Langton Capital – 2018-11-09 – RTN / Waga, JDW, Prezzo, High Street, US restaurants…:
RTN / Waga, JDW, Prezzo, High Street, US restaurants…:
A DAY IN THE LIFE:
Bit of a rush today due to company visits yesterday evening but here’s a thought for you: how long do you have to fly the idiot flag before you can be legitimately labelled an idiot?
Not too many, may be the answer. On to the news:
PUBS & RESTAURANTS:
• Restaurant Group Wagamama documents should be priced and printed and despatched today if the group is to stick to its November timetable.
• Any rights price below 200p would imply potential dilution in the short term as a result of the deal.
• Any rights price above that level could leave the underwriters with shares if current holders baulk at the price being paid.
• JDW shares recovered some ground yesterday.
• So, Prezzo has reported an absolutely humumgous loss to Companies House, has it? At the time of writing, the report is ‘still being processed and will be available in five days’ but, according to reports, it’s dropped in the region of £200m as it concludes that pretty much everything it has done for a few years has not necessarily been right and that it has flushed much of its bondholders’ money down the toilet.
• It’s likely that this isn’t the outcome that the funders of Prezzo had envisaged when they raised money to fund the company’s continued expansion but, as they continued to plough money into the arguably me-too, undifferentiated brand, it’s tempting to ask which part of ‘when you’re in a hole, stop digging’ they didn’t understand.
• The Local Data Company has reported that the rate of closures across high street leisure operators accelerated in H1 this year.
• Report suggests that the rate of openings actually picked up but the rate of closures increased much more markedly.
• Overall vacancy rates are once again on the rise having fallen in the period since the credit crunch in 2008 and 2009. November vacancy rates are reported to be up to 11.4% from 11.0% last year.
• PwC has similarly reported that around 14 shops are closing every day as UK high streets continue to struggle.
• PwC says a net 1,123 stores disappeared from Britain’s top 500 high streets in the first half of this year. The accountancy and consultancy firm says that fashion and electrical stores suffered most obviously. LDC has suggested that leisure operators are no longer taking up the slack.
• PwC reports that London was the worst-hit region with Wales having the lowest number of closures. PwC comments ‘looking ahead, the turmoil facing the sector is unlikely to abate. Store closures in the second half of the year due to administrations and company voluntary arrangements already announced will further intensify the situation.’
• UKHospitality welcomes the launch of the London at Night report with CEO Kate Nicholls saying ‘This report will provide the Mayor’s Office and the Night Time Commission with the insight needed to act to promote London’s night life.’
• In the US, Papa John’s reported Q3 same-store sales down 9.8%, with international same-store sales down 3.3%. Revenue was down 15.7% to $364m with a net loss of $13m.
• CEO of Sainsbury’s, Mike Coupe, warns food ‘can’t be stockpiled’ in preparation for a no-deal Brexit.
• US restaurants saw LfL sales growth of 0.8% in October per TDn2K. This was driven by an increase in spend with visitor numbers still under pressure. TDn2K says ‘as the industry heads into the fourth quarter, the fear was that tougher sales comparisons from Q4 of last year would throw restaurant sales back into negative growth territory.’
• US restaurant ‘traffic’ is reported to be 2.2% down October this year on last year with spend sufficient to produce a net positive result.
• Washington is preparing to clamp down on flavoured ecigarettes in the US per reports.
• CBRE has reiterated that customers are moving towards leisure experiences, with customers focusing on what they do instead of what they own.
• Gemma Jones, co-head of immigration at legal experts SA Law has stated that the Prime Minister’s immigration policy shows a lack of understanding about the hospitality sector.
• Sintons has been appointed as the construction partner to redevelop the Vaux Brewery site in Sunderland.
• Sainsbury’s has announced that consumer spending looks ‘uncertain’ as the retailers ready themselves for Christmas trading.
• A study has shown taxing meat could save the UK economy more than £700m in healthcare costs and prevent almost 6,000 deaths a year.
• The Royal Society for Public Health reports coffee shops are replacing pubs as a place to socialise, drink and eat. Its report suggests that coffee shops revitalise town centres, boost economic performance and support regeneration.
• The Coffee Shop Report announces lattes are the most popular type of coffee, followed by tea, Americano and then flat white.
• Wendy’s Co reports Q3 same-store sales down 0.2% and traffic down slightly, with the company saying it needs to move away from discounting and encourage customers to buy more premium products.
HOLIDAYS & LEISURE TRAVEL:
• US inbound visitor numbers are recovering per the U.S. Travel Association and the American Hotel & Lodging Association. It says ‘widespread growth in global GDP supports strong growth in global long-haul travel,” he said, defining long-haul travel as international trips taken by people around the world outside of their home continent.’
• Amadeus the IT group has reported revenues have increased 4.6% to €3,684m over the last nine months.
• Two new Roomzzz hotels in York and Newcastle with a combined value of £20m are to be built with help from Leeds-based firms Adept Consulting Engineers and The Broadley Group.
• Members of the World Travel & Tourism Council urge the government to support the sector through the Brexit process, visiting number 10 to make their point. WTTC research shows that travel and tourism contributes 10.5% of the UK’s GDP.
• Melia Hotels International will open its third London property in December in Kensington, featuring 81 rooms, a restaurant, bar and meeting rooms.
• Iata figures show global airline passenger demand up 5.5% yoy in September but down on August growth of 6.4%. Overall capacity increased by 5.8% but load factors were down 0.3% to 81.4%. Iata director general and CEO Alexandre de Juniac said the slowdown ‘is likely owing to the anticipated reduced demand boost from lower air fares due to rising airline cost pressures, particularly fuel.’
• Grab, the Singapore-based ride sharer, secures $250m investment from Hyundai and Kia> to date the company has raised a total of $2.7bn.
