Langton Capital – 2020-08-17 – PREMIUM – Working from home, evictions, EOTHO, Yo! Sushi, bowling etc.:
Working from home, evictions, EOTHO, Yo! Sushi, bowling etc.:PREMIUM EMAIL – PLEASE DO NOT FORWARD: A DAY IN THE LIFE: So, where the heatwave has exited stage left, there’s mist over the lawn & the smell of mushy apples on the air meaning that autumn is upon us. Bit busy today so we’ll have to move on to the news. Follow us on Twitter at @brumbymark. ADVERTISE WITH US: Langton’s free email now carries adverts. See front page of website for today’s copy & contact us for further details. CHANGES TO WORKING PRACTICES: There is much speculation about which, if any, Covid-19 changes to working practices will become permanent. 17 Aug 2020: The shock to the system: • The pandemic has put everyone at an unexpected crossroads in their lives, corporate or otherwise • Decisions to questions that might otherwise not have been addressed for years or indeed decades have been made and will be made in the near future • On the personal level, these decisions will involve job swaps, retirement, moving part-time, becoming self employed etc • Some of these decisions will be driven by a reappraisal due to the Covid upset to normality and some will be driven by redundancy • On the corporate level, some entities will cease to exist whilst others may take the opportunity to have a root-and-branch overhaul of their operations • This could encompass job losses, plant and unit closures and increased working from home (amongst many other areas) The implication for F&B • Hospitality may employ 1m, 2m or 3m people, depending on definitions. • These employees and their employers will be making decisions directly regarding themselves. But the industry has 70m potential consumers in the UK, meaning that its top line will be impacted by what happens everywhere else • Job losses per se will impact leisure demand. But here we look at changes to working practices and specifically to the WFH or working-from-home phenomenon Current thinking: • In the depths of the lockdown, some 9.4m people were furloughed and 2.0m self-employed people were similarly jobless • These individuals were not going into work – and they were joined in that by many millions of other workers, who were working remotely • The question, at this unexpected crossroads, is how many of those people will go back Time is of the essence: • In the long run, whatever shocks are thrown at it, the economy will most likely cope. • Similarly, in the long run, all assets are changeable and all costs are variable. • But, in the short run, things are very different. The disruption could be very, very considerable • Because, if there are too many office buildings, too many tube and commuter trains and too many grab n go sandwich & coffee shops in office heavy locations, these may be proven to be surplus to requirements in the very near future • In the longer run, these assets will morph into accommodation, artisanal units or retail or office space at a much-reduced cost • But, in the short term, this leaves the landlords, the coffee shops and TFL in a very tricky position Recent comment: • In just the last 48hrs or so: o The Mail on Sunday has quoted work carried out by accountants PwC as concluding that ‘tens of thousands of staff will never return to full-time office work in the City of London under plans being drawn up by some of Britain’s biggest companies.’ o Accountancy body the ICAEW has commented on similar moves. o Young & Co has bemoaned the fact that its customers are not coming out to play in office locations o And London mayor Sadiq Khan has called for workers to return to their workplaces as soon as practicable – and safe Some specific points: • See also Pubs & Restaurants below • PwC says that there may be plans for ‘’50 to 60 per cent’ of its staff to work flexibly on a permanent basis after the Covid 19 crisis passes.’ • Insurance company Lloyds is among many others currently drawing up rota plans that should allow staff to return to the office only on certain days. • Schroders is amongst other employers reported to have told staff that they will not need to come back into the office full time after the pandemic passes. • Some 13,000 of PwC’s 22,000 UK staff could work at home at least some days a week • This is demand (of staff) as well as supply (of employers) led. • The Mail on Sunday reports ‘internal surveys by City firms have found as many as seven in ten staff want to continue working from home some of the time after the pandemic ends.’ • Hot desking could become more of a thing & office rents are likely to come under downward pressure • Young’s CEO Patrick Dardis has told the Mail ‘up to 10,000 of Britain’s 45,000 pubs could close in January and February’. He says some of his company’s small pubs in Central London may be among them. • Dardis says ‘if our high streets are as empty as they are now this time next year, our country will be bankrupt; it will be in a shocking state.’ • Property company IWG (formerly Regus), which supplies short term space, hopes to benefit from the changes • The Mail quotes HSBC, Lloyds Bank, RBS and the London Stock Exchange as saying that they will have significant numbers of staff working from home for at least the next few months Side effects: • Aside from the impact on offices and working patterns, the above will clearly not be positive for sandwich shops, coffee shops and bars & restaurants near to commuter hubs or major office developments • Over time, the industry will cope. But some of the individual players within it may not. • Time is again the enemy. Comments gratefully received & more tomorrow. LATER IN THE WEEK: More comments on changing working practices, overrenting and the end of the lease eviction moratorium next month. Comments welcome. PUB & RESTAURANT NEWS: Comments welcome: • Next month, the lease eviction moratorium is set to end. How are you getting on with your landlords? Comments welcome & we’ll distribute an anonymised note on the subject to contributors and to the premium list later in the week. • Similarly, any comments on changed working practices, the suburbs and London ‘villages’ versus the capital and city centres would be most welcome. Still abnormal for some: • Despite continued lockdown easing, nightclubs must remain closed leading Michael Kill of the NTIA, to say ‘whilst there is much to be welcomed in this announcement for many businesses, it leaves many in our sector beleaguered.’ Mr Kill says ‘it’s as if the Government are letting us slip through the cracks between the various well-intentioned schemes. A VAT cut when you just can’t open at all is not of any help. Late night venues in towns and cities across the country are facing catastrophe.’ • The NTIA says ‘that will be a tragedy for the business owners, their staff and their customers. But there will be a consequential set of problems when people, particularly youngsters, are left with nowhere to go for music and social entertainment. Instead, we’ll see a further rise in illegal raves and street parties which present a new set of challenges. We renew our call on the Government. You have to help us more with direct financial support.’ • The Mail on Sunday suggests that ‘tens of thousands of staff will never return to full-time office work in the City of London under plans being drawn up by some of Britain’s biggest companies.’ This comes as a result of changes in working practices & despite calls by Mayor Sadiq Khan and others that commuters should return to the Capital. • Accountants PwC say that there may be plans for ‘’50 to 60 per cent’ of its staff to work flexibly on a permanent basis after the Covid 19 crisis passes.’ Insurance company Lloyds is among many others currently drawing up rota plans that should allow staff to return to the office only on certain days. Moves such as the above will have negative implications for the Capital’s F&B operations. Schroders is amongst other employers reported to have told staff that they will not need to come back into the office full time after the pandemic passes. Consumer confidence • Commenting on the US market, Alix Partners suggests that consumers are becoming more comfortable with the idea of dining out. In the UK, the move towards normality has been aided by the EOTHO scheme, which today is available for the third Monday in August. • In the US, Alix Partners says ‘consumers are gaining more confidence. But as they gain more confidence, their expectations are actually rising.’ Spend is still low by historic standards but Alix Partners maintains that ‘it’s not all doom and gloom.’ It says consumers ‘want to go. They need to leave the house, but they want to feel safe.’ • Slightly worryingly, in the US, the proportion of those surveyed saying that they would prefer to cook at home for the time being remained the same at 61%. Alix Partners suggests that concerns could have shifted away from fears re Covid-19 and on towards concerns re the price of eating out. Some 43% of those surveyed had eaten in a restaurant since reopening. EOTHO: • Fourth reports on the EOTHO scheme saying that it has been ‘remarkably successful…in boosting sales, with restaurant companies benefiting the most from the Government-backed initiative, followed by the pub and bar sector, and then QSR.’ • Fourth reports that ‘sales were up 50% between Monday-Wednesday in the opening week of the EOTHO initiative (3-5 August), when compared to the previous week. Restaurants enjoyed a 70% sales increase across this period, with pubs up 26% and QSR up 22%.’ We had heard bigger numbers. Fourth, however, goes on to say that the turnover figures mentioned do not include the cheque due from the government in payment to cover the discounts. It says ‘once these numbers are added in there will be a further increase in these figures.’ • Fourth suggests that ‘the initiative is not cannibalising weekend trade.’ Anecdotally, we have heard that Thursday was impacted but that the weekend trade is ‘a different crowd’. Fourth says ‘there was a slight drop off in sales for the second week of the EOTHO initiative, with sales down collectively 13% between Monday-Wednesday (10-12 August), when compared with the opening week.’ • There is only so much money out there to be spent but we had heard, albeit maybe from operators with more to brag about than most, that the opposite was the case. Fourth says that, week on week, ‘QSR experienced a 30% decrease in sales, pubs and bars a 20% fall, and restaurant sales were down 6%.’ • Fourth concludes ‘the Government’s Eat Out to Help Out initiative has had a significant impact in driving footfall to hospitality venues between Monday to Wednesday. Reinstating consumer confidence in the safety of eating and drinking out of home is paramount to getting the industry back on its feet and on track to achieving pre-Covid operating levels. The good weather has also encouraged consumers to return to hospitality venues.’ Other news: • Entrepreneur Hugh Osmond has told the Sunday Times that discounting in the casual dining industry is like heroin. He says ‘you get on it and you cannot get off — it kills you.’ He goes on to say that customer loyalty is in short supply, adding re customers ‘give them a voucher for Strada one week and they’ll go there, give them one for Pizza Express another week and they’ll go there. They’re the worst — no loyalty to the brand.’ • Mr Osmond has lodged documents in the US setting out plans to raise up to $345m (£263m) for a new vehicle to pursue a big acquisition. Broadstone, the proposed vehicle, will be a ‘blank cheque company’ funded in order to take advantage of the deals that will become available in the hospitality industry. • Mr Osmond is reportedly set to list his Various Eateries chain on London’s AIM market next month in a move that should raise about £25m. He says that very good sites are becoming available adding ‘post-Covid is the first time since the early Nineties that you can get these types of sites.’ • ‘Realistic’ plant-based meat substitute company THIS has raised £3.6m on the Seedrs crowd-funding platform. • Pubs and clubs across Spain have been told to close as a result of a spike in coronavirus cases. Hopefully, other than on a local basis, similar moves will not be deemed necessary in the UK. • The outlook for F&B outlets, other than grab n go, at transport hubs continues to look uncertain. Deloitte has said that passengers will have to spend more time in airports being screened and less time spending money. Deloitte says ‘most leisure travellers spend quite a lot of time around an airport browsing or shopping [or eating & drinking, we would suggest]. But we need to limit the amount of time at the airport in the short term – not have travellers turn up two, three, four hours before a flight.’ The accountant says ‘less dwell time has wider implications. If people spend less time in shops that has a direct consequence on airport revenues.’ Job losses etc. • Yo! Sushi is to cut 250 or so jobs when it closes 19 of its 69 outlets as a part of its proposed CVA. Yo! is thought likely to close a number of sites at travel hubs. Wise move. Yo’s Richard Hodgson says ‘while we have already taken measures to reduce costs, rents remain an issue. In the current climate, it’s just not viable for us to keep any sites that no longer perform.’ • River Island is to cut 350 jobs, Yo is to cut 250 and Debenhams is reported to be drawing up contingency plans for a possible liquidation if it is not able to exit administration successfully. The department store chain says it is currently ‘trading strongly’ and adds that the planning didn’t mean a liquidation was likely. • New West End reports that West End footfall was 7% down on Thursday last week compared with the same day the week earlier. This is too small a sample to call a trend, but it may suggest that any recovery in volumes could be bumpy rather than smooth. • The BRC is to plead with the government to take the current opportunity to thoroughly overhaul the UK’s system of business rates. HOLIDAYS & LEISURE TRAVEL: • There have been calls for the UK to adopt a five day rather than a 14dy quarantine period as Croatia may be added to the list of countries where returnees will be required to quarantine themselves for 14dys upon their return. • There were not the scenes of chaos perhaps expected at channel ports and the Tunnel over the weekend as many Brits chose to return early from their holidays in order to avoid the need to quarantine. • Sky reports that ‘many British holidaymakers have opted to remain in France’ and to cross the quarantine bridge when they come to it. Cross border regulations are being tightened across Europe. • More reflections on TUI’s H1 numbers. The co says it has seen ‘strong bookings’ adding that there are alternative destinations when countries are removed from ‘safe lists’. Group CEO Fritz Joussen says ‘we had almost 1.7 million bookings since the restart which is a lot.’ • Luton Airport has reported July passenger numbers down 74% on the same month last year. • Fred Olsen cruises is to make a third of its Head Office staff, around 70 individuals, redundant. • Airbnb’s decision to prevent under 25yr olds in the UK, France & Spain from booking houses on its platform, could be open to legal challenge some commentators have suggested. • The WTTC and UK Inbound have said that the UK’s decision to add more countries to its quarantine list was ‘deeply disappointing’. The WTTC says ‘this move will crush what little confidence there is left in the fragile travel and tourism sector.’ Considering the situation relating to incoming tourists, UK Inbound says ‘the removal of France and the Netherlands from the travel corridor list is another devastating blow to the already fragile tourism industry. They are crucial markets for the UK and both in the top ten for spend and visits.’ • See our comments on dwell time above under Pubs, Bars & Restaurants. Reduced dwell-time will cut into airport revenues. • Brittany Ferries has said that many passengers are making an ‘informed personal decision’ despite quarantine restrictions. • Labour’s Nick Thomas Symonds has called on the government to publish the scientific evidence it cites in its decision to add a number of countries to the list of destinations requiring a period of quarantine on return. • BVA BDRC says that only 8% of UK adults plan to take an overseas holiday before the end of September. Up to 25% plan to book a flight before the end of this year with 50% prepared to fly before the end of next year. • Jet2holidays it to extend the suspension of its flights and holidays programme to the Algarve up to and including August 23 departures. • The US CDC, which asked for comments regarding potential customers’ attitudes towards the cruise industry, has said that the majority of these came back as positive. • STR reports that US hotel occupancy hit 49.9% last week. OTHER LEISURE: • Both Hollywood Bowl and Ten Entertainment have commented on their reopening plans. Hollywood Bowl Group says it will reopen 49 of its 55 English bowling centres on 15 August 2020. It is ‘confident that it has implemented the necessary measures to provide a safe and enjoyable leisure experience for its team and customers.’ • Meanwhile, Ten Entertainment says it will open 35 of 39 Centres in England on 15 August and adds that its 3 Centres in Wales are already open. It says the 38 units that will be open account for 86% of group turnover. Chairman Nick Basing says ‘we are fully prepared and looking forward to bringing people and families together and delivering entertainment in a very safe way.’ FINANCE & ECONOMICS: • Japan reports that its economy contracted by 7.8% in the April to June quarter. • Rightmove has reported that more than £37bn worth of property sales were agreed in July, making it the busiest month for home buying for 10 years. • Sterling up vs dollar at $1.3094 but down vs Euro at €1.1045. Oil slightly higher at $45.19. UK 10yr gilt yield unchanged at 0.25%. World markets mixed on Friday with London set to open virtually unchanged (as at 7am). START THE DAY WITH A SONG: The song has been furloughed. See you on the other side. RETAIL WITH NICK BUBB: • Saturday’s Press and News (1): The headlines on the front pages of the Saturday papers generally moved on from the A-level results fiasco to the French holiday quarantine fiasco: the Times went with “Free appeals for pupils over poor exam grades”, but the Daily Mail warned “Get out of France now…or you’ll miss school”, the Guardian flagged “Exodus from France in bid to avoid quarantine” , the Telegraph ran with “Testing could end “quarantine roulette”” and the FT noted “Staycation bookings rocket as new quarantine rules set in”. • Saturday’s Press and News (2): In terms of Retailing/Business stories, the Retail Week front cover feature on the rise of Gymshark on Friday proved remarkably propitious, given the news that a US private equity fund has invested c£200m for a 20% stake in the business, as noted by the FT (“Gymshark grows from parent’s garage to £1bn brand”), inter alia. John Lewis was also in focus, with the Guardian running a News story that it plans to enter the furniture rental business, whilst the Telegraph ran an uncritical article about the news that the Major of Birmingham, one Andy Street, still claims to be “astounded” by the final decision to close the ill-conceived John Lewis store in Birmingham Grand Central.
