Langton Capital – 2020-07-10 – PREMIUM – Restaurant Group, gyms, redundancies, Sunak’s measures etc.:
Restaurant Group, gyms, redundancies, Sunak’s measures etc.:
PREMIUM EMAIL – PLEASE DO NOT FORWARD:
A DAY IN THE LIFE:
Tech problems, like working with children & animals, have the capacity to make us all look daft.
Microsoft, bless ‘m, a few days ago replaced all the letter Bs in this doc with the number 657. Probably a reason. Something I will have done 657ut it took me a while to find & made me look silly. 657loody nuisance.
Anyway, a little pressed this morning. Follow us on Twitter at @brumbymark and let’s move on to the news:
ADVERTISE WITH US:
Langton’s free email now carries adverts. See front page of website for today’s copy & contact us for further details.
COFFER PEACH TRACKER. The first Coffer Peach Tracker since pubs, bars and restaurants reopened has been published. 10 July 2020:
• The first Coffer Peach Tracker to be published since pubs reopened shows LfL revenues across the companies that it tracks down 45% on the same weekend last year.
The level of openings:
• The Tracker shows that 36% of the units of the groups tracked were open for eating and drinking inside on July 4 and 5. It says managed pubs and bars that opened saw sales 44.7% below pre-COVID levels compared to the same weekend in 2019 with group-owned restaurants down 41.1%.
Pubs v restaurants:
• A higher proportion of pubs reopened than restaurants. Some 42% of pubs reopened but only 12% of restaurants. Most late night bars have yet to reopen. Many observers agree that closures (or rather failures to reopen) will be more common across the casual diners than across the UK’s pubs.
• CGA says ‘trading at around 55% of pre-COVID norms may seem a disappointing result, and it won’t be profitable for operators, but it is very much in line with what we have seen in other markets.’ Indeed, M&B recently said that it opened at 50% of normal at its Alex steak restaurants in Germany. Sales levels tracked up to around 70% over a period of 4wks.
Growth from here?
• CGA says ‘when bars and restaurants began reopening in the US during May, it was only after a couple of weeks that sales reached 54% of pre-COVID levels, according to data from Nielsen CGA, our Chicago-based research business.’ It says it ‘is going to take time for the trade to return but this provides a foundation on which to build consumer confidence and adapt and improve operations.’
• CGA says it ‘will be reporting trading progress via the Tracker on a weekly basis as the market begins to recover and more sites reopen, including measuring week-on-week increases.’
• It usually reports on London trading compared to that across the UK’s provinces. Hopefully, it will do so again as trading in the Capital could diverge over the short and even medium term from that elsewhere.
RISHI SUNAK’S PACKAGE OF MEASURES: A blunderbuss or a carefully aimed rifle shot? 10 Jul 20:
• The civil service, which has admittedly been out of odour with Downing Street advisor Dominic Cummings for 20yrs or more, is not sure that the measures offer value for money
• And that may be true but is this a genius doing what he must or a panicky, drowning man clutching at straws
HM Revenue & Customs
• HM Revenue & Customs has written to Chancellor Rishi Sunak to express concerns that money spent to encourage staff retention may be wasted. The HMRC also questioned whether offering 50% off meal prices in August at the taxpayers’ expense, would offer value for money.
• An exchange of letters shows that Rishi Sunak issued ‘ministerial directions’ to instruct officials to go ahead with both programmes despite their objections. A Treasury official told the BBC this was ‘normal’ part of government as the final decision was always with the politicians.
• Downing Street would appear to be suggesting that this is civil service advisors watching their backs and covering their backsides. There may be something in that. But the fact that the letters were made public, whilst it may not be a first, isn’t something that many of us have come across before
The £1,000 employment bribe
• Much of the £1,000 bonus x 9.4 million employees will go to employers who would have kept staff on in any case.
• For those intent on redundancies (see Boots & John Lewis below), the grant is too little to make any difference.
• So it does little for either companies such as Boots, John Lewis and Burger King (who between them have turned their back on £9m or so of government funding) whilst giving a £1,000 per capita windfall to companies that were going to take all of their employees back on in a any case
• Mr Sunak told the Today Programme that he knew the grant was not clearly targeted. The implication is that he had little choice other than to behave in the way that he did
• The VAT cut is also a blunt instrument. But it does keep most of the money in the UK as the majority of food and drink consumed here is purchased from local sources
• The half price meals in August could boost spending but the fact that it only applies to Mondays, Tuesdays and Wednesdays, is only August, is capped at £10 per meal and doesn’t include drink, suggests that the government is aware that it is unprecedented and that it may be abused
The shape of the recovery:
• We must get part of the upward V. But how much?
