Langton Capital – 2020-07-16 – Re-openings, no-shows, Pizza Express, Loungers, bingo, GVC etc.:
Re-openings, no-shows, Pizza Express, Loungers, bingo, GVC etc.:
A DAY IN THE LIFE:
Lots to do but also lots of ‘out-of-office’ reports coming back now of a morning. Would appear that summer is upon us. Anyway, we’re time pressured so please feel free to follow us on Twitter at @brumbymark and let’s move on to the news:
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UNINTENDED CONSEQUENCES. INESCAPABLE IN THE REAL WORLD. The economy isn’t like a Petri dish and consumers are not mathematical equations. Everything impacts everything else. 16 July 2020:
• The Covid-19 pandemic is the greatest destabilising event since WW2. See Premium Email.
PUB & RESTAURANT NEWS:
Covid – the new (ab)normal:
• Shop openings (albeit historic data).
• The Local Data Company has said that ‘cautious retailers [have opened] just 52% of non-essential units eligible to be open as the market starts to recover from lockdown.’ The data was collected during the period May 23rd – 1st July. LDC looked at ‘over 111,000 retail units across 164 towns and cities across GB to understand how many shops that were ordered to close by the government in March had reopened to consumers.’
• The number of openings will have changed since 4 July.
• LDC says that only 64% of leisure units were open. At the time of the survey, dine-in was still illegal. Of those units open, the LDC says ‘local favourites like fish & chip shops (93% reopen), Indian food (93%) and pizza takeaway units (91%) were able to reopen successfully.’ But it says that ‘less than half of all chain coffee shops surveyed (42%) had reopened, with these units severely impacted by the lockdown, working from home and change in consumer behaviour. Independent coffee shops did not fare much better at just 50% reopened.’
• LDC reports ‘only 40% of travel agents had reopened due to international travel restrictions and reduced demand due to concerns about international travel.’ It says ‘based on this initial Local Data Company research, an initial increase in empty shops across many high streets and shopping centres is very likely as businesses struggle to weather the pandemic.’
• It says ‘in the short to medium term vacancy rates will increase; taking a more optimistic stance this could also pave the way for a new wave of entrepreneurs who can take advantage of more affordable rental values and a more captive residential population in alternative locations, as the trend towards increased home working continues.’ We’re not sure the landlords will see it this way – at least not in the short term.
• Credit card usage.
• UK Finance says credit cards spending dropped by nearly half at the start of lockdown. This is very much in line with Cambridge University’s granular work on credit card spending in Spain (with BBVA). See earlier Premium Emails.
• That data found that spending on credit cards in Spain had also halved – but spending on food on credit card had risen slightly meaning that the slice of the cake left for everyone else had much more than halved.
• The Mail Online reports that 30 of the largest employers in the City of London intend to bring back only around a half of their workers into the office. Most of the balance will be allowed to work from home.
• As the longer term implications of the Covid-19 crisis become apparent, this will be taken as terrible news for coffee shops, sandwich shops, bars adjacent to tube and mainline stations etc.
• No-shows a major concern.
• A number of top-flight chefs including Neil Rankin and Tom Kerridge have said that no-shows are proving to be a drag on their businesses post re-opening. Whether customers have had a change of heart of have had second thoughts about venturing out is unclear.
• Writing on Sunday, Kerridge said that 27 people had failed to show up on the Saturday having previously made reservations. He said this was ‘disgraceful, short-sighted and down-right unhelpful’ and added ‘this industry, like many others, is on the verge of collapse. All of you ‘no-shows’ in all restaurants up and down the country are adding to the issues already being faced. You are putting people’s jobs more at risk.’
• The VAT price cut.
• A number of larger brands (McDonald’s, JD Wetherspoon, Starbucks and others) have said they will pass price reductions on to customers leading some other operators to criticise them for doing so.
• London Union’s Jonathan Downey says ‘it’s clear where all of the Chancellor’s new support measures are working best, and it’s not for SMEs and the independent sector which is so badly represented within our industry.’ He names the larger firms above (and Pret) and says that ‘smaller businesses are looking at holding on to the benefit in a desperate effort to keep going.’
• Downey says ‘this, along with all the other new measures, has completely divided our industry.’ He says ‘any company that can afford to pass on the full 15% VAT reduction to the customer doesn’t need help with a £10 Mon-Wed voucher scheme and certainly shouldn’t be benefiting from a £9.4bn job retention bonus scheme for jobs that aren’t at risk.’ He says the latter ‘is an astonishing waste of taxpayer cash.’
• The Guardian, meanwhile, says that consumers may be disappointed if they expect to reap all of the benefits of the tax cut.
