Langton Capital – 2020-09-22 – PREMIUM – Restrictions, pubs, footfall, UK hotels & other:
Restrictions, pubs, footfall, UK hotels & other:
PREMIUM EMAIL – PLEASE DO NOT FORWARD:
A DAY IN THE LIFE:
So, given that I haven’t yet reached the cross-over point between a) getting over an illness and b) being lazy, I reckon I can take it easy for a few more days.
Hence, this note has been pre-written as getting out of bed at the hour required to write it in real time is still a bit beyond us.
At least that’s my story and, as I cut the grass a couple of days ago and had to ‘take a moment or two’ on a number of occasions, I think there could still be some genuine recovery left to go – and the fact that the weather is due to be wonderful today (and horrible thereafter) and I fancy reading a book in the garden is completely coincidental.
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FURTHER COVID RESTRICTIONS? Boris Johnson is due to address parliament today on potential further measures: 22 Sept 2020:
• It’s alright saying ‘be alert’ but the Covid-19 virus is deaf, and actions count for much more than words.
• Particularly when dealing with a force of nature, which is impervious to slogans and whose only answer to comments such as ‘this is a world-beating tracking, tracing or testing system’ is ‘well, we’ll see about that, won’t we?’
• And it won’t listen when you say that you want to minimise both hospitalisations and damage to the economy. It will invite you to pick one or the other and then will simply get on and do what it does.
• We don’t have the tables available to SAGE but having the economy ‘locked down’ still left the R rate at 0.6 or 0.7 and opening schools and universities probably takes it to near or over one.
• To state the obvious, that doesn’t leave a lot of room for the rest of the economy if the aim is to keep the R rate below one and prevent exponential growth.
• There will almost certainly be more long faces, sombre voices and increased restrictions
• But, if these are half-hearted in any way, they run the risk of damaging the economy whilst doing little to dampen the spread of the virus
• The UK isn’t alone in facing this problem (and in having precious few solutions), but it would be nice to think there was a plan
• Whack a mole is reactive and backward looking – but what else is there?
• Playing for time (‘flattening the sombrero’, another wordsmith’s simple phrase to explain a complex situation) is perhaps the only realistic game-plan
• This has been played better in Germany, South Korea, China and a host of other countries than it has in the UK.
• Whilst waiting for a virus, the R rate can be depressed by better practises (maintained vigilance, distancing, gloves when preparing food, masks etc), by better tracking measures and by much, much faster testing
• It must surely be about attention to detail, execution and delivery rather than slogans and sound bites
A word about the virus:
• Covid-19 (with any luck) will cram its evolution and time on planet earth into a couple of years and then be gone
• But, at the genetic level, it must have thought it had won the jackpot when it made the leap from pangolins (are they even real?) or lesser spotted dingbats to human beings who conveniently jetted it all around the world in double-quick time whilst coughing on each other and putting their fingers in their mouths
• But the message to it still has to be ‘well done and now go.’
PUBS & RESTAURANTS:
Potential second lockdown:
• Second lockdown concerns hit the sector yesterday with most companies registering material losses. Young & Co was off 6%, C&C and Revolution Bar Group 7% and Cineworld, TUI, Hotel Chocolat and Saga off 8%.
• Rank, Ten Entertainment and JD Wetherspoon were off 9%, Hollywood Bowl was 10% lower, and Hoselworld and Loungers were off by 11%. Gym Group was down by 12%, City Pub Group and On The Beach were off by 13% and Fulham Shore was 14% lower. M&B was down by 15%, Marston’s was 16% lower and Restaurant Group’s shares were down by some 18%. Not a good day for the sector.
• Whether it is called a second lockdown or a circuit breaker or a fire break or it composes of many discrete geographical areas going into lockdown at the same time, a second major forced closure of non-essential retail outlets spooked markets yesterday.
• We mentioned yesterday that simply saying you don’t want something to happen may not be enough to prevent it.
• Emotions are genuine and sector operators are warning that there could be a ‘tsunami’ of job losses in the event of a second lockdown.
• Some 900k hospitality workers are yet to come off furlough and the whiff of a second lockdown might mean that redundancy paperwork is filled in rather than a request for the individuals to return to work.
• JD Wetherspoon chairman Tim Martin says that ‘the main government mistake is a dizzyingly complex set of rules, which keep changing.’ He says ‘only two things are scientifically proven to work: social distancing and handwashing. By introducing a changing rota of complexities like the rule of six, millions of people have forgotten the two main rules.’
• Hugh Osmond, whose restaurant group Various Eateries is currently attempting to raise funds to buy distressed assets has said ‘we have to bring an end to this randomness of announcements made at the last minute. Is it Eat Out To Help Out and everybody should go back out, or is it rule of six? We don’t know if the Government is accelerating or reversing.’
• Simon Emeny of Fullers warns against government mixed messaging. Emeny says re the Rule of Six that ‘I think they [the rules] are sensible, but any further creep on that will cause untold damage and result in a tsunami of job losses.’
