Langton Capital – 2020-03-06 – PREMIUM – Gig economy, coffee, Easy Hotel, chefs, grills etc.:
Gig economy, coffee, Easy Hotel, chefs, grills etc.:PREMIUM EMAIL – PLEASE DO NOT FORWARD: A DAY IN THE LIFE: A bullfinch flew up to the window of Langton’s home office yesterday. It perched on a twig, gawped at us stupidly, squawked a bit, and then flew off and, pretty though it was, we knew full well what the fat little beast has been eating. Because, as garden-birds.co.uk says, Bullfinches ‘usually feed on insects, berries, seeds (e.g. dock, nettle, bramble, ash, birch), and buds.’ And good for them but, whilst they can knock themselves out eating nettles and bugs as far as I’m concerned, it’s the buds and blossom that I object to. And I’m not alone because the avian-loving website above suggests that orchard-owners should hang up seed-feeders or suet to distract bullfinches rather than chase them around your property with a big stick. And the latter just wouldn’t work because the birds have got more energy than most humans and they are hard wired by their genes to eat, destroy or poo on fruit trees such that they’re at it pretty much 24-7 at this time of year and its only the local sparrow hawks that can do much to stop them. Anyway, live and let live, that’s what I say. Who needs apples, plums and pears in any cae? On to the news: LANGTON 240-PAGE PREMIUM COMPENDIUM, £300 PLUS VAT: Langton’s Premium Email launched around 12mths ago and, during its first year in operation, it has comprised a body of research & published opinion on a wide range of topics. Here, we have curated a large number of those articles in order to logically sequence the major issues that are currently impacting the hospitality subsector or the wider leisure sector. The piece is available now. Please drop us a line. ADVERTISE WITH US: Langton’s free email now carries adverts. See front page of website for today’s copy & contact us for further details. THE GIG ECONOMY – SELF-EMPLOYED OR EXPLOITED WORKERS? Gig economy employers say they offer flexibility and choice. Some workers’ organisations disagree. 6 March 2020: Where are we at? • Fans of the gig economy, many of whom include those who make money from it, say that technological change has made new businesses possible • They add that extortionate taxi prices & the consumers’ desire for food at their doorstep provided the demand • And the rise of apps on smartphones then paved the way for disruptors such as Uber and Deliveroo. The companies are referred to as ‘New world tech’ • Virtually no barriers to entry for workers means anyone can work for these companies, it would appear at the drop of a hat Where are we now? • This is new ground, all of the parties are feeling their way along. • Court battles are being won to give workers’ rights to those in the gig economy • There is a negative reaction by some consumers, regulators and competitors to delivery drivers/unlicensed cab drivers. • A turf war was perhaps always to be expected. Some councils are acting out against them. • The public dislikes the congestion, pollution & noise all these extra drivers are causing – not to mention the personal info their companies are privy to • Disruptors are being told to vet their workers more thoroughly before hiring them due to security concerns • The stability of the new world tech companies is often called into question, with many running on low margins and still occupied chiefly with burning through VC money New conflicts of interest / trade tensions: • Rarely does a new ‘thing’ turn up without it having an impact on existing relationships. There are certainly several new conflicts thrown up by the gig economy • We have alluded to safety re taxi drivers • Airbnb property providers may not be paying their full whack when it comes to tax • Amazon and other online retailers don’t ‘shop-window’ their products. They pay much, much less in business rates than does the High Street • In food delivery, delivery companies are getting access to the names and addresses of restaurant customers. • These people would, previously, have contacted the restaurant directly if they wished to buy its products • Delivery companies could (and perhaps capitalism says they should) steal these customers over time and cut the restaurants out • In the meantime, there is a ‘lack of ownership’ when it comes to the product. If it arrives in poor shape, the restaurant can blame the delivery driver and vice versa • Delivery riders may be in conflict with restaurants. The former are ‘on the clock’ and the latter have walk-in customers to seat and feed. Deliveroo riders recently boycotted orders from Wagamama as they said they had been kept waiting too long What does the future hold? • The gig economy is 1) not going away but 2) almost certainly faces increased regulation in the near future, worker’s rights and security being the foremost issues • Where gig sales are