• FT and others suggesting that the various boosts proposed by the Chancellor are not addressing the real issue, which is consumer concerns re safety. The value of transactions on plastic over the weekend which included the opening of England’s pubs & restaurants was still down 23% on the same weekend the year before.
• Data from banks shows that leisure spend was up 7% last week (when many more units were open) compared with the week before. This may come as a disappointment.
• Or at least as a sobering sign re the length of the road back. Barclaycard Payments says that spend was down 45% across hospitality compared with the same week last year.
• Data from Google mobility shows footfall still well down on last year. Boots, John Lewis and Burger King would appear to have extrapolated this at least some way into the future.
PUB & RESTAURANT NEWS:
Covid-19 – Mini Budget proposals & reception:
• Sunak’s measures. See Premium Email.
• The measures are still broadly welcomed although wet led pubs, the late night market, brewers and overseas holidays companies say that there is very little in it for them.
Covid – the new (ab)normal:
• The first Coffer Peach Tracker to be published since pubs reopened shows LfL revenues across the companies that it tracks down 45% on the same weekend last year.
• Research commissioned by Safety Culture has found that over a half (54%) of the UK adults it contacted believed that it was too early to be easing the lockdown. It says ‘the results highlight a lack of confidence in the relaxing of lockdown rules and a reluctance by many British people to return to pubs, cafes and restaurants.’
• Safety Culture says ‘while ‘Super Saturday’ saw millions flock to pubs and bars, just a quarter (26%) of the British public feel safe going back to pubs and bars and only 37% feel safe going back to restaurants and cafes.’ It says there is an ‘urgent need for business to be transparent about new measures for customer and employee safety.’
• Safety Culture says ‘just 6% of the UK public feel that the re-opening of businesses was too slow and should have happened earlier.’ It says that ‘35-44-year olds are particularly concerned about restrictions being eased, with only just over one third (34%) feeling that it was safe for businesses to be allowed to re-open from the 4th July. Those aged 45-54 are most confident in businesses re-opening, with 43% believing it to be safe.’
• Only 26% of consumers felt it was safe to go back to the pub whilst 37% said the same thing about restaurants. Safety Culture, who admittedly have a vested interest in safety and presumably culture, say ‘as we move into the next phase of re-opening in Britain, the majority of the public are still unsure about returning to the iconic British pub, local restaurant, hairdressers or museums. Everywhere is high risk in a pandemic but everyone has the right to expect a safe experience so businesses must prioritise the safety of both their customers and employees right now.’
• Westminster Council is to ask businesses operating outdoor services to implement a ’no seat, no service‘ policy.
• Incite Marketing says there have been ‘seismic shifts in consumer behaviour in such a short space of time’.
• UKH has welcomed yesterday’s announcement that Scotland’s hospitality sector is to reopen on 15 July. Indoor hospitality will be granted an exemption from the two-metre social distancing rule. UKH says ‘this is great news for hospitality and tourism in Scotland. Venues will be eager to open their doors and welcome customers once again. Many of them will have learned valuable lessons this week opening up their outdoor areas and they will feel confident they can keep staff and customers secure.’
• A down day for the sector yesterday. Restaurant Group, Whitbread, Gregg’s & Loungers’ shares all fell by 4%. Dart Group was 6% lower, Marston’s was off by 7% and Revolution Bars’ shares were 8% lower. C&C (up 4%) and 888 Holdings (up 5%) defied the trend.
• Boots is to cut 4,000 jobs and John Lewis will close eight stores, putting around 1,300 jobs at risk.
• The Restaurant Group has updated on its financing & reopening plans saying that it now has ‘increased flexibility in banking facilities’ and that the cuts to its board pay will continue.
• RTN says ‘we have accessed £50m from the Government CLBILS scheme, supported by Lloyds Banking Group’ and has extended the term of its current RCF facility by six months to 30 June 2022. In addition, it has received a covenant waiver for December 2020 with covenants next tested at the end of June 2021. The group says ‘overall, TRG has added an additional £10m to the Group’s overall committed debt facilities.’
• TRG says ‘the Executive Directors and Non-Executive Directors have volunteered to take a 20% reduction in their base salaries or fees while the business continues to access the Coronavirus Job Retention Scheme. This follows on from the 40% reduction (20% for the CFO) that was volunteered from 1 April 2020.’
• Regarding reopening, RTN says the revised group, post its CVA and the administration of Chiquito and Food and Fuel, ‘will comprise approximately 400 restaurants and pubs.’ It says ‘the Group has now started a phased reopening of its restaurants and pubs for eat-in trade in line with government guidance.’