• Other observers are focusing on compensation arguing that, if the government wants to have a hospitality industry in the future, it will have to support it, particularly if it is shut down again, today.
Footfall & current trading:
• S4 Labour reports that ‘hospitality likes for likes stabilise at 91% of last year for second week in a row but remain 15.5% up on July levels.’ S4 Labour says ‘like the previous week, food sales continue to be in growth, up 4.9%. However drink sales slipped 18.7% on the same week last year.’
• Geographically, ‘London like for likes continue to lag behind the rest of the country, down 28.4% on the same week last year, with food down 23.9 and drink down 30.5%. However, outside the capital likes for likes were down just 3.7% with food sales up 11.3%.’
• S4 Labour says there is a ‘flattening out of sales, it may be that in the short term we have settled at a new normal. The extension of the warm weather has been a welcome boost to the sector.’
• Morgan Stanley reports that, at the end of August, some 63% of UK office workers had still not returned to work. This is in contrast to the 62% of workers that the ONS said were once again commuting. The latter figure seems high. The BBC points out that the ‘government has been encouraging workers to return to offices to help revive city centres.’ This may be about to go sharply into reverse.
• Pragma Consulting says there may be too much retail space in our city centres and not enough residential capacity. Swapping the one over to the other will have a big impact on rents, rates and other costs.
Other Covid-19 news:
• Foodservice analyst Peter Backman reports that ‘sadly, the sector, now weakened by 6 months of uncertainty, faces more of the same.’
• Private rents in some parts of London are said to have fallen by up to 20%. Landlords are now once again able to pursue eviction proceedings against tenants.
• Stonegate Pub Company has announced further business support within its lease and tenanted business, Ei Publican Partnerships. It says this is ‘creating an overall support package, which has been implemented in response to the COVID-19 lockdown, in excess of £36.5 million.’
• Stonegate says ‘the road out of lockdown is a long one and we are standing by our publicans every step of the way to help safeguard their businesses in these uncertain times.’
• Grolsch Premium Pilsner it to return to the UK market this Autumn as a 4% beer brewed in Enschede, The Netherlands.
• Imbibe Live Online is to join forces with BCB Berlin, BCB Brooklyn and BCB São Paulo, to produce Global Bar Week – a worldwide networking and education event, from 12 – 18 October
HOTELS & LEISURE TRAVEL:
• STR reports that ‘the United Kingdom has enjoyed a summer of warm weather and pent-up demand, but now that schools have reopened, the question is what awaits hoteliers for the next two quarters and beyond.’ It says a concern is ‘the almost complete absence of convention, meetings and group business.’
• Jet2holidays has cancelled all package holidays to Iceland for the rest of the year.
• Menzies Aviation could cut 1,050 workers at Heathrow. It has told all staff they are to face a 50% cut in hours (per the GMB union). Menzies yesterday said that 200 staff at Luton could lose their jobs.
• Business travel in the doldrums. FCM Travel Solutions and Corporate Traveller have reported that only 26% of businesses plan to return to pre-Covid-19 levels for domestic travel during 2021.
• Speakers at Travel Weekly’s Future of Travel Week have suggested that cruise bookings for the second half of next year are strong.
FINANCE & MARKETS:
• Shares fell sharply yesterday on fears of further restrictions on business. All major markets were down. Sterling is $1.0901 and €1.2799. Oil stands at $41.33 and the UK 10yr gilt yield is 0.15%.
• Labour has launched an attack on the government’s “financial mismanagement” of the coronavirus pandemic
RETAIL WITH NICK BUBB:
• Yesterday’s News: The much delayed Superdry finals yesterday morning report a huge underlying £42m loss for y/e April, even before big exceptional costs, but the main surprise is that recent trading has been weak again, after a better than expected Q1, with sales over the last 7 weeks down by 30%, although CEO Julian Dunkerton says “I am very excited about our new AW20 collection which will be almost fully ranged by the end of October and is the first full collection I’ve overseen since my return to the business last year”.
• Monday’s Press: The front-page headlines yesterday were about the warning from the Government’s chief scientific advisers this morning that the country is at a “critical point” and faces further lockdown measures unless the public responds…In terms of Retailing stories, the Daily Mail goes big again on the IPO of The Hut, highlighting that private investors are expected to rush to buy the shares today, despite the worries about poor corporate governance. The FT follows up on the story that the controversial entrepreneur Philip Day is to break up his embattled Peacocks and Edinburgh Woollen Mills chains, whilst the Times notes the windfall for ASOS staff from the success of the recent share placing and also flags that one of the private equity bidders for ASDA wants to develop the supermarket sites for housing.
• News Flow This Week: Tomorrow brings the Kingfisher interims. The Mothercare AGM and the Joules AGM are on Wednesday. On Thursday we get the DFS finals and the Pendragon interims. The widely followed GFK Consumer Confidence index is out first thing on Friday.