GRG, GNK, Majestic, ETM, costs in general, vouchers etc.:

A DAY IN THE LIFE:

I’m beginning to think that the magnetic poles might be shifting around because the number of birds flying into the windows of our house has increased markedly.

To the point where we have smeary, wing-shaped marks on many or the windows and a parade of stunned looking (or dead, for that matter) birds floundering on the grass before either they fly away to crash into another piece of glass or are encountered by our dog or one of the local foxes.

Anyway, bit of a rush this morning so let’s move on to the news:

Q4, FULL YEAR OR CHRISTMAS TRADING UPDATES – GREGG’S, MAJESTIC, GREENE KING, E.T.M., UPCOMING REPORTS & ARC INSPIRATIONS:

• Gregg’s has updated on Q4 trading saying that it has had ‘a strong finish to a year of significant strategic progress.’

• Gregg’s says total sales for the year are +7.2% with LfL sales +2.9%. The group says full year underlying PBT should be ‘at least £88m.’

• CEO Roger Whiteside says ‘we delivered a very strong finish to 2018 despite the well-publicised challenges in the consumer sector. This performance was broad-based, reflecting the strength of our range of freshly-prepared food and drinks, and the strategic changes that we have made in recent years to focus more effectively on the food-on-the-go market.’

• Re the outlook, Gregg’s says ‘in the year ahead, we will continue to innovate with products designed to reflect changing consumer tastes, and by opening in new locations that make Greggs even more accessible to customers.’

• Gregg’s reports ‘in the fourth quarter company-managed shop like-for-like sales grew by 5.2 per cent, building on the strong trading performance that we reported in our November trading update.’

• Majestic Wine has updated on Christmas trading saying sales grew by 6.8% with a gross profit up by 8.2% ‘despite challenging UK retail market.’

• Majestic says its performance was ‘led by strong performance in Naked Wines together with a solid performance from Majestic Retail despite the challenging market backdrop.’ Majestic reminded observers that it delivers c.30% of total annual sales during the Christmas trading period.

• Majestic says ‘Naked had a great Christmas delivering both sales growth and gross margin expansion across all markets in the period. Performance in the US, where we are accelerating investment to capture the attractive growth opportunity, was particularly strong with sales up 21%, and Naked UK returned to double digit sales growth.’

• In the UK, the group ‘encountered difficult trading conditions amidst economic uncertainty and weak consumer confidence. While sales were up 1.5%, reflecting growth in our online and Concierge propositions, and we grew market share3, gross margins were 1.2 percentage points lower year-on-year in a very price promotional market.’

• Majestic says ‘the Christmas trading period was more challenging than expected for Retail’ but it still ‘expects to report Group adjusted PBT for the full year broadly in line with current market consensus. Naked remains on track, and we will continue to seek additional investment opportunities which we will execute if proven.’

• CEO Rowan Gormley reports ‘while trading has been challenging over the Christmas period, the trends we reported in November are the same (namely strong growth in our overseas markets and our digital propositions but headwinds for our UK Retail stores).’

• Greene King’s shares moved higher yesterday after the company reported LfL managed sales up 10.9% over the two week Christmas period. The performance was remarkably strong – even given positive comments from other (smaller) operators recently – but forecast numbers (for the April year end company) have not been increased.

• M&B updates on trading tomorrow & Revolution Bar Group updates on Monday. M&B has a sizeable London estate (which should help) but it is heavily skewed towards food-related sales, particularly outside town centres. Whitbread, which has now received its Costa cash, updates on 17th, Marston’s on 23rd and EI Group will update on 7th Feb.

• Some operators, whilst expressing relief that Christmas was good, have suggested that this week could be a reasonable signal as to how underlying trading is progressing. That said, if Xmas has ‘borrowed’ spend from January, it may be somewhat depressed.

• The 14-strong bar and restaurant chain, ETM, has announced its best ever Christmas with revenue up 16% and LfLs up 13.1% for the five weeks to 31 December. CEO and co-founder, Ed Martin commented: ‘We are delighted with the group’s performance over the festive and New Year period – delivering double-digit growth and record sales of over £1.2m for the week ending 16 December. Through innovative trading formats, investment in a new sales division and robust forward planning, we have been able to optimise sales across all our venues’.

• The bar operator, Arc Inspirations has also reported strong numbers for the Christmas period, with LfLs up 6.5%for the period 1st December to 1st January. Arc Inspirations CEO Martin Wolstencroft, commented: ‘December has been a very strong trading period for Arc Inspirations as guests seek out a differentiated and memorable experience to celebrate the festive season’.

PUBS & RESTAURANTS:

• The UK-based meal kit group, Gousto has secured £18m in a new funding round.

• Mindful Chef, the meal ingredient delivery group, has raised £6m from private equity firm Piper.

• Porridge has usurped toast as the nation’s favourite breakfast choice, research from Caffè Nero has found. The group found that 46% of Brits say porridge is their breakfast of choice.

• SSP Group has announced that it is set to open a Burger King at Edinburgh Airport, its 30th site overall for the fast food brand. 

• US retailing giant Sears is reported to be on the verge of liquidation as a result of changing consumer spending patterns & intense competition.

