Langton Capital – 2019-04-23 – PREMIUM – Hot weather, discounts, pub closures, Thomas Cook etc.:
Hot weather, discounts, pub closures, Thomas Cook etc.:
PREMIUM EMAIL – PLEASE DO NOT FORWARD:
A DAY IN THE LIFE:
Well, it’s back to work.
After a fashion, that is, because holiday commitments mean that the email will be a little shorter until the end of the week and, judging by the Tsunami of out-of-office replies we got towards the end of last week, we may not be the only ones feeling a little semi-detached.
Anyway, whilst we’re many, many miles from home at the moment, it’s worth noting that some things don’t change. After having somehow stowed themselves away on my clothing, there are still dog-hairs in my coffee. On to the news:
WEATHER AND THE PUBS: Stating the obvious but some things are often worth repeating. 23rd April 2019:
• Good weather helps pubs.
Some rather obvious comments:
• There are exceptions but most pubs’ income is positively correlated with hot weather. Income for restaurants, cinemas, bowling alleys and the like often works the same way.
• A late Easter is more likely to feature acceptable or even good weather than is one in mid-March.
• Easter this year has featured some glorious weather.
• Good weather is like a Joker. Best play it when there is a fat pot. Great weather falling over Easter is doubly helpful
A bit more detail:
• The beer garden is the biggest ‘room’ a pub has. It should be utilised whenever possible
• Bottle fatigue is unlikely to set in in April. Consistent hot weather in July or August can lead to customers turning away and firing up their BBQs etc.
• So, the pubs should have had a fantastic weekend.
• This comes on the back of a generally rather good March.
• Helped by some permanent factors (less capacity, more versatility etc.) and some temporary ones (good weather), pubs should have outperformed restaurants.
• The latter are still discounting, they are negatively impacted by good weather, more capacity has gone on and more new-entrants have piled into the market
• They tend to operate from leasehold sites meaning that capacity may be slow to exit the market as alternative uses may be more limited
GENERAL NEWS – PUBS & RESTAURANTS:
• Glorious weather will have had the pubs’ tills singing. See Premium Email.
• Some discounts continuing despite good weather & kids’ Easter break. Beefeater (Whitbread) offering 33% off food over Easter & Bella Italia offering 30% off. Getting back to full price was always going to be hard. But if it can’t be managed over a holiday weekend, then there may be some serious issues to resolve.
• The rate at which pubs are closing has decreased to 76 per month down from the seven year average of 138 pubs. Ale Probyn, president of Altus Group has commented about the reasons for the slowdown in closures: ‘The increase in the thresholds at which businesses such as pubs pay business rates, coupled with the pubs discount during the last two financial years, has helped ease the decline. The new retail discount, which slashed rates bills by a third for high street firms with a rateable value less than £51,000 from April 1, will help independent licensees in small premises’.
• The Times reports that Yo! Sushi is to drop the conveyor belt from some of its restaurants in an attempt to broaden its appeal. It says ‘this summer the chain, which opened its doors more than 20 years ago, will establish its first restaurant — at the Westfield shopping centre in east London — without the kaiten belt snaking around the premises. It also will remove the belt from its outlet at Manchester Piccadilly station.’
• The number of retail businesses entering into administration has increased by 30% since 2015 according to data from the Centre for Retail Research.
• Californian vegan food supplier Beyond Meat is reportedly aiming to raise almost $200m via an IPO next month. The fund raise would value the company at more than US$1bn.
• Beyond Meat’s IPO comes at what the FT calls ‘a busy period for the US IPO market with several of the most high-profile, private Silicon Valley tech companies, such as Uber, Lyft and Pinterest, listing their shares.’ Whether or not these companies can maintain their listing prices remains to be seen.
• Beyond Meat aims to tap into the vegan, vegetarian and flexitarian trends that are making themselves felt on both sides of the Atlantic.
• The World Wine Trade Group has held a meeting in the UK for the first time.
• The Telegraph points out that the potential reintroduction of ‘crown preference’ (whereby the taxman leaps to the front of the queue when the assets of busted companies are doled out) could dissuade lenders from providing funds to some companies in the first place
• William Grant & Sons has lost its trademark battle against a new blended Scotch whisky brand called Glenfield after claiming it adopted similar labelling to its own Glenfiddich brand.
• Nation’s Restaurant News has reported that the struggling restaurant group, Kona Grill, may have to file for bankruptcy even if its talks with lenders are successful.
• Pernod Ricard has seen sales increase by 2.5% in Q3 to €7.2bn.
• PepsiCo has beaten expectations with sales rising 2.6% to $12.88bn in Q1 2019.
HOLIDAYS & LEISURE TRAVEL:
• Thomas Cook has reportedly received approaches for some of its operations and for the company as a whole reports Sky.
• KKR and EQT are reported by Sky to be interested in the company in addition to existing major shareholder Fosun.
