Langton Capital – 2019-01-07 – Xmas & early Jan, discounts, CVAs, holiday bookings etc.:
Xmas & early Jan, discounts, CVAs, holiday bookings etc.:
A DAY IN THE LIFE:
Langton was in Brussels on Friday testing out the Eurostar but, this now being the first full week of 2019, we are running out of excuses as to why we’re not getting down to work.
See comments on Hard Work in Leisure below. On to the news:
CHRISTMAS & NEW YEAR 2018:
• Overall feel that Christmas & very early January has traded well. There are some very impressive LfL figures out there.
• Weather comps have been helpful and, materially, with a late Easter this year, there has been no hurry to get the kids back to school this year. Many start tomorrow meaning that Christmas has been extended.
• Food operators & the like suggesting that the week just commencing could be the first truly comparable one for some time.
• That said, the negative pressure could be substantial given ‘borrowing’ to spend over Xmas and some allowances will need to be made if trading this week and next (and in the long run up to the January pay-day) seems to be unduly bad.
PUBS & RESTAURANTS:
• Discounting picking up. Toby & Harvester (M&B) offering 40% off mains, Pizza Hut 41% off food, Pizza Express 2-4-1 (about 50% off), Carluccio, second main for £1 (about 45% off). Prezzo offering 30% off mains & Jamies Italian also offering 30% off main courses.
• Salad chain Tossed has reported full year March 2018 numbers to Companies House saying that ‘the group operated from 17 company-owned Tossed-branded stores at the start of the year and opened one more and closed two during the period’. The acquisition of Vital adds 13 stores to the company’s estate.
• Tossed reports that revenues slipped from £10.0m last year to £9.4m for the year being reported. The group made a 2018 operating loss of £1.4m (2017: loss of £82k) and it now has has accumulated losses since incorporation of £4.7m. The group has negative shareholders’ funds of some £125k.
• Tossed reports that ‘cost inflationary pressures meant stores are converting the lower turnover at reduced margin.’ It says the group reported a negative EBITDA in 2018 but adds that ‘since the year end, this position has reversed, and we have been enjoying a steady period of growth in normalised EBITDA’. The group will have been aided by the hot weather during summer last year.
• Kerb Food has reported full year numbers to end-March 2018 to Companies House showing that retained profits rose by around £75k to c£153k. The group has positive shareholders’ funds of c£153k.
• Accountant Deloitte has reported that 125 retailers went into administration in 2018, up 6% from 2017. It says within this number were 26 were large retailers, compared to 17 in 2017.
• Deloitte says there was a ‘53% increase in retail CVAs in 2018 – and a seven-fold increase in the number of large retailers choosing CVAs as a restructuring method’. It says ‘the number of large multi-site retailers (those with more than 10 stores) entering into a CVA last year increased significantly to 13, from just two in 2017. Large multi-site retail administration appointments also increased from 17 the previous year to 26 in 2018.’ Deloitte reports ‘consumer confidence fell in the third quarter of 2018, which, combined with inflation-driven pressure on disposable incomes, has contributed to twelve consecutive months of declining footfall.’
• Deloitte comments ‘the rapid decline in the performance of the high street has driven bricks and mortar retailers to increase their levels of discounting to counter this. This comes as retailers continued to face increasing staff and property costs, and a weaker Sterling. Online retailers however have fared better, accounting for a record 21.5% of all UK retail sales in November.’
• Caprice Holdings has reported that a fire that broke out at its Manchester Ivy restaurant was ‘quickly contained’.
• Research from CGA has indicated that the trend towards lower calorie, alcohol-free and vegan foods is to extend beyond Dry January or Veganuary. November’s Business Confidence Survey from CGA and Fourth, for the out of home eating and drinking sector, has revealed that healthy options have increased in importance for over half, 55%, of businesses.
• EI Group Friday bought back 270k of its own shares at 191p.
