Langton Capital – 2020-04-29 – New normal, furlough extension, Starbucks, re-openings etc.:
New normal, furlough extension, Starbucks, re-openings etc.:A DAY IN THE LIFE: Still either a bit busy at the moment or setting the alarm just a few minutes too late. Still, the effect is the same so let’s move straight on to the news: LANGTON PREMIUM EMAIL: Corporate Offer: Premium email just £295 (plus VAT) for a single subscriber or £495 (plus VAT) for multiple subscribers. Drop us a line to get involved. Retail Offer: Easy in, easy out. £30 per month (inclusive of VAT, £25 net) via PayPal. Email us for details or check here. ADVERTISE WITH US: Langton’s free email now carries adverts. See front page of website for today’s copy & contact us for further details. SEE PREMIUM EMAIL. • Life under the new-normal PUB & RESTAURANT NEWS: Media blitz: • The BBC ran interviews with Simon Emeny (CEO Fuller’s) and Jonathan Downey yesterday evening. Whilst there are more questions than answers, operators want to be reassured that support will not end when the lockdown begins, slowly, to be reversed. Revenues could be down by up to 80%, says Fuller’s. it adds that the end of the lockdown could be more difficult than the lockdown itself. Downey says that two million jobs are at risk. • The Evening Standard runs interviews with several bar & restaurant operators in the capital. The plea is similar. Operator Jamie Barber says ‘the government has not done everything it has done over the last few weeks to protect jobs just to see businesses go bust as soon as they reopen.’ This remains a real and present danger. • The Standard says the government ‘need to continue with the furlough scheme for up to 12 months following the formal end of lockdown. Social distancing will immediately bankrupt most pubs, clubs and restaurants otherwise.’ • The Times reports on a raft of operators that have furloughed virtually all of their employees. The paper says ‘surviving the lockdown is one thing, but operators are becoming increasingly concerned at what the industry will look like when it is given the green light to start reopening.’ • Social distancing is inconsistent with socialising. The industry is not the master of its own destiny. If the government wants the sector to survive, then it will have to put its hand in its pocket (in truth the pocket of the taxpayer) for some time to come. Government help: • Chancellor Rishi Sunak has suggested for the first time that workers in parts of the economy worst affected by the Covid-19 shutdown could be furloughed for longer than others. The hospitality industry was adversely impacted when PM Boris Johnson told people to stay away from pubs (but didn’t order them to close) and it could be one of the last areas to leave lockdown per Cabinet Secretary Michael Gove. • The Treasury is said to be modelling a ‘wide range of scenarios’ as regards easing the lockdown. • The British Beer & Pub Association has called on PM Boris Johnson to give British pubs the support they need to survive through the COVID-19 lockdown and beyond. The BBPA says ‘such support is essential to ensuring pubs survive the COVID-19 lockdown, so they can re-open when safe to do so and be commercially viable whilst getting back on their feet.’ France has said it will not permit restaurants, bars and cafés to reopen before June at the earliest. • The BBPA says ‘the sector needs his [Boris Johnson’s] full support if pubs are going to make it through the COVID-19 crisis.’ It says ‘pubs might survive the COVID-19 lockdown, but without additional support to assist them when re-opening, many could fall at the last hurdle as we come out the other end of this crisis.’ • The British Institute of Innkeeping has also called on the Chancellor to extend support to pubs. A survey of licensees suggests that ‘whilst some of our members have been helped by the economic support measures Government has put in place, many others have not yet received that relief, and over 20% of our members with rateable values over £51k are not even eligible for the cash grants.’ It says ‘the BII is continuing to support its members as individuals, however, it is also our role to ensure Government are made aware of the challenges that continue to face licensees as they try to keep their businesses alive.’ The new normal? • Spain has taken the first steps to easing its lockdown. Children have been allowed out onto the street for the first time since mid-March. Vulnerable groups have been told to stay at home but some staff will now be encouraged to go back to work. • President Pedro Sánchez has unveiled a four-phase plan (phases zero through to three) aiming for a ‘new normality’ in Spain by the end of June. We are in Phase Zero now. In Phase One, smaller businesses will be allowed to re-open with social distancing still in place. Restaurant terraces will be allowed to open but capacity will be limited to 30% of normal. • In Phase Two, restaurants will be allowed to open internal areas up to a third of their normal capacity. Cinemas and exhibitions will also be allowed to operate at one third of normal levels. Cultural events