• MEATailer is to close its MEATliqour Brixton site after five at the Market Row, the group have stated they are actively looking for another site in Brixton.

• Halewood Wines and Spirits has reported a substantial boost in operating profit to £13.4m in the year ending 30 June 2018, compared to £4.2m in 2017. The UK-based wine, spirits and beer producer has put the growth in profits down to strong sales of its gin brands.

COSTS & PRICES:

• Those ‘when-I-was-young’ conversations are sometimes of more than passing interest.

• But it’s worth trying occasionally to sort the truth from those apocryphal stories that have become part of domestic legend.

• Like, for example, my genuinely held belief that, when I started socialising in the late 70s in the North of England, you could buy three pints and a packet of crisps for less than a pound.

• But is that really true?

• Well, rather than dig out the RPI tables at stupid-o-clock in the morning, we’ve had a more cursory dig around and, yes, the above is correct.

• The Telegraph reported on some prices a few years ago (we’ve updated the ‘today’s prices’ to end-2018) and comes up with a few interesting points on the way that prices have moved since 1980.

• Beer:

o In 1980, beer (nationally, cheaper in Hull) cost 35p per pint. That’s equivalent to a 2018 price of £1.45. Beer actually costs around £3.20 nationally in the on-trade suggesting a real increase in price of around 120%. It can cost £5.50 to £6.00 in Central London.

o Ingredient costs haven’t changed a great deal, rents & utility costs may have risen but the main reasons for the above will be labour costs, increased taxes and wider margins as well as the impact of the Beer Orders whereby vertical integration was discouraged.

• Milk cost 17p a pint in 1980. That’s around 71p in 2018 money. The actual cost (albeit in a 4pt bottle) is 28p. The price of milk has therefore dropped by around 60% in real terms.

• Bread was 33p (£1.44 in 2018 money). It costs around £1 in most supermarkets suggesting a fall in real terms of around 30%.

• Wages were £6k per annum (£25k in 2018 money). Average salary for 2018 was in actual fact around £28k suggesting that wages have risen by only around 12% in real terms over the last near-40 years.

• Hence, ignoring the impact of direct taxes, you could buy 17,100 pints of beer per annum from your wages in 1980 but only around 8,800 now.

• If milk is your thing, however, you could now manage 100,000 pints per annum whilst in 1980 you could have only afforded 35,000.

• Conclusions?

o Pity the farmers because the price of milk has fallen or lambast the government (and profit-driven retailers) because the price of beer has more than doubled? Or both.

o Well, some things have gone up and some things have gone down. One of the unintended consequences of the Beer Orders could have been higher prices but the impact of higher taxation was presumably intended.

o And, if pub companies are finding it tough to make ends meet at £3.20, how would they be managing if they could only charge the 1980 equivalent of £1.45?

HOLIDAYS & LEISURE TRAVEL:

• Staycity Group has confirmed that property entrepreneur, Stephen Vernon’s John Pollard Foundation has purchased 5% of the company’s shares. 

• Merlin announces its intention to build a LEGOLAND Park in South Korea scheduled to open in 2022. The park will be an hours drive from Seoul and within a 2-hour drive of nearly 24m people.

• Justin Miller is ordered to pay £20,000 to Tui after being found guilty of submitting a fraudulent holiday sickness claim. Miller’s Facebook page showed him drinking, eating and socialising during the time of his purported illness.

• KPMG recommends travel agents offer better deals to more destinations in order to counter customer concerns over Brexit. 

• Millennium & Copthorne reports the Millennium Hotel London Mayfair will rebrand to The Biltmore, Mayfair. The refurbishment is expected to cost around £50m and is set to launch in Spring 2019.

• London City airport passenger numbers increased 6.4% yoy in 2018 to 4.8m, with 75,271 air traffic movements during the year.

• A Business Travel Show survey claims one third of corporate travel buyers say they will have bigger budgets in 2019, showing a decline yoy. This year, 15% of respondents think they will have a smaller budget, compared to 13% last year.

• Heathrow airport has temporarily suspended flights after a reported sighting of a drone.

• US Hotels have recorded a 5.2% decrease in profitability per room for November to $84.26, according to data from HotStats.

• Morgan Stanley’s Global Hotel RevPAR Tracker found strong RevPAR growth in Europe in November, while the UK showed stable growth. For the month of November European hotel’s RevPAR increased 5.2% whilst UK hotel RevPAR grew 2.2%.

FINANCE & ECONOMICS:

• Sterling down at $1.274 and €1.1115

• Oil up two bucks at $59.36

• UK 10yr gilt yield up 1bp at 1.27%

• World markets all up yesterday with Far East higher today.

• Brexit etc.:

o Disgraceful scenes of abuse outside H of Commons as tempers run high and bullying gets the upper hand.

o Guardian says farm prices could fall by a fifth as farm incomes slide post Brexit. Financial Services firms said to be preparing to move nearly a trillion pounds worth of assets out of the UK.

o Telegraph reports new cross-Channel ferry venture awarded a £14m no-deal Brexit contract by the Government had ‘left a trail of angry creditors in Hong Kong when his marine insurance company failed.’#

o Port of Ostend tells BBC the Belgian port will not be ready for a new ferry line in time for Brexit.