• Gizzi Erskine and Rosemary Ferguson have launched a three-month residency of their vegetarian burger concept F!lth, in Shoreditch, London.
• Brewdog has recorded LfL sales up 4.1% in the UK in 2018, with the group announcing it intends to open another 20 in the next year taking its estate to around 90 bars globally.
• Carluccio’s has stated that it will pay fees for its 1,550 EU staff member to apply got ‘settled status’ in the UK, if they so desire.
• Research from the British Beer and Pub Association has estimated that three million traditional dinners were served up on in pubs on Christmas Day.
• Manchester Gin is set to open a new distillery, bar and restaurant in Manchester.
• Gusto reports December sales up 7% LfL, with the Italian restaurant operator experiencing strong performance for the year to date.
• In the US, Del Frisco’s Restaurant Group reports LfL sales up 0.2% in Q4 to 25 December across all four brands combined.
HARD WORK ON LEISURE:
Langton decided that it would use ‘supporting the leisure industry Europe-wide’ as an excuse to get some in over the weekend. Below is an incomplete list of what we got up to:
• Friday. St Pancras Costa Coffee. Quite busy, efficient service, quality good, price scandalous for a half pint of hot milk with an expresso dunked in it. But wadya gonna do?
• Eurostar. Buffet car too far away. Coffee Brussels. Moevenpick. Miniscule with a titchy chocolate. Pricey at €15 for four (incl. tip). 30c to use the loos. An experience.
• Meal, Brussels. Price around €85 for four, quality probably OK but hard to tell, given the pervasive taste of prunes. Odd with beef. Service? Pretty much what you’d expect when ‘capital city meets foreigner’. Bit of sneering going on & the odd curled lip. Water off a duck’s back. Witbier strong. Bit of a buzz on.
• Museum, Grote Markt then waffles & coffees. Brussels. Haagen Daz. Price, can’t remember but around €25 for four. Calories? Don’t ask. Probably north of a thousand per serving. Service, somewhat bemused.
• London, Portobello Road market, Saturday. Asking price for ‘potato springs’ (spiral fried potatoe peel on a stick), £4.00 for half a spud. Street food looked interesting.
• Franco Manca Westbourne Grove, mid-afternoon pizza for four. Bill £52.30 including beers & tip. Service authentic. Product good. Restaurant ticking over at 3.30pm with c20 covers active. Nearby restaurants deserted.
• Queensway Skate, Dine & Bowl. Pretty busy but checked it out. Did none of the above.
• Cittie of York. Sam Smiths. Moderately busy. Old Brewery Bitter £3.40 per pint. Service pretty good, décor interesting, cavernous etc. Honest, no frills etc.
• Bank of England Pub. Fleet Street. Fuller’s. Empty. Frontier Lager at £5.85 per pint. Service fine. Maybe a hint of smirk when presenting the bill. Décor wonderful but unit very pricey.
• Cheshire Cheese. Sam Smiths. Pretty busy. Tadcaster’s best White Beer at £4.95 per pint. Intriguing pub known to many with an interest in these things.
• The Blackfriar’s. Mitchells & Butlers. Camden Hells at £5.45. Best not to think about the price. Nicely busy. Some seats available. Service professional, unit known to many. Interesting, nonetheless.
• Sunday. Petticoat Lane, Spitalfields, Brick Lane & Colombia Road Flower Market. Overdosed on markets. Couldn’t get a seat in The Birdcage. Bit of streetfood.
• Food too fussy for a picky 12yr old in a number of Shoreditch pubs (Water Poet, Owl & Pussycat, Crown & Shuttle etc.) so it was the Crosse Keys. JD Wetherspoon. Hop House lager rolled in with meal. £43.65 for four. Price can’t be beat. Quality OK. Décor: suffering a bit post Christmas & some tweaks re carpets etc. going on.
• Coffees maybe 20. Meals bought out, around 12. Snacks, numerous. Vouchers used, nil. EDLP (everyday low pricing) outlets used, two. Pretentiousness count, low.
