshaw) warned last Friday that the introduction of Worldwide Harmonised Light Vehicle Test Procedure (“WLTP”) was causing further damage to new car sales and that underlying PBT for 2018 was expected to be only £50m (versus c£60m last year). The detailed Q3 update today gives more figures, eg new car sales were down 9.1% LFL, but there is no further news, although it has also flagged the increased costs from the investment in “used car factories” (whatever they are…).
• Trade Press: Retail Week magazine has not been published this week, despite the plethora of Retail news, but Drapers magazine is out today and the Editor highlights in her column that, following in the footsteps of other social media sites like Instagram and Snapchat, Pinterest is launching a shopping feature that links “pinned” images directly to product pages on retailers’ websites. In terms of News stories, Drapers focus on the news that “Retailers demand more action on Business Rates” ahead of the Budget and the Reiss chain has reported improved trading. Drapers also flag that a new shopping and restaurant district, Coal Drops Yard, has just opened in King’s Cross and the Icon Outlet shopping centre has opened at the O2 in Greenwich.
• BDO High Street Sales Tracker: We flagged on Wednesday that Home sales at John Lewis struggled yet again last week and today’s BDO High Street Sales Tracker for medium-sized Non-Food chains for last week, w/e Sunday Oct 21st, highlights that their Homeware sales (including Online) were down by 3.2%. But BDO Fashion sales were up 5.9% last week, however, against weak comps, and Total sales were up by 3.3% (flat in terms of Store LFL sales and up 15.6% Online).
• News Flow Next Week: The week kicks off on Monday, unusually, with the Autumn Budget at 3.30pm. And with the end of the month coming up quickly now, we also get, on the Economics front, the latest CBI Distributive Trades Survey, for what it’s worth, on Monday morning and the latest GFK Consumer Confidence index first thing on Wednesday (ahead of the latest MPC interest rate decision and Bank of England Inflation Report on Thursday at noon). Otherwise, the highlight of the week is the Next Q3 update on Wednesday, although it is also a big week for Carpetright (the first half pre-close update is on Thursday morning), Intu Properties (the John Whittaker “PUSU” bid deadline is Thursday afternoon) and Apple (the Q4 results in the US are out on Thursday evening).