• Choice Hotels International reports Q3 net income of $80m with adjusted EBITDA up 11% to $103.6m. The company has raised full-year expectations.
• STR reports US hotel occupancy down 0.7% to 62.9%, ADR up 0.7% to $124.81 and RevPAR down 0.1% to $78.54 for the week ending 3 November.
• Bleisure, the trend of combining business trips with leisure, rose by 46% yoy in 2017 according to SAP Concur. Emma Maslen, MD of UK enterprise at SAP Concur, commented ‘Bleisure is a rising trend across the globe. Increasingly as employees seek to achieve a better work-life balance, they don’t want to only see the airport of a city.’
• Per CBRE, despite the variable weather so far in 2018, cinemas remained resilient with Cineworld reporting H1 revenues up 2.5% despite a fall of 2.7% in admissions.
• Samsung reveals its new foldable phone in a bid to reverse steep declines in profit for its mobile division, partly due to intense competition from Apple.
• Disney announces plans to release a new Star Wars spin-off on a new video streaming site. Disney earned record annual results this year, making profits of nearly $12.6bn on $59.4bn in revenue.
FINANCE & ECONOMICS:
• The ICAEW has reported that ‘business confidence has fallen to its lowest level for nearly a decade – reflecting lack of progress on Brexit negotiations.’
• ICAEW says business confidence has fallen from minus 0.2 in Q3 to minus 12.3 currently. It says ‘the decline is widespread across most sectors and all regions.’
• ICAEW says ‘despite low confidence, growth in sales volumes is still around 4% and is expected to remain at this rate over the next 12 months. Profit growth is marginally down, as are expectations over the year ahead.’
• Sterling mixed at $1.3048 and €1.1497
• Oil down at $70.84
• UK 10yr gilt yield up 3bps at 1.57%
• World markets mixed yesterday, Far East down today.
o Cabinet meeting yesterday produced no fireworks. Or stated solution etc.
o Dominic Raab has said that he did not realise how important the Dover-Calais crossing was for British trade
PRIOR DAY LATER TWEETS:
• Later tweets: JDW. Q1 LfL +5.5% but no comment on margin, expectations for full year cut & shares drop. Bouncing this morning.
• JDW reiterates Labour costs critical. Hard to pass on, need to save money. Could help innovative companies & grill innovation
• Restaurant Group is on tour in the City and elsewhere trying to sell its Wagamama deal to somewhat sceptical shareholders.
• RTN on a mission to convince £4m per (leasehold) restaurant is an opportunity rather than a mover from a position of weakness.
• The number of restaurants closing in London has hit a 28-year high. Harden says 2015-16 was ‘peak restaurant’
• Brexit was never a choice between a ‘dream’ exit & Remain but rather between an ‘achievable’ Brexit & status quo. Everyone currently upset…
START THE DAY WITH A SONG:
Yesterday’s song was A Message to You, Rudy by The Specials. Today, who sang:
You know it seems the more we talk about it,
It only makes it worse to live without it
But let’s talk about it
RETAIL NEWS WITH NICK BUBB:
• AO.com: If you’ve ever wanted to buy a mobile phone from AO.com, to take advantage of its legendary customer service, then you will soon be able to, as AO.com has agreed to buy the Online phone retailer Mobile Phones Direct for c£33m. Echoing the ill-fated rationale for Dixons to buy Carphone Warehouse, CEO Steve Caunce says “With 5G services expected to launch over the next two years and as the electrical products we sell become more connected than ever before, moving further into the mobile market is a logical next step for us”. The price seems reasonable (just under 6x EBITDA for y/e March 2018), given how quickly MPD is growing, although the City will want to know how conservative its accounting policies are. And the City may be concerned by the tone of the detailed trading update for the 6 months to end Sept, with UK sales growth only c6% and Q2 growth slowing in Germany. AO say
• Trade Press: Retail Week magazine has not been published today, but Drapers magazine is out and, although it went to print before the M&S interims, the Editor contrasts M&S’s struggles with the success of Primark in her column, thundering that “Strong medicine is required to survive”. In terms of News stories, Drapers focus on the news that Fashion retailers are at risk of delays to deliveries of stock in the run-up to Christmas and beyond, as a result of a “perfect storm” of congestion at the UK’s largest container ports and a shortage of haulage drivers. Drapers also flag that at least two credit insurers have withdrawn cover from suppliers to Footasylum and that the ratings agency Moody’s has downgraded its long-term outlook for Debenhams (to Caa1, from B2). Drapers also have a review of Selfridges’ refurbished Menswear floor in Oxford Street.
• BDO High Street Sales Tracker: We flagged on Wednesday that sales at John Lewis again struggled a bit last week, despite the boost to Fashion from the cooler weather, but today’s BDO High Street Sales Tracker for medium-sized Non-Food chains for last week, w/e Sunday Nov 4th, highlights that BDO Fashion sales were up by 8.4% last week (including Online) and Total BDO sales (Including Homewares and Lifestyle sales) were up by 6.6% (+1.5% in terms of Store LFL sales and up as much as 28.9% Online).
• News Flow Next Week: Next week is less busy, but there’s still quite a lot going on, kicking off on Monday with the Dignity Q3 update. Tuesday bring the B&M interims and the latest Kantar/Nielsen grocery sales data (for the 4/12 weeks to Nov 3rd/4th). On Thursday we get the Card Factory Q3 update and the ONS Retail Sales figures for October, as well as the Asda/Walmart Q3 results. It is also a big week in the world of the beleaguered Shopping Centre landlords, with the interims from Land Secs on Tuesday and British Land on Wednesday, ahead of the revised “PUSU” deadline on Thursday for the John Whittaker consortium over its bid for Intu Properties.