• More tired after a ‘rest’ than was before it, alco units: material, calories consumed: high, steps c60,000. So let’s call that one ‘broadly’ even.
• A lot of European tourists in London, fewer UK tourists in Brussels. Eurostar; easy going out, less easy getting back to the UK given border checks etc.
• Cost? Don’t go there. Didn’t push the boat out but trains to London then Brussels, meals, drinks, museum entry, knick knacks etc and it all adds up. May have to root out cheaper options going forward.
HOLIDAYS & LEISURE TRAVEL:
• Travel reports a positive start to 2019 bookings with up to 5.2m people predicted to book a holiday this month, with 5 January dubbed ‘Sunshine Saturday’. However, some companies forecast a late sales surge due to Brexit fatigue.
• STR reports US hotel occupancy down 1.8% to 50.9%, ADR down 0.5% to $130.57 and RevPAR down 2.3% to $66.52 for the week ending 29 December.
• Venice is set to introduce an entry fee of up to €10 for day visitors, with the mayor describing it as a ‘landing tax’. The tax is designed to better manage the tourism burden on the city.
FINANCE & ECONOMICS:
• Services PMI a little ‘subdued’ says Markit. Came in at 51.2 in Dec up from 50.4 in November. Markit says ‘subdued growth conditions persisted across the UK service sector at the end of 2018, with business activity rising at one of the slowest rates seen over the past two-and-a-half years.’
• Markit says ‘new work increased only marginally during December, which contributed to a slowdown in job creation to its weakest since July 2016.’ Input cost inflation has moderated somewhat, largely as a result of lower oil prices.
• Markit comments ‘the service sector…is now showing worrying signs of having lost steam amid intensifying Brexit anxiety. The final two months of 2018 saw the weakest back-to-back expansions of business activity since late-2012 and highlight how clarity on Brexit is needed urgently in order to prevent the economy sliding into contraction.’
• PMI all Sector PMI indices rose marginally to 51.6 in December from 51.0 in November.
• Nationwide reports British house prices are rising at their slowest rate since Feb 2013 with prices up well below the rate of inflation at 0.5% in the year to December.
• Fed Chairman Jerome Powell has said that the US Central Bank may be more patient re rate rises going forward.
• Sterling up at $1.2748 and €1.116.
• Oil up at $57.85
• UK 10yr gilt yield up 8bps at 1.28%.
• World markets all higher Friday with Far East up today.
o Back to ‘normal’ with the House of Commons debating Brexit before voting on Mrs May’s deal on 14th or 15th.
o Mrs May says the vote will ‘definitely happen’ this time. See her December comments on the same issue, on the promise of no snap election in 2017 etc.
o Mrs May has said there will be no referendum. But see comment above. Mrs May is being accused of trying to run down the clock in order to bounce doubting MPs into supporting her deal. DUP says is remains dissatisfied with proposals to tie Ulster to the Republic.
o Reuters reports YouGov poll as saying that majority of UK voters now wish to remain in the EU. Voting would be 46 to 39 YouGov says. The number of ‘unknowns’ remains material.
START THE DAY WITH A SONG:
Last Friday’s song was Bridge Over Troubled Water by Simon and Garfunkel. Today who sang:
When I hold you in my arms,
I know that I can’t do no wrong
And when I hold you in my arms
My love won’t do you no harm
RETAIL NEWS WITH NICK BUBB:
• Saturday Press and News (1): There were a few snippets in the Saturday’s papers about the big losses filed by the once booming Online fashion business Missguided (eg in the Telegraph and the Daily Mail) and the profit warning from the music chain Gear 4 Music. More substantively, the main Business story in the Telegraph was about the full December overview from the BDO High Street Sales Tracker, headlined “Christmas crash caps worst year for the High Street” and showing that LFL sales fell by 1.9%, despite a last-minute boom on Christmas Eve. The Times had a preview of the key trading statements expected next week from Retailers (noting there were “no champagne corks popping” at M&S HQ) and there was also a typically pompous Editorial in the main section of the paper about the need for the High Street to reinvent itself.