incremental to sales already being achieved by an existing operator, this is wonderful. But it’s not often the case • The fox is often being let into the henhouse. • As more industries get disrupted via apps it is likely the gig economy workforce will increase in size over the coming years • Rapid advances in driverless cars could have knock on effects to the gig economy workers. Drones and the like could disrupt the disruptors PUBS & RESTAURANTS: • A YouGov poll has reported that 88% of the British public believe that chefs are ‘skilled labour’. Many in the hospitality industry have considered it unfair than many of their staff will be considered ‘unskilled labour’ under proposed immigration legislation. Fourth Analytics has suggested that the average wage for back-of-house operations in the restaurant sector is £9.17 per hour (before tips). • The UK’s coffee shops should take in as much as £4bn in revenues this year reorts Mintel. The amount spent was around £3bn only 4yrs ago. • Mintel says ‘coffee shops have enjoyed robust growth in the past five years, benefiting from brands’ ability to meet consumer demand for the convenience of takeaway coffee and emergence of speciality coffee.’ • Tea consumption is also rising with Mintel’s Trish Caddy saying ‘the popularity of tea amongst millennials is likely a reflection of the growing popularity of alternatives to the traditional cuppa. Speciality black, green and fruit/herbal/spice teas are particularly popular among 16- to 34-year-olds.’ • Starbucks yesterday said that LfL sales in its shops in China were down by 78% last week. The worst week was week 2 of February and the group has seen ‘sequential improvements’ since then. Starbucks said in a conference call that its US business had not (yet) been impacted. Starbucks is still paying wages to its staff in China. The company says ‘while the current situation in China continues to be dynamic, we believe that the financial impacts of COVID-19 are temporary, and we remain confident in the strength of the Starbucks brand and the long-term profitability and growth potential of our business in China.’ • Supply disruptions have led to the price of piglets shooting to record highs in China. The price of pork is up 116% year on year. • The government has proposed that the coronavirus should be designated a ‘notifiable disease’. This should allow some employers to claim on their insurance policies in the event of disruption. For the government it ticks two boxes. It solves a problem and somebody else is required to pay for it. • Incite has suggested that the restaurant and bar sector ‘has been seen as retail’s less digitally-savvy relation.’ It says that only 5% of the c£57bn spent in the UK restaurant sector annually is spent online. This is perhaps not as surprising as it sounds as, in general retail, a TV or a suit or a bicycle is ‘consumed’ off-premises whilst much of the attraction of the restaurant sector is that consumption takes place away from the customer’s home. • Incite says ‘integration costs and implementation challenges have slowed the uptake of technology in the sector. From the operator perspective, investment in technology is only justified if it serves a clear operational or consumer need. Only then can it drive growth.’ • Synergy Grill has said that its new oven, which is capable of replacing existing chargrills, has had a warm reception. Food Service Equipment Journal says that an unnamed customer is taking twenty and it quotes Synergy Commercial & Marketing Director Richard Ebbs as saying ‘we have been testing it [the new grill] and trialling it for nearly a year now, so it has been around in concept for a little while. A major chain approached us and wanted a replacement for a charcoal oven so that progressed the testing stage a little bit further. We have had it on trial in that chain – as well as a couple of other sites not connected to it – for two months now and they absolutely love it.’ • Synergy’s grill uses less gas and does not require as much cleaning as a normal gas (let alone charcoal) grill as it does not have or need a fat tray. • Synergy says its grill is more acceptable to asthmatic staff as it causes less irritation. As the labour market tightens, retaining staff (that are expensive to acquire and train) will become evermore critical. • Langton attended the HRC hospitality and foodservice industry event at Excel London yesterday and can confirm the event was well attended despite fears around the ongoing COVID-19 outbreak threatening to put a damper on proceedings. Many stands at the show were promoting the theme of efficiency and reduced environmental impact in terms of kitchen equipment. • However, some stands reported to Langton that they suspected the number of international visitors attending the show might have been down year on year. One can assume this travel reluctance is due to companies being more