• Saturday’s Press and News (3): The Telegraph also flagged that Amazon is to create 1000 “jobs” by opening a new warehouse in Nottinghamshire and its Business Editorial weighed in on the controversial new CVA plan of New Look to link all its store rents to turnover (“New Look rent battle can reform High Street”), arguing that “landlords have been getting fat on a horribly outdated upwards-only rent model for decades”. The Times took advantage of the Royal photo opportunity provided by the news that the struggling Jigsaw fashion chain is planning 20 store closures and it also noted that the struggling QUIZ fashion chain has extended its banking facilities and that no less than 300 cases of COVID-19 have been discovered amongst staff at an M&S sandwich factory in Northampton. Finally, the Guardian had a detailed feature on the problems of charity shops: “Sales slump but lockdown • Sunday’s Press and News (1): Many of the headlines on the front pages of the Sunday papers were about exam results: the Sunday Times went with “Exam results chaos to end in court battle”, whilst the Observer flagged “Controversial algorithm to set GCSE results”, but the Sunday Telegraph ran with the Health Minister’s decision to scrap Public Health England (“Hancock axes ‘failing’ public health body”) and the Mail on Sunday noted the Home Secretary’s undiplomatic remarks about the French treatment of migrants (”Priti in racist French storm”)… • Sunday’s Press and News (2): In terms of Retail/Property stories, the Mail on Sunday went overboard on the Sky News report that the vulture fund Hilco has been brought in to help with a potential liquidation of the beleaguered Debenhams with a page 2 News story headlined “14,000 jobs at risk as Debenhams teeter son the brink”, but there was more nuanced coverage in the Business stories in the Sunday Times and the Sunday Telegraph, which noted that the Hilco move is merely “contingency planning”. The main Business story in the Sunday Telegraph was that Tesco is lining up free Online Grocery delivery for Clubcard Plus customers to fight the threat from Amazon Fresh, whilst the main Business story in the Sunday Times was that Mike Ashley has tabled a £30m big with the administrators of the bankrupt DW sports and gym chain.
• Sunday’s Press and News (3): The Sunday Times also had articles about the way in which Gymshark plans to take on mighty Nike and Adidas and the problems of the family-run Lakeland homewares chain (“Middle England’s cookware darling”). The Sunday Times also had an interesting list of the Retail luminaries who have fallen foul of “Culture clashes” after being appointed CEO (including Christos Angelides, John Browett and Kate Bostock). And the Sunday Times’ “Inside the City” investment column looked at the high-flying Naked Wines and said the shares are a Sell (“Quaffing Naked may lead to a hangover”). There were also a couple of feature articles about the M&S/Ocado tie-up: the Mail on Sunday flagged that M&S Food is starting TV commercials to remind customers that it has brought down its prices on so-called “bread and butter” lines (“Now M&S price war with Waitrose really • Sunday’s Press and News (4): In terms of all the Economics columns in the Sunday papers, we would, as per usual, highlight the thoughtful column by the Sunday Times Economics correspondent David Smith (“Worried about debt? Not in a world running on MMT”), in which he noted the implausible claims of Modern Monetary Theory about unlimited Government spending. We would also flag the column by the veteran City commentator Jeremy Warner in the Sunday Telegraph (“What has become of Britain that it cannot get its Covid strategy right?”), in which he lamented “the Governments’ persistent wrong-footedness”, as well as the column by the Observer Economics correspondent (“Britain isn’t “recovering”, whatever the Bank may suggest”). News Flow This Week: As we move even further on into the “dog days” of August, the news cupboard is bare today, but there is actually a fair bit going on this week, kicking off tomorrow morning with the latest monthly Kantar/Nielsen grocery sales figures (for the 4 weeks to Aug 8th/9th), followed at lunchtime with the Asda/Walmart Q2 results. The much-delayed final results from the hapless Frasers Group (aka Sports Direct) then come out on Thursday, along with the AO.com AGM. First thing on Friday we then get the widely followed GFK Consumer Confidence index for August, as well as the ONS Retail Sales figures for July… |
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