• Saturday Press and News (2): Many of the stockmarket reports (eg the Daily Mail) noted that Sainsbury was hit by a downgrade from HSBC on Friday. The Daily Mail led its Business coverage with a slightly odd story that “vulture funds” (ie hedge funds shorting the shares) are still circling M&S, whilst its “Hero of the Week” was the estimable Simon Wolfson of Next, after he reported that “Christmas wasn’t the massacre that might have been expected”. Finally, there was an excellent profile of the aforementioned Simon Wolfson of Next in the FT (“Chief’s keen eye for detail keeps Next looking good”), noting that he got his big break when former CEO David Jones took on the “shy and intense” young man as his personal assistant in 1991
• Sunday Press and News (1): Marks & Spencer and Sainsbury were both in the spotlight in the Sunday papers, ahead of next week’s updates. The papers couldn’t, however, quite agree on what line to take over M&S: one of the main Business stories in the Sunday Times was headlined “M&S reprieved by last-minute spending spree”, but the main Business story in the Sunday Telegraph was headlined “Festive season sales slump leaves bad taste for M&S” (noting City concern about M&S Food performance), whilst the main Business feature in the Observer mocked CEO Steve Rowe’s grand five-year plan and noted that M&S has not exactly been working overtime to dispel our “brutal” view that Steve Rowe is “the obvious guy to blame for disastrous Christmas trading”.
• Sunday Press and News (2): As for Sainsbury, the Sunday Times had a big feature about CEO Mike Coupe (headlined “Coupe the dealmaker needs to focus on his shopping”), noting that “Sainsbury’s boss must clinch his Asda deal to avoid passing his sell-by date”. The Mail on Sunday turned the spotlight to Waitrose, flagging that Waitrose was the big loser at Christmas, “as Lidl and Aldi steal festive food sales crown”. The Mail on Sunday also highlighted that Ted Baker will reveal on Wednesday whether the “hugging” row hit sales at Christmas and flagged that the shareholder adviser ISS has raised concerns about the suitability of former Conviviality Chairman David Adams as a non-exec Director of Debenhams. The Sunday Telegraph had a feature on how the US fashion business Abercrombie & Fitch has reinvented itself and the Sunday Times noted the record results reported by the Space
News Flow This Week: There is plenty of company news scheduled this week, peaking on “Super Thursday” (traditionally the best day to “bury bad news”). Notwithstanding today’s SMMT New Car sales figures for December, the week starts with a Food Retail focus, in the form of the Morrisons update tomorrow, closely followed by the latest Kantar/Nielsen grocery sales figures. Wednesday then brings the Sainsbury Q3 figures, the Greggs Q4 and the Majestic Wine trading update and then on Thursday we get the Tesco Q3 and the JLP update on Waitrose trading. In terms of General Retailing, tomorrow brings the Joules update and Wednesday brings Ted Baker’s update, the Shoe Zone finals and the Topps Tiles Q1. Then on Thursday we get the BRC-KPMG Retail Sales figures for December, the much-awaited Marks & Spencer Q3, the B&M Q3 figures, the DFS update, the Mothercare Q3, the Card Factory update,
• After a strong, discount-driven end to December (skewed to Online sales), as flagged by John Lewis and Next, the risk of a rash of profit warnings has diminished, but there is still plenty of scope for disappointment in the January reporting season, which will be overlaid by continuing political chaos and uncertainty ahead of the key Brexit vote on Jan 15th…
• Thursday Jan 10th will be “Super Thursday”, traditionally the best day to “bury bad news”, given the plethora of retailers all reporting at once that day, including the struggling Marks and Spencer (with its Food performance likely to be the main focus again) and the embattled Debenhams…