conservative about international travel due to lack of knowledge around the novel coronavirus. • Coffee #1, in which a majority stake was purchased by a subsidiary of Caffe Nero in February 2019, has reported financial statements for the eight months to end-May 2019 to Companies House. The company reports that turnover fell to £22.9m from £30.8m in the prior year and PBT fell to £1.059m from £1.498m in 2018, both largely as a result of the shortened accounting period. • Black Box Intelligence (formerly TDn2K) has reported that US restaurants posted their second consecutive month of positive same-store sales growth during February. It says growth was, however, modest at only 0.3%. • Black Box says ‘restaurants have now achieved positive sales growth during five of the last six months.’ However, it says ‘as encouraging as that sounds, restaurant sales are far from strong, which is not surprising for an industry that continues to struggle with declining guest counts.’ • Black Box in the US says February LfL sales were down on those of two years ago. Footfall in the month was down 2.0%. Traffic declined by 3.1% over 2019 as a whole. • The CMA has warned retailers not to ‘exploit’ fears re the coronavirus by jacking up prices. Amazon has recently taken steps to remove products making unproven claims re their efficacy against the virus. • Some talk of ‘panic pantries’ being set up in consumers’ homes. • Casual Dining Group owned brand La Tasca has passed a resolution to appoint a voluntary liquidator. La Tasca was reported to have disposed of its last four remaining sites in the third week of February. • Cha Cha, a Latin American bar and restaurant, will open this month on Golborne Road in Notting Hill. The founders of the concept are Rayhana Karim, Max Parfentieff and Alexandre Santamaria. • Corbin and King will open two further restaurants in London, one in the City and another in Notting Hill. • Elixir Distillers in Argyll & Bute has submitted new plans for its Islay distillery with a more traditional frontage. • Pernod Ricard has made a significant investment in Kyoto Distillery, with the funds set to be used to build a new distillery for the Japanese gin producer. HOLIDAYS & LEISURE TRAVEL: • Easy Hotel has announced that it is proposing to place 11.6m new shares at 95p per share with shareholder Citrus Holdco. Citrus Holdco is owned by a consortium of ICAMAP investments. It purchased a majority stake (c68.8%) in Easy Hotel, also at 95p, late last year. • Easy Hotel says the gross proceeds of the Subscription will be approximately £11 million before expenses. It says the ‘subscription price represents a premium of approximately 35.7 per cent. to the closing mid-market price of 70 pence per Existing Ordinary Share on 5 March 2020.’ • Easy Hotel says the ‘proceeds of the Subscription will be primarily utilised to fund the Group’s owned hotel roll-out strategy.’ Interim CEO Scott Christie says ‘our recently announced investment in Spain marks the latest step in our strategy to expand our owned hotel network across centrally located, high quality sites in major European cities. The Group continues to make good progress towards securing sites in its target destinations and we look forward to announcing further developments in due course.’ • Chairman Harm Meijer says ‘the proceeds from this proposed subscription will provide the business with the capital it needs to pursue the next stage of its owned hotel roll-out strategy. We are excited about the development pipeline and, in particular, the potential for accelerating our targeted growth of the brand in Europe.’ • Jet2.com and Jet2holidays have put summer 2021 flights and holidays on sale from Leeds Bradford and East Midlands airports. The operator is offering some 2m seats, an increase of around 4% on last year. • Sir Frederick Barclay is reported to be threatening to sue the family of his twin brother, David, if they attempt to sell the Ritz London hotel for less than £1bn. • China tourist departures well down. Chinese departures to the Americas are said to be down 63.2% over the last month or so on the same period last year. Departures to all destinations are down by 55.9%. Visitor numbers to Europe are down 36.7% per Forward Keys. Some 415k Chinese tourists visited the UK last year, spending an average of £1,680 each. • Accor is opening a budget Ibis hotel in Swindon. • Following the collapse of Flybe, it’s worth considering perhaps just where we would have been if the government had propped up Thomas Cook. Good luck to all its surviving competitors, of course, but the tax payer would arguably still be busy shovelling money down a deepening hole… • STR reports US hotel occupancy down 1.7% to 64.1% for the week ending 29 February, with ADR up 1.6% to $129.67 and RevPAR down 0.2% to $83.16. CORONAVIRUS UPDATES: • The BBC says ‘there are a growing number of reports of empty shop shelves as people rush to buy products such as hand soap, loo roll, pasta and rice.’ • A rush on hand sanitisers has led one spirits producer to say that it is no use using vodka as rubbing alcohol needs to by 60% alcohol to be effective. • Domino’s has said that it is stockpiling some products in case there is any disruption to distribution. • Everyone is agreed that the virus is not positive for the travel industry. • Flybe, though tottering already, has said that the coronavirus was a contributory factor in its collapse. • Virgin Atlantic is postponing wage rises, freezing recruitment and restricting staff travel. • Passengers on the MSC Opera were ordered to stay on board temporarily after an Austrian passenger from a previous cruise tested positive for the virus. • Bookings at Saga’s tour operation are running 20% down. • ITB Berlin, one of the largest travel shows in the world, has been cancelled. Some 130k delegates were due to attend. ITB is running a ‘virtual convention’ on its website. • The official premier of the latest Bond film, No Time to Die, has been put off from this month to November. • IATA says that the revenue hit for airlines globally this year could be a shortfall of $113bn on levels that would have been achieved in the absence of Covid-19. • US travel and commercial organisations claim domestic travel is still safe, despite the ongoing COVID-19 outbreak. OTHER LEISURE: • Twitter is to introduce tweets that disappear after one day. They are to be called Fleets. • Facebook has closed an office in Seattle after one of its workers tested positive for the coronavirus. FINANCE & ECONOMICS: • Sterling up vs dollar at $1.2953 but down vs Euro at €1.1529. Oil lower at $49.54. UK 10yr gilt yield down 4bps at 0.33%. World markets lower yesterday and Far East down in Friday trade. UK (as at 6.30am) due to open over 100 points lower. START THE DAY WITH A SONG: Yesterday’s song was Ride a White Swan by T Rex. Today, who sang? Swing from high to deep, Extremes of sweet and sour, Hope that God exists, I hope, I pray RETAIL WITH NICK BUBB:
John Lewis Partnership: The JLP finals were announced at 8.15am yesterday morning. We were expecting JLP pre-exceptional PBT to be down from £160m to £95m for y/e Jan, but the outcome wasn’t too bad, at £123m (albeit that included a £16m property profit at Waitrose), although there were heavy exceptional write-offs on top of that, eg for the John Lewis store portfolio. The damage was obviously done at John Lewis: we expected operating profits there to be down from £115m to £30m (on ex-VAT sales of £3.82bn) and the outcome was £40m. Waitrose was solid at £213m vs £203m in the previous year (on ex-VAT sales of £6.37bn), helped by the property profits. As for the Strategic Review, the new unified management structure of the 2 Divisions makes it hard to separate one of them off, but the new Chairman Sharon White has said both brands will be kept. JLP is bound to be looking at ways of cutting BDO High Street Sales Tracker: We highlighted on Wednesday that the better vibes about recent John Lewis sales figures have been helped by improved Online sales growth and today’s BDO High Street Sales Tracker for medium-sized Non-Food chains (which has been reporting surprisingly/suspiciously good progress in recent months) tells the same story, despite continued poor High Street footfall figures…In w/e Sunday March 1st, Total BDO LFL sales (including a handful of Homewares and Lifestyle retailers, as well as Fashion retailers) were only down by 0.9% (down 6.1% in Store sales and up by 15.9% in Online sales). Trade Press: Retail Week magazine has not been published this week, but Drapers magazine is out today and the front cover flags up the main feature article on the outdoor brand Patagonia, which has long led the way in sustainable fashion. As the Covid-19 coronavirus spreads, Drapers also look at the impact it has having on the fashion supply chain and hear from one retailer based in China about its effects on his business and workers. In terms of News stories, Drapers concentrate on the news that “pressured’ fashion retailers are already discounting spring product and the industry view that Ted Baker must fill its ‘poisoned chalice’ top job News Flow Next Week: Notwithstanding the Budget on Wednesday lunchtime, the big event for many people next week will be the annual Cheltenham horse-racing Festival, which starts on Tuesday afternoon, with our alter ego “Honest Nick” bringing you his Tips every day. Otherwise, the week kicks off first thing on Tuesday with the BRC-KPMG Retail Sales figures for February, closely followed by the DFS interims and the French Connection finals. Wednesday then brings the Dignity finals and the Lookers finals. On Thursday we get the delayed Intu Properties finals and the prestigious “Retail Week” Awards are being announced on Thursday evening |
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