• RTN says its ‘diversified portfolio of the Group allows each division to adapt to the challenges of social distancing uniquely, whilst keeping the customer at the heart of every decision.’ RTN will have 25% of its total estate operational by the end of July and 60% by the end of August. It says 90% of its units will be open by the end of September.
• RTN says ‘the remaining 10% of the estate is not expected to open this calendar year reflecting locations where footfall is anticipated to remain considerably weak (primarily in some airport locations).’ RTN will next update the market at its Interim results on 6th October 2020.
• Starbucks has said that it will require customers to wear face coverings at all its company-owned U.S. stores from next week.
• ASDA is to sell some food via Uber Eats.
• Zest Food, which owns the Tossed and Vital Ingredient chains, has filed a notice of intention to appoint administrators.
• TGI Fridays has two former Carluccio’s sites in Cobham & Lincoln.
• Burger King has said 10% of its sites could close.
• Café Cereal Killer has announced the permanent closure of its two London sites.
• The MA reports JDW will spend €21m on further expansion in Ireland.
• Dishoom has confirmed it will open its first site in Birmingham next week.
• Moody’s reports that Uber Technologies’ announcement that it is to acquire Postmates will ‘augment the scale and competitive position of Uber’s food delivery business Uber Eats in certain large US metropolitan markets and accelerate its goals of achieving EBITDA-level profitability for the whole company and the Uber Eats segment.’
• Australian wine producer Treasury Wine Estates has said ‘while it is right to remain cautious on the near-term outlook, given uncertainty remains around the timing and pace of recovery in our key markets, we remain optimistic around our return to both margin and profit growth.’
• Frasers Group has told landlords it will not pay rents until trading returns to normal
HOLIDAYS & LEISURE TRAVEL:
• The European Travel Commission has said that there are some signs of recovery in the intra-European holiday market. The ETC says ‘so far, so good. We are not seeking a resumption of full operations. Nobody could expect that.’
• The WTTC has said that all travellers should wear protective face masks to show they ‘wear to care’ in the new normal
• Cruise operators Carnival and NCL have said that, if they have to impose social distancing rules, their business models will struggle to work. NCL says ‘one of the hallmarks of the cruise industry is that we always sail with full ships. It’s one of the basic tenets of our business model.’
• Carnival has announced that its AIDA Cruises, Germany’s leading cruise line, will resume sailing operations in August 2020. Following an industry-wide pause in operations in mid-March, three of its ships will restart sailing next month.
• The European Travel Commission has said that, for the moment, tourism has “ceased to exist.” It says job losses “could be monumental.” The recommencement of flights etc should do something to mitigate this.
• The UK government has issued advice against cruise ship travel. This would appear to some to be perhaps four or five months late. And there is no cruise travel anywhere in the world at the moment.
• Specifically, the FCO says the over-70s and those with existing health conditions might like to consider not taking cruises. It is not clear (to us at least) what impact the above will have on the holiday insurance held by would-be travellers. Any impact is more likely to be negative than positive.
• Travel Weekly reports cruise agents as saying they were “frustrated” and “disappointed” by the update from the FCO.
• Airlines for Europe has said that the ‘patchwork’ of uncoordinated travel restrictions across Europe will ‘erode consumer confidence’ as to the safety of travel when it is once again permitted.
• Manchester Airports Group is seeking to raise £300 million from shareholders
• A HVS webinar has heard that hotel operators need to be ‘flexible, be lean and react quickly to change’ during their reopening phase.
• Hapag Lloyd cruises is to resume limited capacity cruises for residents of Germany, Austria and Switzerland at the end of this month.
• STR reports US hotel occupancy was down by 30% in the week to 4 July compared to the same week last year. Rates were down 21% and REVPAR was 45% lower.
• Online travel agent EDreams ODIGEO has reported a net loss of €40.5 million for the year to March 31. The company says ‘in these circumstances these are good results demonstrating the relative strength of our business.’
• Walt Disney World is to undertake a phased reopening of its US parks with significant reductions in capacity.
• Pools, gyms and sports facilities will be able to reopen from 25 July, the government has announced. Outdoor gigs will also be able to take place. Elsewhere, beauticians, nail salons and tattooists can also reopen from Monday.
• UK Hospitality has responded to the news, saying ‘the reopening of additional parts of the hospitality sector is great news. Health and leisure facilities, such as pools, spas and gyns are a major part of the appeal of the UK’s hotels and holiday parks. The reintroduction of sporting activities and live entertainment will be a boost right across the sector.’
• CEO Kate Nicholls says ‘for those businesses still not able to open fully, such as nightclubs, business events hosts and music venues, there must be a roadmap for reopening these businesses accompanied by Government support which ensures that none fall through the gaps in the meantime.’