• EU rules require that airlines be majority-owned by European investors. Thomas Cook owns an airline but the larger part of its business, its tour operations, could be owned by non-EU capital.
• Thomas Cook issued two profit warnings last year and said last month that it was undertaking a strategic review of its airline business. It reported last week that it was seeking shareholder approval to allow it to loosen its borrowing limits. It says that it may have been in breach of these internal limits already. Bank limits are not impacted.
• The FT suggests that a takeover of Thomas Cook ‘would be a relief to investors, who have seen shares fall 91 per cent over a decade.’ The business did avoid collapse in the years after its 2011, nadir but it has struggled to adapt and to keep up with rival TUI in the years since. Hot weather last year, the World Cup and, more recently, disruption to travel patterns brought about by Brexit have caused the company significant problems.
• The attacks in Sri Lanka are expected to halt the rebound in tourism to the country. The country had been named as the Lonely Planet guide’s 2019 best country to visit and visitor numbers increased 400% in 2018 on 2009 levels.
• The US has recorded level results for March with occupancy flat at 68.4% and average daily rates and RevPAR both up 0.6% to $132.66 and $90.78 respectively.
• HNN has commented that Q1 was weak for US-listed hotel companies leaving investors feeling anxious about the companies projected growth.
• Research from Mintel has found that 43% of British holidaymakers say Brexit uncertainties have made them more cautious about booking holidays. Marloes De Vries, travel analyst at Mintel, said: ‘While taking a holiday remains a clear priority for Brits, Brexit and economic uncertainties are bringing unwanted storm clouds over the holiday market. As a result, more travellers will consider staycations and all-inclusive holidays in 2019, while lower-cost destinations, such as Turkey and Tunisia, are likely to be the industry winners’.
• The holiday comparison website icelolly.com has claimed that more British holidaymakers are likely to book a holiday in Europe this summer following the Brexit delay.
• The specialist booking platform, Direct Ferries has reported a 52% increase in sales for routes across the channel following the Brexit delay.
• Advantage Travel Partnership’s 2018 Hotel Market Report has found an increase of 8% in overall room night bookings across 250 destinations in the UK during 2018.
• The BBC has reported that Crossrail could be delayed until 2021.
• The US hotel industry has recorded occupancy up 2.4% to 69.9% during the week of 7-13 April. The sector also reported Average daily rate climbing 4.4% to $136.25 with RevPAR increasing 6.9% to $95.22.
• Marriott has announced plans to build the tallest modular hotel in New York, at 360-feet-tall.
• Shares in Pinterest have increased by over 28% on its first day of trading, with the company reaching a market cap of $16bn.
FINANCE & ECONOMICS:
• Sterling $1.2987 and €1.1541. Oil $74.39. UK 10yr gilt yield 1.19% & world equity markets mixed overnight.
o Westminster taking a break. Sigh of relief as can tumbles down the road.
START THE DAY WITH A SONG:
Last Thursday’s song was I Wanna Be Adored by the Stone Roses. Today who sang:
And the IRS says they want to chat,
And you can’t explain why you claimed your cat
And Ma Bell sends you a whopping bill
With eighteen phone calls to Brazil
RETAIL NEWS WITH NICK BUBB:
Planet ONS Watch: We flagged on Thursday that, in the real world, Retail Sales were reasonably solid last month, as per the BRC-KPMG Retail Sales figures for March (the 5 weeks to March 30th), despite the later fall of Easter. But, amazingly, “seasonally adjusted” life was much better on that mysterious parallel world, the Planet ONS (aka the Office of National Statistics), via Thursday’s official Retail Sales figures for March…As usual, City economists swallowed at face value the 1.2% jump in month-on-month seasonally adjusted sales volume, which was much better than expected (giving 6.2% growth year-on-year). The cold weather a year ago meant that the comps were soft, but time will tell if the ONS got its seasonal adjustment right, when we see the April figures. We focused, as usual, on the year-on-year non-seasonally adjusted sales value figures and the controversial split
Today’s Press and News: After the extraordinarily hot and sunny Easter weekend, the footfall figures from Springboard are rather mixed, given that most people wanted to be outdoors, with the City AM headline summing up the outcome “Easter bounce for the High Street while shopping centres struggle”. The Telegraph flags that “Folli Follie may cut off Links of London as jewellery chain fights to survive”, noting that the struggling Links business may be sold off by its Greek owner. And if you have seen headlines about “Three children of Asos tycoon killed in Sri Lanka massacre”, this very sad news refers to Anders Holch Povlsen, Denmark’s richest man and the boss of the Bestseller fashion group, which has a big stake in ASOS.
News Flow This Week: There is not much company news scheduled for this week, after the long Easter weekend, but the ABF (Primark) interims, along with the Boohoo finals, are out tomorrow morning, whilst the Carpetright pre-close update is on Thursday.