PRIOR DAY LATER TWEETS:

• Later tweets: Strong trading at GNK (managed LfL +10.9% in fortnight) reinforces view on positive Xmas trading. Good news today from ETM, ARC etc

• Year on year wholesale foodservice price inflation reached 6% in November, the highest level during 2018

• Discounting hitting new highs with Café Rouge and Bella Italia (both CDG) offering 50% off mains, Toby & Harvester (M&B) 40% off

• Survey commissioned by the TUC finds UK household debt reached a new peak at £15.4k per household in addition to mortgage

• Great sales numbers (from GNK & others) over Christmas. But no comment yet on margin. Jan discounts now 50% and rising

START THE DAY WITH A SONG:

Yesterday’s song was Karma Police by Radiohead, today who sang:

And you’re a prima ballerina on a Spring afternoon,

Change on into the wolfman, howlin’ at the moon, hooowww

RETAIL NEWS WITH NICK BUBB:

• Sainsbury: After yesterday’s Morrisons update and Kantar figures (see below), the Food Retail focus continues today, not least with the Q3 figures (the 15 weeks to Jan 5th) from Sainsbury. And the first thing that CEO Mike Coupe says in the statement is that “Christmas came late this year“, but overall LFL sales were down by 1.1% in the period. Interestingly, Grocery sales were slightly up, by 0.4% on a gross basis, thanks to modest growth in Online and Convenience, but the damage was done in Non-Food, with General Merchandise. Inevitably, the spotlight will fall on Argos, but, infuriatingly, there is again no precise LFL measure of its sales performance: the statement says that the final Christmas weeks were “strong“, but it sounds like over the quarter as a whole that sales were down, given reduced Black Friday discounting. There is no comment on the profit outlook, or on the CMA
process with Asda, but there is an analyst conf call at 8.45am

• Other News: Greggs is good (slight upgrade). Majestic Wine is OK, thanks to Naked Wines. Ted Baker is OK, with no sign of brand damage. The Shoe Zone finals are OK, The Topps Tiles Q1 is a bit weak. Tthe Mothercare Q3 is in line, with decent International growth offsetting terrible UK sales.

• Grocery Market Share Watch: We flagged yesterday that the latest Nielsen grocery sales figures (for the 4 weeks to Dec 29th) showed that overall supermarket industry sales value growth was a decent 1.8%, even though it was skewed to Aldi/Lidl. The rival Kantar survey reported a slightly worse outcome of +1.2% for a similar 4 week period (to Dec 30th), on a Till Roll basis, but on a pure Grocery basis (ex-Non Food) overall sales growth was 1.7%, driven by combined Aldi/Lidl growth of 8.7%. Tesco was the main winner amongst the “Big 4”, with gross sales up by 2.1%, whilst Asda was up by 0.7% gross, Morrisons was up by 0.5% and poor old Sainsbury was 1.0% down. M&S Food was 0.8% down, but that is an improvement on the worrying 4.5% fall in the previous 4 week period…

• Waitrose Watch: The Waitrose business looks to have been one of the losers in the supermarket industry on a “top-line” basis over the Christmas fortnight, with LFL sales down by an estimated 2%, but, according to yesterday’s weekly sales overview from JLP, last week enjoyed an extra day of trading over the New Year because of the calendar shift and Waitrose reported a decent 7.5% increase in w/e Jan 5th. That shifted the cumulative sales run-rate up a notch or so, from -0.8% to -0.5% after 23 weeks of H2. With no new store openings to speak of, the slight fall in LFL sales is disappointing, but Waitrose were working hard to protect gross margins by not discounting pre-Christmas, to protect profits, as JLP will flag in their overview tomorrow.

• John Lewis Trading Watch: Christmas trading at John Lewis enjoyed a good late run and that seems to have continued last week, as the w/e Jan 5th was up by as much as 11.2% gross (c8.5% up on a “LFL” basis, excluding new stores like Westfield). Given the calendar shift, how far the performance was truly LFL is unclear, but John Lewis did not call that out in their overview, merely flagging that it was the first full week of Clearance.  In terms of sales mix, Home sales were only up 1.7% gross last week, but Electricals was 11.7% up and Fashion/Beauty sales were up by an impressive 20.4% gross, boosted by a surge in Menswear business. We will hear tomorrow in the full 6 week JLP update what damage has been done to gross margins by the reliance on discounting, but at least the cumulative H2 sales run-rate has improved to +0.4% gross after 23 weeks (c2% down LFL).

• News Flow This Week: Tomorrow is “Super” Thursday, with the BRC-KPMG Retail Sales figures for December (which are likely to be flat at best LFL), the much-awaited Marks & Spencer Q3, the Tesco Q3, the JLP update on Waitrose/John Lewis trading, the B&M Q3 figures, the DFS update, the Card Factory update and the Debenhams AGM trading update. Friday then brings the Moss Bros update and the AO.com Q3 update, whilst QUIZ should also be announcing by the end of the week (hopefully they will not try to “bury bad news” tomorrow…).