• Scotland yesterday moved to ‘phase three’ of its lockdown exit strategy meaning that from yesterday, pubs and restaurants were allowed to reopen their doors to the public for indoor dining and drinking.
• The National Restaurant Association in the US has urged the White House to create a targeted relief fund for operators with 20 or fewer units. Regarding renewed shutdowns in California, Florida and elsewhere, the NRA says ‘in just the past two weeks, state and local government mandates have shut down almost 100,000 restaurants.’ It says these units will need help. The NRA says ‘despite losing more jobs and revenue than any other industry in this country, Congress has chosen not to advance a recovery package that is tailored for the unique challenges of a restaurant on the cusp of bankruptcy.’
• The FT says ‘Pizza Express is heading for a takeover by its lenders as early as this month in a debt-for-equity swap with Chinese owner Hony Capital that is also likely to involve closing some of its high street restaurants hard hit in the pandemic.’ The story was first run by The Times.
• The FT says ‘investors in the £465m of senior secured bonds that back the company are in advanced talks over a restructuring deal, according to two people familiar with the discussions. These are likely to result in control of the UK business being handed to the debt holders.’
• Pizza Express has around 450 restaurants in the UK and around 600 in total. Prezzo is also close to changing hands. Companies where we are awaiting news (where advisors have been appointed, where negotiations with landlords are underway etc.):
• Azzurri (ASK & Zizzi), Busaba, Byron, Gourmet Burger Kitchen, Pizza Express, Pret (talks with landlords), Prezzo, Wasabi and there may be others.
• Loungers has updated on its re-openings saying it has ‘successfully re-opened 75 Lounges and 19 Cosy Clubs (from a total estate of 138 Lounges and 29 Cosy Clubs)’. The company says ‘we have been very encouraged by the reception from both our teams and our customers.’
• Loungers says ‘we have decided not to re-open two sites. Banco Lounge in Bristol is one of our earliest sites and a combination of its small size and the additional costs of doing business mean that it no longer meets our returns criteria. Its lease expires in March 2021 and will not be renewed. We have also closed Allegro Lounge which hasn’t performed as we had hoped since opening in 2018.’
• Loungers’ CEO Nick Collins says ‘it remains our view that Loungers is well placed coming out of lockdown and we are optimistic with regards to future trading and the continued planned growth of both our Lounge and Cosy Club brands.’ He says the short term roll out programme will be ‘considerably more conservative’ and says ‘we welcome the further sector support announced by the Government last week which is timely and will assist us in re-building momentum over the weeks and months ahead.’
• CAMRA has called on the CMA to investigate the creation of the Carlsberg Marston’s Brewing Company. Given the explosion in the number of brewers over recent years, this is less to do with choice and more to do with market share.
• CAMRA says ‘since the day that it was announced, CAMRA has raised serious concerns about the proposed Carlsberg Marston’s Brewing Company and choice for beer drinkers, pub goers and over the future of British beers, brands and breweries.’
• JD Wetherspoon reminds a number of newspapers that it ‘paid just under three quarters of a billion in taxes in our last financial year ( including £358m of VAT), about 43% of sales- around one pound in every thousand of all UK taxes. In the current financial year, when we are likely to be lossmaking, Wetherspoon will have paid about £450 million of taxes to the government, net of furlough grants. We’ve only been asked this question by newspapers, which themselves pay no VAT on their sales and whose owners benefit from non-dom tax status.’ It says ‘we will consider this issue in the next few months.’
• Wahaca says it will pass on the VAT cut in full to customers.
• Cote is offering its Cote at Home range for delivery nationwide.
• ASOS says it will repay the money it claimed from the government furlough scheme. Its shares rose during the lockdown.
• Domino’s Pizza has called once again on the CMA to prevent Amazon from investing in Deliveroo. It says the CMA has misapplied the test of whether Amazon’s investment of 16 per cent in the company would reduce competition.
• Chipotle Mexican Grill is to open its 100th Chipotlane, the brand’s drive-thru digital order pick-up lane, later this month. It says it is adding 10,000 jobs across its estate.
• Nielsen reports that, like it or not, Covid has helped spawn what it is calling a ‘homebody economy’. Getting people out and about again may be no mean task.
HOLIDAYS & LEISURE TRAVEL:
• Travel Weekly reports that ‘UK outbound travel has resumed more as “a trickle” than a flood despite industry relief at the restart.’ It quotes Alan Bowen, an advisor to the Association of Atol companies, as saying ‘it’s great to see people travelling. There is an opening, but it’s relatively small. The question is what happens two months down the line. We need to see some movement and see what people say when they come back. Did they enjoy it?’
