Langton Capital – 2019-01-04 – Stonegate, Wagamama, Gear 4 Music, Whitbread & other:
Stonegate, Wagamama, Gear 4 Music, Whitbread & other:
A DAY IN THE LIFE:
We had a few visits to the vet pre-Christmas, which culminated in the very pleasant and concerned practitioner putting the rabbit on a drip.
I kid you not but, when he suggested that it might be better to keep the thing in for observation overnight at their intensive-care facility somewhere in the Yorkshire area, I had a vision of them calling in an air-ambulance and half a dozen be-gowned veterenarians stretchering it into a £1,000 per hour aircraft and whisking it off to Leeds.
We thought, on balance, that this wouldn’t be necessary but, as the poor animal expired shortly after, we may have been wrong. It’s a rather briefer-than-normal email today as we are shortly on our travels for the rest of the day. On to the news:
CHRISTMAS & NEW YEAR 2018:
• Further feedback suggesting that a number of smaller operators are performing well with LfLs of up to 15%.
• See Stonegate below.
• This is a selective sample and tends to be more wet-led. Some food-operators are considering that the Christmas period could extend till this weekend coming as the kids don’t go back to school until next week.
• On that point and admittedly with a sample of only one family, we’re down in London with school aged offspring & couldn’t get into a popular pizza restaurant in the (nearly empty) City of London yesterday evening.
• Xmas Day looks to have been strong. The weather, apart from Sat 15th, was pretty benign.
• Affluent areas & city centres seem to have done well. Delivery up on last year.
• A number of operators have pointed that, not only is it a long drag till payday in January (five or even six weeks from the last payday) but, with a late Easter, it’s a long time until the next major ‘events’ (Valentine’s Day excepted) that could / should lift the sector.
• All of the above comments are regarding revenues. Margins are likely to have been lower due to discounting, delivery % rising, other costs increasing and general customer parsimony.
PUBS & RESTAURANTS:
• Stonegate has updated on trading from 1 Dec to 1 Jan saying ‘all of the Group’s formats and regions performed well during festive trading with total like for like sales growth up 7.8%, following a strong performance over the festive period last year (2017: up 5.5%).’
• Stonegate says ‘on the season’s key trading days, including Christmas Eve and New Year’s Eve, Stonegate’s sales were up on average 8.3% and in the two weeks from 17 December they were up 12%.’
• Stonegate reports that pre-bookings were up and CEO Simon Longbottom comments ‘I am delighted to report a strong festive trading period for Stonegate – crowning another year of significant progress for the business. Our like for like sales have increased again driven by our multiformat strategy, relentless focus on customer service and bolstering our market share in our local markets. Our success shows that there is value in a drinks-led, high street focused strategy.’
• Stonegage continues ‘encouragingly, all of our trading formats and regions performed well and it was particularly pleasing to see the sites and brands we acquired in 2018 contributing to this. Our investment in our prebooking facilities resulted in a double-digit increase in like for like bookings enabling us to maximise the trading opportunity from key festive events, such as New Year’s Eve and Boxing Day Football. We have entered 2019 with positive momentum.’
• Wagamama has reported to bondholders on its Q2 (to end-Dec) saying that turnover rose 15.4% to £81.5m with UK company owned revenues up 16% at £78.0m.
• Wagamama reports q2 US revenue up 17.4% at £2.7m.
• Wags reports Q2 LfL growth in the Uk of 12.0% with 134 stores open at end-Dec compared with 128 the year before.
• Gross margin has increased in total to £33.8m (from £29.9m) implying that it fell in % terms from 42.4% to 41.5%. Both costs and delivery as a % of total sales are likely to have risen. The mix change will have depressed margin.
• Wags reports that ‘administrative expenses before exceptional items increased 25.7%’.
• EI Group yesterday bought back 112,422 of its own shares for cancellation at 189.2p per share.
• Whitbread completes the sale of Costa to Coca-Cola for £3.9bn in cash. Whitbread intends to start a share buyback programme, likely to commence after its Q3 update on 17 January as well as making a £380m one-off contribution to its pension fund.
• The Centre for Retail Research reports a total of 10,413 job losses in UK casual dining during 2018 as the sector faced overcapacity and rising operational costs.
• Peroni Nastro Azzurro launches Peroni Libera 0.0%, its first alcohol-free beer which will be available in Tesco stores this month.
• Hogs Back Brewery launches its ‘TEA Total’ campaign for January with the TEA standing for its flagship beer Traditional English Ale.
• Amazon is ramping up its grocery arm by introducing its two-hour delivery service to all Whole Foods stores in the US.
• Crussh Fit Food & Juice Bars will launch a 100% vegan pop-up store in Soho during January 2019.
• Michael Gove has warned there could ‘considerable turbulence’ for British farmers in the event of a no-deal Brexit. Mr. Gove continued stating that it was a ‘grim and inescapable fact’ that leaving the EU without a deal would lead to new export tariffs and border checks.
