Langton Capital – 2019-02-20 – Food prices, the High Street, wages, TUI, German Hotels etc.:
Food prices, the High Street, wages, TUI, German Hotels etc.:A DAY IN THE LIFE: I’d love to think that we operated like a smoothly-running machine at stupid o’clock in the morning but, sadly, we don’t and, as we often get 100-word press releases with 10, 12 or 15mb of photographs attached that crash our systems for 20 minutes or so, the whole early morning experience can be a bit stressful. However, today, for a while at least, all was tranquillity and light because the internet wasn’t working at all. This led to a rather fraught silence and some frantic turning-off-and-back-on-again after which it did cough and splutter its way back to life and then ask us if we wanted to impose parental controls on ourselves because it presumably knew that we frequently looked at websites where alcohol is being discussed. Or even gambling for that matter and, although this was great, it didn’t do much to help us get back on schedule, get our heart rates down, lower the level of cursing in the office etc. etc. Anyway, here we are. On to the news: LANGTON PREMIUM EMAIL: Spin: For less than the price of a coffee and a newspaper per week, Langton is to produce a premium email. It will have an interactive relationship with subscribers, with more Langton Comment, from the archive pieces & 60-seconds, Questions, Questions etc. Super spin: We will also thrill readers with our accountancy insight. And, for special occasions, we’ll serve up what we’ve found while trawling through Companies’ House, joint directorships, overdue numbers, winding up notices etc. More Spiel: When we’re technically competent enough we’ll open our website for historic stories. Interest here has been very substantial, but we’d like to keep the list down to a manageable size. Get on board while stocks last. Facts: Langton is to produce a premium version of its email from 1 March priced at just £295 (plus VAT) for a single subscriber or £495 (plus VAT) for multiple subscribers. The free email will be largely unchanged. Drop us a line to join in. PUBS & RESTAURANTS: • Food prices. Environment Secretary Michael Gove reassures farmers that the government will apply tariffs to food imports to protect farmers. This somewhat negates the suggestion of some Brexiteers that lower food prices will provide a windfall for the consumer. It was always likely that we would have to protect our farmers from international competition. • Mr Gove says ‘there will be protections for sensitive sections of agriculture and food production.’ • The National Farmers’ Union has also demanded a guarantee from the government that Brexit won’t undermine British farming standards. Here it may be adopting the same line taken by transport unions who are ‘protecting safety’ when going for pay rises. The union’s president Minette Batters has said: ‘I have asked the secretary of state to commit to ensuring that any future new trade agreements will not undermine British food standards’. • The Centre for Cities think tank has stated that authorities should be focusing on attracting high-paying office jobs to support city centres rather than replacing ‘failed shops’. • Starbucks has opened its first Reserve Bakery Café in Shanghai. Belinda Wong, CEO of Starbucks China said: ‘Today marks yet another significant milestone as we take everything we have learned around coffee and our relentless pursuit for food innovation, to create a new exciting all-day cafe dining and Italian aperitivo experience’. • The average salary for kitchen staff in London has increased 14.8% in 2018, according to data from The Change Group. Back of house employees in the hospitality sector in London now earn an average of £32,674 a year. • Kentucky’s Bourbon industry boosts the state’s economy by $8.6bn annually, according to data from the Kentucky Distillers’ Association. • Asda has reported a slowdown in trade with LfL sales declining 1% in the final three quarters of 2018. Asda chief executive Roger Burnley said: ‘The year ahead looks no less turbulent than the last. Whilst I am pleased with our performance in 2018, we must remain focused on ensuring the long-term sustainable success of Asda for our customers’. • Punch completes a £380k refurbishment of The Claremont in Bath. CEO for Punch, Clive Chesser said, ‘We are extremely proud of the work that has gone into transforming The Claremont.’ • Bar operator, Arc Inspirations, announces its first site in Newcastle, Banyan Bar & Kitchen, set to open on 30 March this year. The 5,000 sq ft bar and restaurant has undergone a £1.5m refurbishment. • Hogs Back Brewery has unveiled a new keg beer range at Craft Beer Rising comprising rebranded Hogstar lager and three new beers: Unfiltered TEA, Hog IPA and low ABV blonde beer Little Swine. • Texas Roadhouse has reported sales increased 5.6% in Q4 2018, while margins decreased 112 basis points to 15.9% due to higher labour costs. Kent Taylor, Chief Executive Officer of Texas Roadhouse, Inc., commented: ‘We finished the year strong, with double digit revenue growth for both the fourth quarter and full year. This represented the 36th consecutive quarter of positive comparable restaurant sales, with growth of 5.6% driven by increased traffic’. • Remarking on current trading, Texas Roadhouse said: ‘Comparable restaurant sales at company restaurants for the first 54 days of our first quarter of fiscal 2019 increased approximately 6.0% compared to the prior year period’. HOLIDAYS & LEISURE TRAVEL: • Tui Group has stated that it will be in a ‘good position’ to take advantage of consolidation in the market, with Chief Executive Fritz Joussen commenting: ‘We think there will be an enormous pressure in the market for consolidation and with our strategic strength, our balance sheet strength and our financial strength we will be in a good position to take advantage of consolidation’. • InterContinental Hotels has announced it will ‘up its game’, as rival Whitbread forges ahead in Germany. The Whitbread owned, Premier Inn has previously stated that it aims to have 33 hotels in operation in Germany by 2021. • Staycity announces plans for a £35m luxury aparthotel in Micklegate, York city centre. It will comprise 152 apartments across a mix of studio and one-bed accommodation. Each unit with have a kitchenette, 43-inch smart TV and touch-control air conditioning. • Wizz Air faces disruption of its Luton flights due to a week-long strike by baggage handlers and check-in staff set to begin on 3 March 6pm until 10 March 5:59pm. • AC Group reports 41% growth in annual passengers last year despite overall inbound visitor growth the the UK only growing by single figures. The company saw strong increases from the US, Brazil, United Arab Emirates, France and Spain but tourists from the Netherlands dropped 8%, Germany by 20% and Ireland by 45% over 2017 levels. OTHER LEISURE: • Activist investor Carl Icahn has called for Caesars Entertainment Corp to put itself up for sale, after taking a 9.78% stake in the casino operator. FINANCE & ECONOMICS: • Average earnings held at 3.4% in the year to December. CPI in January was 1.8% (2.0% in December) suggesting that real wages continue to rise. • Unemployment fell in the three months to December by 14k to 1.34m. Employment is at record levels of 32.6m or 75.8%. The NIESR says ‘earnings growth continues at a robust pace, boosting real incomes for those in work.’ • The NIESR says ‘there appears to be little slack in the labour market, with unemployment at 4 per cent in December, and this is contributing to higher real wages growth. Looking further ahead Brexit-related uncertainty may push up further on real pay. There is some evidence that businesses are seeking to take on more workers rather than invest in new capital, pushing up the demand for labour. At the same time workers seem reluctant to change jobs which may also add to pay pressures in expanding sectors.’ • This would go some way to explain why consumers remain more optimistic, or at least less pessimistic, than do their employers. • A robust labour market but sluggish growth suggests that productivity remains a problem. • Honda has confirmed that it will close its Swindon plant in 2021. Business secretary Greg Clark says this is a ‘particularly bitter blow to the thousands of skilled and dedicated staff who work at the factory.’ • Sterling up at $1.3054 and €1.1512. Oil little changed at $66.38. UK 10yr gilt yield unchanged at 1.17%. World markets higher yesterday except the UK, which fell on the back of Sterling strength etc. • Politics, Brexit etc.: o An 8th Labour MP has left the party as some suggest that the Tories are too nasty and Labour too incompetent (and nasty) to vote for. o The FT says it is a ‘delicious irony that, as the UK prepares to quit the EU on March 29, its political trends, and the social conditions and ideological battles that produce them, are as European as ever.’ Fragmentation and alliances have been a feature of European politics for decades. o PM Mrs May is in Brussels again today as she continues to run down the clock. PRIOR DAY LATER TWEETS: • Later tweets: Only slightly fewer vouchers out there now that Half Term is upon us. Giraffe & Harvester, kids eat free (or for a quid), Prezzo 30% off etc • Strong trading from Greggs as it goes partially veggie. FY figures ahead of expectations. LfL +9.6% on back of veggie sausage roll • Chancellor may be forced to abandon his borrowing targets warns KPMG. It sees a £12bn ‘dent’ in financing due to global slowdown. • Honda is to close its Swindon plant in 2021. Could cost Exchequer £150m p.a. plus hurt balance of payments. Balance of what…? Yes, it matters • Seven MPs give up on Labour. Mad Hatters’ Tea Party that is the Tory Party continues on road to ‘red-white-and-blue’ Brexit START THE DAY WITH A SONG: Yesterday’s song was The Temptations with My Girl, today who sang: So, slide over here, And give me a moment Your moves are so raw RETAIL NEWS WITH NICK BUBB: Intu Properties: After the collapse of the bid from the John Whittaker consortium at the end of November, the last we heard from the embattled shopping centre business Intu Properties was on Dec 5th, via a bullish leasing update, but the share price has begun to rally slightly ahead of today’s finals, as if the news might not be as bad as feared. And the headline of the statement is certainly quite bullish: “Winning destinations drive a resilient operational performance in a challenging market”. Q4 asset values were only down by 3% and although net rental income is now expected to be 1%-2% down in 2019, Intu has raised the possibility that it could reduce its 53% debt to assets ratio by selling off its valuable Spanish centres.
Sainsbury and Asda: The provisional verdict of the CMA on the planned merger of Sainsbury and Asda has been published at last this morning and although it was expected to play hard-ball at this stage the tone is pretty negative…The headline of the summary statement is “Sainsbury’s/Asda merger could push up prices and reduce quality” and the conclusion is clear: “the merger could lead to a substantial lessening of competition at both a national and local level”. We can’t see a number on the potential store disposals, but the CMA’s view on the remedies is brutal: “…sell off a significant number of stores and other assets – potentially including one of the Sainsbury’s or Asda brands – to recreate the competitive rivalry lost through the merger. The CMA’s current view is that it is likely to be difficult for the companies to address the concerns it has identified”. Sainsbury has issued a Asda Watch: In the Wal-Mart Q4 results yesterday, Walmart said that in the 3 months to end Dec Asda’s gross margin was down (because of increased food price investment), notwithstanding modest 1.0% LFL ex-petrol sales growth and that operating profits were also down, despite strong cost control. Walmart CEO, Doug McMillon, said, helpfully, that “In the UK, Brexit – and the potential implications of a hard Brexit – is increasingly on the mind of everyone”, but also that “I visited our team in the UK a few weeks ago, and am really impressed with their performance, attitudes and leadership”. Asda CEO Roger Burnley made no mention of the mooted Sainsbury deal in his prepared remarks, but said, pointedly, that ”retailers have to be prepared to innovate and challenge their status quo if they want to continue to remain relevant and deliver for their customers”. Waitrose Watch: After the improved trading in January, Waitrose is still going quite well in February so far and yesterday morning’s JLP weekly overview reported a 1.0% increase in gross ex-petrol sales (c1% up LFL) last week, w/e Feb 16th (helped by good Valentine’s Day trade). With no new store openings to speak of, LFL sales were only flat in H2, to the end of January (albeit Waitrose worked hard to improve gross margins), but the first 3 weeks of H1 have been up c2.2% LFL. John Lewis Trading Watch: In contrast, John Lewis has started the new financial year on a weak note and last week, w/e Feb 16th, was again disappointing, down 3.4% gross (over 5.5% down on a “LFL” basis, excluding new stores like Westfield). In terms of sales mix, Fashion/Beauty sales were up by 1.2% gross last week, but Home sales were down 7.6% gross and Electricals were 3.1% down gross. John Lewis LFL sales were c2% down in H2 (with gross margins under a lot of pressure), but have been over 6% down over the first 3 weeks of H1. |
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