• A study by domestic holiday operator Parkdean Resorts has suggested that the international travel industry could lose £10.4 billion in revenue as a result of Covid-19. It says that travel searches are down by a third compared to the pre-lockdown period with airline searches down by 16%. Parkdean reckons there will be a transfer of up to £8bn from overseas holidays to domestic competitors.
• The government of Spain’s Balearic Islands has announced that it will close three streets in main nightlife areas on Mallorca in order to combat ‘tourism excesses’.
• Disneyland Paris is to commence a phased reopening
• Carnival’s Holland America Line has announced that three ships will be leaving its fleet and will be transferring to undisclosed buyers.
• Buzz Bingo (formerly Gala) has told customers ‘while we are planning the phased reopening of our clubs from 6th August…[we have made] some difficult decisions about how we move forward and ensure that we protect the future of Buzz Bingo.’ The company says ‘26 of our clubs will not reopen, and will close permanently in a proposed restructure of our retail business.’ It is proposing a CVA.
• Buzz says ‘we could never have expected this outcome when we closed our doors on 21st March, but the coronavirus crisis is a completely one-off event. The decision to restructure our club portfolio is the right way to secure our long-term future and make sure that we can still bring bingo to our customers in the majority of our clubs around the country and online at buzzbingo.com.’
• The company says ‘we are reopening 12 clubs on 6th August and the rest of our clubs will be reopening in the coming weeks, and, of course, our online bingo and slots are open to all at buzzbingo.com. I really hope that you will continue to enjoy playing with us.’
• Buzz CEO Chris Matthews says ‘the ongoing pandemic has had far-reaching consequences for the entire leisure and hospitality sector and an immediate and significant impact on our business. Following a thorough review of our options, the proposed CVA will restructure our retail portfolio to ensure we are well positioned for a return to growth, while adapting to the ongoing, challenging environment as we start to reopen the majority of our clubs.’
• GVC, which includes Ladbrokes, has updated on trading saying it has made an ‘encouraging start to the year, despite the impact of COVID-19, with Group net gaming revenue down 11% and Online NGR up 19% in H1.’
• CEO Kenneth Alexander says ‘given the extraordinary circumstances in which the Group is currently operating, delivering double-digit online net gaming revenue growth in all of our major territories is a very strong performance. It is a clear testament to the strength and diversification of our business model.’
• GVC says ‘all in all, our resilient performance through what has been a turbulent first half and the proven strength of our business model means that the Group can look forward to the future with confidence.’ Mr Alexander has informed the board that, after 13 years as Chief Executive Officer, he will retire from the Board and from the Company tomorrow. He will be succeeded by Shay Segev, GVC’s Chief Operating Officer.
• Twitter has been the target of a hacking attack said to be related to a Bitcoin scam. Twitter CEO Jack Dorsey said via a tweet ‘tough day for us at Twitter. We all feel terrible this happened.’
FINANCE & ECONOMICS:
• The Chancellor says Britain faces some “tough choices ahead” on paying for the various support measures that he has put in place. He would not be drawn on details.
• The Resolution Foundations says that way that unemployment is reported in the UK may not reflect the “true scale of joblessness”.
• Warwick University has found that areas of the UK that voted to leave the EU have suffered the biggest economic hit since 2016
• China’s economy grew by 3.2% in the quarter to the end of June. Its statistics bureau says the country ‘demonstrated a momentum of restorative growth and gradual recovery’. It says ‘we are confident on the economic recovery in the second half of this year.’
• China says that the Huawei debacle has made it reconsider whether the UK is a safe place to invest.
• Sterling down at $1.2559 and €1.101. Oil higher at $43.54. UK 10yr gilt yield down 2bps at 0.17%. World markets higher yesterday but Far East lower in Thursday trade and London set to open down around 30pts (as at 7am).
• The annual rate of increase in the CPI in the UK rose to 0.6% in June from 0.5% in May says the Office for National Statistics. Clothing and footwear prices held steady, video games prices rose and core inflation, which excludes more volatile items, rose from 1.2% to 1.4%.
• The NIESR says ‘our analysis of approximately 97,000 goods and services included in the basket indicates higher prices in the clothing and footwear, health, and miscellaneous goods and services categories. Our measure of underlying inflation, which excludes extreme price movements, decreased to 1 per cent in June. On this basis, we expect CPI inflation to settle slightly above the Bank of England’s target of 2 per cent in the coming year.’
• US President Donald Trump has said that he was responsible for Prime Minister Boris Johnson’s decision to ban Huawei from Britain’s 5G network. Maybe chlorinated chicken next.