HOLIDAYS & LEISURE TRAVEL:
• Representatives from Abta, UK operators and travel businesses in the Balearics will attend a summit in February to discuss a proposed alcohol clampdown at all-inclusive hotels, aimed at reducing ‘uncivil tourism’ in the islands.
• Pitchup.com, a camping website, reports bookings up 35% yoy in the week from Boxing Day, with domestic bookings soaring.
• Egencia reports New York is the most popular destination for business travel for a fourth year running, with London second and Paris third.
• Ryanair has secured a UK operating licence, which means that the airline will be able to continue domestic flights and flights from Britain to outside the EU in the event of a no-deal Brexit.
• G4M reports that FY19 EBITDA will be down on FY18.
• Gear4music has updated on trading for the 4mths to 31 Dec saying that sales rose by 41%. The company says this was ‘driven by significant customer demand, delivering strong growth both in the UK as well as Europe and the Rest of the World.’
• G4M says ‘further sales growth in excess of expectations was constrained by our York distribution centre, which reached maximum capacity during the peak trading period between Black Friday and Christmas. Whilst there was an improvement in margins in the Period compared to H1 FY19, these capacity constraints prevented further sales growth compensating for the lower gross margins and, as a result, the Board now expects FY19 EBITDA to be slightly below FY18 levels.’
• The group says ‘we are pleased to have delivered strong sales growth of 41% over the last four months, building on the 36% sales growth achieved in the first half of the year. In addition, our strategic initiative to expand in to Europe has shown further good momentum, with sales growth of 47% in the Period, an increase from 39% at the half year.’
• G4M reports ‘we are already working on plans to further expand our UK distribution capacity ahead of our peak trading period next year and we are confident that this can be achieved by Autumn 2019.’
• Chelsea FC report record revenue of £443.4m last year, up 22.7% yoy. Chelsea made a £113m profit on player sales during the period, while broadcasting revenues rose £41.7m to £204.1m.
FINANCE & ECONOMICS:
• The UK Construction PMI slipped in December to 52.8 from 53.4 in November. Any number over 50.0 implies expansion but Markit comments ‘UK construction firms indicated a disappointing end to 2018 as business activity growth eased to a three-month low and new orders expanded at a relatively subdued pace.’
• Markit reports ‘UK construction firms signalled a slowdown in housing and commercial activity growth during December, which more than offset a strong performance for civil engineering at the end of 2018.’
• Sterling up a bit at $1.2634 and €1.1089.
• Oil stronger at $56.39
• UK 10yr gilt yield down 2bps at 1.20%
o Tory ministers including pro-Brexit environment secretary Michael Gove are suggesting that a no-deal Brexit would negatively impact the economy.
o The BBC reports that the firm awarded a government contract to provide extra ferry services by the government has used cut-and-paste website terms and conditions apparently intended for a takeaway food firm.
o A YouGov poll has suggestetd that more 57% of Conservative Party members favour a no-deal Brexit over PM Mrs May’s current proposals. Only 23% favour Mrs May’s deal.
PRIOR DAY LATER TWEETS:
• Later tweets: Xmas trading feedback. Some cracking performances from smaller, wet-led & city centre operators. Food & larger players more mixed.
• Vulnerable retail property values. Rents may not be sustainable. Who will fill void space? Residential? Experiential? Only at lower rents…
• Dominos is offering 35% off orders over £25. Carluccio is offering a second main meal for £1. Discounting to pick up in next couple of weeks?
• Construction PMI miss in Dec at 52.8. Says ‘firms indicated a disappointing end to 2018’ & ‘intense headwind from political uncertainty’
• NXT bounces on Xmas update, online +15.2%, bricks & mortar down around 10% LfL. Little change to forecasts
START THE DAY WITH A SONG:
Yesterday’s song was Shine on you crazy diamond by Pink Floyd. Today, who sang:
Sail on silver girl,
Sail on by
Your time has come to shine
All your dreams are on their way
RETAIL NEWS WITH NICK BUBB:
• Debenhams: Last year Debenhams rushed out a profit warning the day after the Next update and so we were braced for some bad news today, but no such warning has been forthcoming so far. That may mean that Christmas was no worse than expected in the end…Or it may just mean that the embattled Debenhams want to see how stock clearance goes this week before coming clean with their banks and restructuring advisers. Or it could mean that Debenhams are simply trying to keep quiet, for fear that anything they say will inflame Mike Ashley and encourage him to throw his weight around at the AGM next Thursday. One announcement that has come from Debenhams this week, by the way, is that the venue of the AGM has been changed….from the HQ near Kings Cross to the nearby ORT Conference centre in Camden. In theory that would make the AGM on the 10th more open and accessible to the outside world, so it