will be allowed with a maximum of 400 people outside and 50 indoors. • Phase Three will move numbers up to 50% with more shops open and the new normal will include allowing more general movement but the use of masks will still be recommended. Retailers will be able to open at 50% capacity, with measures for restaurants further eased. • The Institute of Economic Affairs has suggested that ‘we are in a very strange new world’. It goes on to say: ‘our high streets, already greatly threatened, now face wipe-out’. The IEA says ‘footfall in shops will be far lower than before lockdown, and anyway people have got used to buying many more things online. As for bars, restaurants and the wider hospitality industry, some calculations suggest that social distancing could reduce the safe capacity of venues by as much as three quarters.’ • The IEA goes on to make a number of further, blood-curdling predictions. It says that scrapping ‘or at least dramatically reducing’ business rates could allow some operators a breathing space. • Coronavirus may hasten the decline of cash and give a further boost to the use of plastic, even for smaller value transactions, across the hospitality industry. Company news: • Pepsi has reported Q1 numbers saying that demand for its snacks has risen sharply but that demand from restaurants and bars has unsurprisingly dropped markedly. The drinks business is performing less well. Coke said last week that volumes had dropped globally by 25% since early April. • Pepsi’s Q1 revenue rose by 7.7% to $13.9bn with earnings at 107c, ahead of brokers’ estimates of 103c. The company has withdrawn guidance for the year as a whole. • Starbucks has said that it will begin re-opening its stores in the US from next week. It should have 90% of its units open by early June with services changed to prioritise drive-thru sales and in-store pick-up. CEO Kevin Johnson says ‘as we begin the recovery process that requires ongoing monitoring to rapidly adapt and recover, we are well-adapted in our digital assets to expand service to customers and focus on the customer experience, beverage innovation and digital assets.’ • Starbucks updated on Q1 sales saying that LfL sales in the US were down by 3% with transaction numbers down by 75 but spend per head up by 5%. China sales are reported to be recovering with 98% of stores there now open. • Wagamama is to reopen three restaurants across London in order to process delivery sales. • The Telegraph reports that landlord Grainrent has filed a winding up petition against Pizza Express for non-payment of rent. The paper quotes that landlord as saying it ‘remains open to compromise with the chain’. • Nando’s is to open six sites across London and Manchester in order to undertake a ‘controlled experiment’ re delivery. • US vegan food manufacturer Beyond Meat is to enter the Chinese market via a partnership with Starbucks • The Wellington Pub Company is reported to have said that it will give tenants a three-month, rent-free period where deemed appropriate. • Burger King is said to be planning to reopen 10 more UK sites a week for delivery as a part of its lockdown exit planning. • McDonald’s is reported to be considering reopening a site this week. The operator says ‘recently, we began working through a potential and limited reopening.’ • AB InBev has launched alcohol free variants of its Budweiser and Stella Artois beers. • A blue day for the most part for the sector yesterday. C&C, New River, Playtech & Rank shares all rose 5%. Safestay and Whitbread were up 6%, Hostelworld & Carnival rose 8%, Games Workshop was up 9% and Cineworld, a notably volatile stock recently (in both directions) was up 17%. Restaurant Group was a rare faller, finishing off some 5%. Other news: • President Donald Trump has ordered meat-processing factories to remain open. He is invoking the Defence Production Act in order to do so. • Stay in a Pub has suggested that demand for staycations later in the year could provide a welcome boost to revenues for some pubs. Would-be overseas holidaymakers my be put off from flying – or they may not be allowed to – meaning that domestic accommodation could see good demand. • Stay in a Pub says that ‘many pub website homepages state that they are physically closed but also that they are closed for room bookings which means that customers wanting to plan in advance are unable to book future accommodation.’ If staff are furloughed, there may be nobody available to pick up the phone. • Paul Nunny says ‘pub owners need to be looking to the future and taking bookings with clear and flexible refund and booking policies. This may include flexibility over changing booking dates, fully refundable vouchers, or guaranteed refunds if money has been taken. Gaining bookings now builds and secures future trade.’ • The CBI has reported that British retailers recorded their biggest fall in sales since the 2008 financial crisis in the first half of April. The CBI says ‘the lockdown is hitting retailers hard. Two fifths have shut up shop completely for now.’ • BT Sport will not charge pubs until further notice. That’s helpful. Though there is no sport at present and there are, effectively, no pubs. HOLIDAYS & LEISURE TRAVEL: • BA is reported set to cut up to 12,000 jobs. • Norwegian Cruise Lines, which we reported on 20 April had appointed Goldman Sachs to explore options to ‘bolster is finances’, has announced that it is working with its export credit agencies to finalise a debt holiday deal. The company says ‘our quick action to proactively and aggressively implement initiatives to preserve cash and enhance liquidity in this uncertain and fluid environment puts us in a stronger position to withstand the adverse financial effects of Covid-19.’ • Transport consultant Systra has reported that two-thirds of UK residents believe virtual meetings will replace some or all business trips. • A Travel Weekly webcast has heard from a number of operators that the rebound from current non-existent booking levels could be uncertain and erratic. Summer is now reported to be ‘in doubt’. • Analytics firm Forward Keys has said that consumers are still ‘dreaming of travel’. They probably are. • Travel brand Secret Escapes is said to be close to securing a £40 million equity investment to help it through the coronavirus crisis. • Bourne Leisure brands Butlin’s, Haven and Warner Leisure Hotels have extended the closures of their parks and hotels until 7 June at the earliest. Haven says ‘it is now clear we will be unable to offer the usual Haven experience for a longer period of time, and so we have taken the decision to temporarily extend the closure of all our parks.’ OTHER LEISURE: • GVC announced yesterday that it had agreed a new £535m Revolving Credit Facility with its existing lending banks. GVC says ‘having taken early and decisive actions to mitigate the impact of COVID-19 on our business, we are confident that we can achieve our target of breakeven cashflow per month during this crisis.’ It says ‘we remain well placed to take advantage of a range of attractive growth opportunities which we believe will be available to us.’ • Google parent Alphabet has reported a 13% increase in Q1 revenues to $41.2bn. The shares were up by 3% or so in after-hours trading. Advertising is now the most significant earnings stream. FINANCE & ECONOMICS: • The NIESR says that, for the UK, ‘the economic outlook is extremely uncertain and depends critically on the effectiveness of policies to manage the economy while limiting the spread of Covid-19.’ It says ‘it is almost certain that GDP will fall in 2020 and a material risk of a further fall in 2021.’ • The NIESR estimates that GDP will run at around 30% down while the lockdown is in place. The key question then will be whether any longer lasting damage has been done to the economy whilst it has been in the deep freeze. • The NIESR’s base case is still that ‘the complex network of relationships that make up the economy can be restored after the lockdown without any significant long-term damage.’ This remains an aspiration rather than a firm belief because, as many observers have said, these are unprecedented times. • The NIESR also expects GDP falls in across most major developed economies. It believes that global GDP will fall by around a relatively modest 3.5% this year. • Panorama has joined the Sunday Times in suggesting that the UK government was woefully unprepared to face the current crisis, despite various warnings coming from its own experts. • Sterling up at $1.2474 and €1.1497. Oil up at $21.20. UK 10yr gilt yield down 2bps at 0.29%. World markets. UK & Europe higher yesterday with the US down and Far East mixed in Wednesday trade. UK set to open up by perhaps 30pts (correct as at 7am). START THE DAY WITH A SONG: The song has been furloughed. See you on the other side. RETAIL WITH NICK BUBB:
• Next: The much-awaited Next Q1 update today is much more detailed than usual, with a revised stress test, as well as a helpful weekly sales chart and an explanation of all the mitigating actions taken to re-focus the business during the pandemic crisis. The upshot is that “even in our worst scenario, with full year full price sales down -40%, the mitigation we have put in place means that: (1) the company can operate comfortably within its cash resources and (2) we will end the year with less net financial debt than at the end of last year”, although Next would make no profit…As it happens, Q1 product sales were down by as much as 41%, despite a steady start (Retail down 52%, Online down 32%), as “the fall off in sales to date has been faster and steeper than anticipated in our March results”, but Next highlight that 70% of the ranges are now available Online and warehouse capacity • Dixons Carphone: The pre-close update from Dixons Carphone is less sombre, highlighting that LFL sales over the last 5 weeks have only been down by 3%, thanks to a surge in sales in the Nordics (where stores remain open) and an Online sales boom. The CEO Alex Baldock highlights that “In the Nordics, our stores continue to operate to high social distancing and hygiene standards, providing a successful blueprint for how our UK stores can safely reopen as soon as Government so decides”.