START THE DAY WITH A SONG:
The song has been furloughed. See you on the other side.
RETAIL WITH NICK BUBB:
• Today’s News: We had, for some reason, expected the Frasers Group (aka Sports Direct) finals today, but, needless to say, they haven’t come out and the useless corporate website doesn’t have a date, so everybody is in the dark, albeit Bloomberg apparently have the results down for next Friday. The only other Retail related news today is the Marshall Motors AGM, but the company has not so far issued any sort of update beforehand. So, after a bumper bundle of company news yesterday, the cupboard is bare today…
• Burberry: Ahead of its AGM yesterday, Burberry issued a Q1 trading update, flagging that Retail LFL sales fell by 45% in the 13 weeks to June 27th, although it highlighted “trends improving through quarter”, with June only down 20%. Interestingly, it gave guidance that Q2 is expected to be down by 15-20%, as “tourist flows are likely to remain negligible, and store operations are continuing to face significant headwinds, with some remaining closed and operating with reduced trading hours”.
• Dixons Carphone: Yesterday’s delayed finals from Dixons Carphone for y/e April (which was a 53 week year) were headlined “Good progress on strategy, robust performance in Electricals despite Covid-19”, but the results themselves were nothing to write home about, given the big loss in UK Mobile. And shareholders groaned to hear that the UK Mobile loss in the new year is now expected to be “slightly worse” than last year’s huge loss…There was no guidance on current trading or the outlook in the core Electricals business, although the company says that “technology retailing is resilient”.
• Dunelm: Although Dunelm is thought to have been one of the winners from the lockdown, it had not updated the market on trading since March and so the Q4 update from Dunelm yesterday (which has a June year-end) looked a bit disappointing with total sales down 29% for the last 3 months, despite strong Online growth. June, however, was up by 20% overall and the company said that “we have been pleased with the strong customer response since re-opening”. There was no guidance on the trading outlook for the new year, but Dunelm flagged up some cost headwinds.
TRADING STATEMENTS & EVENTS:
Upcoming results are set out below:
• 13 Jul 20 Pepsi Q2 numbers
• 21 Jul 20 DP Eurasia H1 trading update
• 22 Jul 20 Britvic Q3
• 23 Jul 20 C&C AGM
• 27 Jul 20 Gregg’s H1 numbers
• 28 Jul 20 Gregg’s H1 numbers
• 28 Jul 20 AG Barr trading update
• 28 Jul 20 Starbucks Q3 numbers
• 29 Jul 20 Wizz Air June quarter numbers
• 29 Jul Premier Foods AGM & Q1 update
• 5 Aug 20 Rank H1 numbers
• 6 Aug 20 Naked Wines AGM
• 7 Aug 20 Diageo FY numbers
• 11 Aug 20 Domino’s Pizza Group H1 numbers
• 19 Aug 20 Rank FY numbers
• 2 Sept 20 Gym Group H1 numbers
• 8 Sept 20 Fever Tree H1 numbers
• 11 Sept 20 JDW full year results
• 6 Oct 20 Restaurant Group H1 numbers
• 9 Oct 20 JD Wetherspoon FY numbers
• 26 Nov 20 Britvic 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:
• 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
• Sobering fact alert. Of the 9.4m workers furloughed (at peak furlough) & the 2.0m self-employed supported likewise, some 85% of them will need to get their jobs back by the end of furlough (October) if UK is to avoid hitting its highest unemployed number in history (c3.1m).
• Sobering fact alert. Did anyone tell this to the V-shaped recovery peddlers? Or to Boots, BurgerKing, Frankie & Benny’s, Casual Dining Co, Pret, John Lewis, Arcadia, Carluccio, British Airways, SSP, Ryanair, EasyJet, TUI, Harrods, Burberry, Rolls Royce, BP, Centrica, Bentley..
• …Aston Martin, P&O, JCB, Johnson Matthey, Monsoon, Clarks, Oasis, Warehouse, Mulberry, JLR, Travis Perkins, Next, Airbus, TM Lewin, Shoe Zone, Compass Group, Royal Mail…This is not an exhaustive list. We ran out of ink. Even competently run, the economy would have issues…
• See earlier tweets. We conclude, sadly, that the ‘V-shaped recovery’ is living with the pixies. It’s in a misty cloud floating around some fantasist’s head. This is a long slog. Hospitality needs more help. To have a tax base, you sometimes (like now) need to tend the tax base
• Previous tweet too subtle? Restarting an industry is more difficult that restarting a car. And, given the millions of flat batteries, corroded tyres and the like out there, that’s tough enough. And be quick about it. We’re living this in real time. #hospitality
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