• Ms Nicholls says ‘much of the focus has been on restaurants and pubs reopening, but there have been many other parts of our sector waiting for the nod to reopen. This will bring more people back into work and off furlough. It is another very positive step forward for our industry.’
• The Gym Group has updated on its reopening plans post yesterday’s government announcement. It says it ‘will be re-opening its gyms in England starting on 25 July 2020.’ The company says its 1601 sites across England will reopen on 25 July 2020 with its 13 sites in Scotland and 3 in Wales ‘to follow as soon as possible after relevant local restrictions are lifted.’
• Gyms will operate with reduced hours initially. CEO Richard Darwin says ‘we are in the process of un-furloughing our colleagues, who will be ready to open the doors of our gyms in England on 25 July and in the other home nations once restrictions are lifted. We are encouraged by the response of our members, the vast majority of whom are keen to get back to the gym to begin working out again.’
• There is a global shortage of push bikes.
FINANCE & ECONOMICS:
• Accountant BDO has suggested that UK GDP will fall by 11% this year. It says GDP will not recover to 2019 levels until 2024. It says, ominously, that ‘businesses will be rethinking their operations and future plans in order to adapt and survive as major investments and planned M&A activity will likely be on hold until there is a more certain and stable outlook. We should assume that the full extent of economic damage will not be revealed until the Government’s Coronavirus Job Retention Scheme comes to an end in October.’
• The EU has said there are “significant divergences” between the Brexit aims of the UK and the EU.
• Firms in Northern Ireland may be paid by the UK taxpayer to compensate them for what The Telegraph has called a ‘deluge of Brexit customs red tape’.
• More discussion on the V shaped recovery. Given the speed of the drop and the fact that the immediate reason, venues were ordered to shut, will at some point be removed, a part of the upward side of the V is guaranteed. It is how much of the vertical drop that is recovered and how long the rest takes to get back that is up for debate. See FT.
• Brexit talks have finished early for a second week running.
• Sterling down v dollar at $1.2586 but up v Euro at ®1.1166. Oil lower at $41.84. UK 10yr gilt yield down 2bps at 0.16%. World markets lower yesterday. Far East down today. London to open down around 25pts as at 7am.
• Unemployment claims numbers fell again in the US last week. Some 18.1m people are now receiving benefits.
START THE DAY WITH A SONG:
The song has been furloughed. See you on the other side.
RETAIL WITH NICK BUBB:
• Today’s News: After yesterday’s double-whammy of store closures/job losses from both Boots and John Lewis, today has got off to a quiet start, but McColl’s has announced that it is delaying the interims due on Tuesday, as its auditors need more time to review the 26 weeks to May 24th. And the embattled Boohoo has announced that its Employee Benefit Trust has been taking advantage of the slump in the share price to buy in shares to meet future share option awards, picking up 4.4m at just 226p on Wednesday and hoovering up 5.5m yesterday at as much as c286p a share.
• News Flow Next Week: A busy week kicks off first thing on Tuesday with the BRC-KPMG Retail Sales survey for June, quickly followed on the same day by the Ocado interims, the AO.com finals and the Motorpoint finals. The McColl’s interims due on Tuesday have been delayed. Wednesday then brings the Dixons Carphone finals, the Dunelm Q1 update and the Burberry AGM. On Thursday we get the Frasers Group finals and the Marshall Motors AGM, with the Homeserve AGM on Friday.
• BDO High Street Sales Tracker: The BDO High Street Sales Tracker today for medium-sized Non-Food chains flags that in w/e Sunday July 5th, BDO Fashion sales were down by c17% (down 63% in Store sales and up 45% Online), but Total BDO LFL sales (including a handful of Homewares and Lifestyle retailers, as well as Fashion retailers) were down by only c5% (down c47% in Store sales, but up by c96% in Online sales)…
• Trade Press: Retail Week magazine has not been published this week, but the glossy new monthly Drapers magazine is out and is dedicated to the theme of “change”: Drapers even commissioned the Finnish artist Jukka Kettunen to illustrate the cover picture of a lotus flower (inspired by the Zen Buddhist saying: “The lotus blooms in the midst of the fire”, meaning that we come to realise our true selves in the most challenging and even potentially destructive of times). The Editor’s column is headlined “Change is the only constant, so let’s embrace it”. The new-look magazine is focused on feature articles rather than news articles and Drapers look, inter alia, at the problem of racism in fashion retailing, the role of the Head Office in a post-Covid working world, interview Pernilla Wolfhart (the new MD of the H&M lifestyle brand Arket) and unveil the winners of the inaugural Drapers