• Retail Sales Watch: The Retail Sales month of April (the 4 weeks to May 2nd) is nearly over, but we haven’t seen the final word yet on how bad March was on the High Street, given the coronavirus lockdown that began on March 23rd…The Office of National Statistics (ie the ONS or what we mockingly call the “Planet ONS”) reported on Thursday that non-seasonally adjusted total Retail Sales by value were down by 2.3% last month (ex-petrol). But the BRC-KPMG unadjusted measure of gross sales was down by 4.3% in gross terms (down 3.5% LFL). So, who was right? The ONS? Or the BRC? Well, the Retailing consultancy group, Retail Economics (RE), which was founded by Richard Lim (who used to run the monthly BRC-KPMG Retail Sales survey), has just come out with its own detailed overview of March and their estimate is that gross Retail sales fell in value by 3.4% last month, year-on-year
• John Lewis Partnership Trading Watch: Moving onto sales in April, in the absence of the much-missed JLP weekly sales figures (which have not been published since the end of January), we have to guess at what they would normally have reported yesterday for last week…Now, John Lewis has clearly outperformed the market, thanks to its strong Online sales, but we still assume that overall John Lewis sales were c25% down in w/e April 25th. Over at Waitrose, the fine weather last week and the comp with the post-Easter week a year ago may have given more of a boost, but, given the big increase in Online delivery capacity, we’d still assume that sales were at least 10% up at Waitrose. Recent trading trends may well be a subject for discussion at this morning’s 10am briefing by JLP with analysts, but we imagine that the main focus will be the scale of the upcoming John Lewis store closure • Grocery Market Share Watch: The latest monthly Kantar grocery market share figures (for the 4/12 weeks to April 19th) said that Grocery sales increased by 5.5% in those last 4 weeks, but the rival Nielsen survey published last night (which was headlined “Online reaches 10% of all UK grocery spend amid COVID-19 lockdown”) highlighted that industry till sales increased by only 0.8% over the last month, despite the boom in Online sales and Convenience store sales. Mike Watkins, Nielsen’s UK Head of Retailer and Business Insight, said: “Retailers have increased Online capacity significantly in the last few weeks…by increasing the number of delivery slots, whilst prioritising the more vulnerable and improving order sizes so that shoppers can minimise the frequency of shopping”. TRADING STATEMENTS & EVENTS: Upcoming results are set out below: • 29 Apr 20 YUM Brands Q1 numbers • 29 Apr 20 Nichols AGM • 30 Apr 20 Sainsbury FY numbers • 30 Apr 20 Carlsberg Q1 update • 4 May 20 Texas Roadhouse Q1 numbers • 12 May 20 Morrison’s Q1 IMS • 13 May 20 Ten Entertainment FY numbers • 14 May 20 Premier Foods FY numbers • 30 May 20 Minoan AGM • 7 May 20 Intercontinental Hotels Q1 numbers • 7 May 20 Coca Cola HBC Q1 numbers • 12 May 20 On the Beach H1 • 13 May 20 Marston’s H1 numbers • 13 May 20 Stock Spirits H1 • 13 May 20 Compass Group H1 • 13 May 20 C&C full year numbers • 14 May 20 Flutter AGM • 19 May 20 Cranswick FY numbers • 21 May 20 Young & Co full year numbers • 3 Jun 20 SSP H1 numbers • 3 Jun 20 DP Eurasia AGM • 11 Jun 20 Fuller’s FY numbers • 23 Jun 20 Gear4Music full year numbers • 23 Jun 20 – Cranswick FY numbers Many results are likely to be delayed. For information purposes, the results below were delivered at these dates last year. 2019 COMPARATIVE RESULTS: • 30 Apr 19 Whitbread FY numbers, 8 May 19 Elegant Hotels H1 numbers, 8 May 19 JD Wetherspoon Q3 update, 10 May 19 Millennium & Copthorne Q1 numbers, 14 May 19 Stock Spirits H1 numbers, 14 May 19 On the Beach H1 numbers, 15 May 19 SSP H1 numbers, 15 May 19 TUI H1 numbers, 22 May 19 Britvic H1 numbers, 22 May 19 C&C FY numbers, 22 May 19 Britvic H1 numbers, 23 May 19 M&B H1 results, 23 May 19 Young & Co FY numbers, 29 May 19 EasyHotel H1 numbers, 11 Jul 19 Dart Group FY numbers, 16 Jul 19 Fulham Shore FY numbers, 17 Jul 19 Nichols H1 numbers, 24 Jul 19 Marston’s Q3 trading update, 25 Jul 19 Fuller’s FY numbers, 25 Jul 19 Compass Group Q3 update, 25 Jul 19 Diageo FY numbers, 30 Jul 19 Gregg’s H1 numbers, 31 Jul 19 M&B Q3 update YESTERDAY’S TWEETS: • COVID Qs #16. Where are the winners? Thin on the ground. Delivery, maybe but TSCO is cutting staff, SBRY says margins impacted by security, screening & MKS says ‘food trading has been adversely affected by lockdown.’ We’re ‘all in this together’? But not in a good way • Covid ££ side effects #58. New Normal to feature Dead Men Walking? Will ‘zombie’ be the new look? Companies too indebted & with too little revenue to move forward, too fearful to retrench & with creditors & administrators too pre-occupied to pull the plug. Hope not. LANGTON CAPITAL: Made in Hull. Like all the best things. Langton Capital is a financial advisory company providing insightful views on the UK and global leisure industry and the wider consumer sector in general. Subscription to the daily email is free. Unsubscribing is painless. We provide daily off the shelf and bespoke research. We have helped with transactions, fund-raisings, disposals and other corporate issues. We have a good ear, we are impartial, independent and not half bad at what we do. If you think that we could help you or your business, drop us a line. |
|
