Langton Capital – 2020-10-19 – JDW, hospitality Covid comments, jobs, shop closures & other:
JDW, hospitality Covid comments, jobs, shop closures & other:A DAY IN THE LIFE: I finally went on Chancellor Rishi Sunak’s job-swap website, the one that’s little-doubt telling baristas with sleeve tattoos and topknots that they should be retraining as care workers and Amazon delivery drivers, and it lived up to both the best and the worst expectations for algorithms. It missed the basics, gender (perhaps it shouldn’t matter), age (no getting away from it), health and previous experience (both of which certainly do matter), and then dived down the nearest rabbit-hole (a bit like Facebook or YouTube insisting on showing you endless cat videos because you once accidentally clicked on a kitten with a ball of string) as soon as it had received what it perceived to be a hint. And, as I clicked on a button saying I didn’t mind using my hands and that I liked to see a task through to completion, it suggested I should retrain as a dressmaker, earning £13,500 for a 38-hour week after a year or two of training. And it said another member of Langton’s team should be a fashion model, another a makeup artist. Thanks, but no thanks. We’d better stick to the day job. Time’s pressing so on to the news: LANGTON PREMIUM EMAIL: Langton produces a premium email alongside the free version that you receive. It’s about 100 lines longer than the free version (depending on what’s going on) and includes analysis and opinion. If you would like an example, please let us know. Corporate Offer: Annual subscription 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. JD WETHERSPOON – FULL YEAR CONFERENCE CALL: Following the release of its full year numbers on Friday, JD Wetherspoon hosted a conference call for analysts. 19 Oct 2020: Trading: • FY20 has clearly broken several previously unbroken upward trends in revenues, sales per pub etc • Exceptional costs total a net £59m. Covid-19 costs of £29m have been recorded (large part being furlough top-up costs). There were also stock losses, Perspex screen costs etc. There was a £15.9m credit regarding a settlement of gaming machine legislation. See Premium Email for analysis PUBS & RESTAURANTS: Increased Covid-19 restrictions: • York, a number of other towns and London are now in Level II. This, unless we’re much mistaken, is worse for hospitality operators than the peak level of alert because operators are not forced to close and, despite the fact that nobody can socialise there, they are therefore not eligible for compensation. • The BBPA says, re Lancashire going into Level III, that 1,200 pubs will be impacted. CEO Emma McClarkin says ‘pubs in Lancashire can only remain open if they serve substantial meals, but with even more restrictions including no mixed household groups either inside or outside and only being allowed to serve alcohol with a substantial meal. This will completely kill the business model of up to 400 pubs. The remaining 800 pubs who don’t serve substantial meals will be forced to close completely. The survival of all pubs in either of these categories is hanging dangerously in the balance.’ • The BBPA says we ‘need urgent clarity on cash grants that must properly cover the lost revenue and high fixed costs these pubs face. The Government’s current grants – as low as £325 per week for many pubs – are simply not enough. Grant support given to them needs to be in line with the vastly bigger funds available in Scotland and Northern Ireland. These grants need to be exempt from State Aid restrictions to ensure they reach all the businesses that need protecting.’ • Some operators have commented on the rising level of cancellations in the face of increased restrictions. • Manchester remains somewhat in limbo. Job losses: • UK Hospitality, the British Institute of Innkeeping and the British Beer and Pub Association have pushed home their view that up to three quarters of a million jobs could be lost in the hospitality sector by February as perhaps half of businesses now operating will not make it through the winter. • A survey commissioned by the trade bodies suggests that three quarters of operators are currently failing to break even. This is a moving feast and, as regulations tighten, more and more operators will become loss-making. JD Wetherspoon on Friday reported the first full year loss in its history. • Some 89% of those working in the hospitality sector were pessimistic about its future. Only 3% were optimistic. The furlough scheme ends this month. • Job losses on the ground: Pret cuts another 400 staff (having cut 2,800 in August), JD Wetherspoon has confirmed that it will cut up to 450 jobs at its airport sites. The company has cut head office staff numbers by just over 100 roles. Marston’s commented on up to 2,150 job losses on Thursday. It is looking at further central function cuts. Comments on the government’s stance: • JD Wetherspoon chairman Tim Martin said that the government was ‘jumping from pillar to post’ and was ‘tinkering with regulations’. The Labour Party says that it should accept that a circuit break, with compensation for all operators, would be more effective. • The curfew, says Tim Martin, ‘has meant that many thousands of hospitality industry employees, striving to maintain hygiene and social-distancing standards, go off duty at 10pm, leaving people to socialise in homes and at private events, which are, in reality, impossible to regulate.’ • The Guardian points out that ‘less than 18 months after Brexit-backer Martin endorsed Boris Johnson’s candidacy for prime minister over a beer, the Wetherspoon’s boss blamed him for “confusion” over restrictions such as the 10pm curfew and limits on household mixing.’ • Jeremy King in The Times says that the regulatory change ‘is another kneejerk, ineffective, window-dressing, butt-covering initiative that hasn’t been thought through properly. It will have no real effect other than to temporarily suppress the number of infections before they erupt again but meanwhile propelling operators and staff into further financial hardship.’ • Julian Jessop, writing for the IEA, says of local lockdowns that ‘the economic recovery could soon be snuffed out again. At best, these measures will only slow the infection rate temporarily.’ He says ‘a zig-zag policy of ‘stop, start and then stop again’ could then increase uncertainty and magnify both the social costs and the economic damage. It would also be harder for the government to provide the right financial support.’ • North west brewers & pub companies Joseph Hold, Hydes, JW Lees, Frederic Robinson and Thwaites have publicised their view that ‘Boris Johnson’s Tier 3 pointlessly victimises and destroys pubs, their employment and our Northern communities.’ The companies say ‘we are on the ground – we are not running our pubs in a theoretical intellectual and political bubble 200 miles away in Westminster.’ They say ‘the current government policy to single out pubs for closure in Tier 3 with inadequate support is a national disgrace.’ • The north west operators say ‘pubs are being victimised and made a scapegoat in a desperate political effort to be seen to do something – even though it is obvious it will not work as the real problem lies elsewhere. Victimising pubs for closure will destroy people’s businesses and employment, take away the homes of landlords and their families and cause community misery and financial ruin in the North of England and Wales.’ • The Leeds Hospitality sector says its sector’s operators ‘are among the hardest hit by the COVID outbreak’ and say they will continue to lobby for a move to 11pm closing. They say that face coverings, hand sanitising and other measures will help combat the spread of the virus. • HospoDemo is organising a demonstration against ”catastrophic” Covid-19 restrictions at London’s Parliament Square today. • The British Chambers of Commerce has warned that companies will need more financial support to avoid “catastrophic consequences” from the tougher coronavirus restrictions that were introduced in many areas over the weekend. The BCC says ‘enhanced support must be given to those facing the indirect impacts of restrictions and closures – in supply chains, tourist destinations and town and city centres.’ Company & other pub & restaurant news: • CGA’s latest Volume Pool tracker shows that ‘tightening restrictions squeezed food and drink sales again last week, with more disruption to pubs and bars looming with the new tiered system.’ It says that year-on-year food sales were down between 6% and 10% from Monday to Wednesday (5 to 7 October), but then dropped between 24% and 28% from Thursday to Sunday (8 to 11 October). Sales were worse than last week’s on five of the seven days.’ • CGA says ‘meanwhile drink sales in the seven days to last Saturday (10 October) were down by more than a third (38%) on the same week in 2019.’ CGA believes ‘the gap between food and drink sales is likely to grow after the introduction of restrictions, which will force the closure of many pubs and bars in Tier 3 areas unless they are operating as restaurants.’ • JDW makes a few points in its RNS from Friday. Chairman Tim Martin says ‘customers can approach the till in a shop, but not in a pub – which is, in no sense, ‘scientific’. • He points out ‘the recent curfew and introduction of table service only have been particularly damaging for trade, depressing sales for customers who find it too much ‘faff’, at the same time as substantially increasing costs.’ • JDW received £124.2m (in the period to end-July) in furlough payments and is benefitting, along with other pub operators, from suspended business rates, 5% VAT on food (some of which has been passed on) etc. • Mr Martin says ‘the pub industry generally has worked very hard to maintain social distancing and Covid-safe environments, with considerable success.’ This is certainly the case (at least across multi-site-operators) in our experience. Mr Martin quotes Professor Johan Giesecke in saying ‘if you don’t get too close to other people, they won’t infect you.’ This isn’t entirely the case as the virus can be spread by asymptomatic staff touching otherwise spotless spoons, plates, glasses, cups, food and the like. • The Local Data Company says that a record number of shops closed on UK high streets during the first half of this year, largely due to the coronavirus lockdown. The LDC says that 11,120 chain store outlets shut between January and June. The LDC says that York has been the worst affected area, with a net loss of 55 outlets. • Fuller’s is launching a range of new campaigns and promotions designed to entice customers back into pubs and hotels across the South of England. It says ‘despite doom, gloom and local lockdowns – Fuller’s pubs and hotels are safe, COVID-secure and still open for business – and Fuller’s is setting out to give customers even more good reasons to visit.’ • Diageo is launching more RTD cocktails based on products from its Gordon’s and Smirnoff ranges. • The Food & Drink Federation has said, regarding the PM’s comment that discussions re a trade deal with the EU had ended, that ‘we are heading into very dangerous territory.’ It says ‘the perils of a no-deal exit for GB food and drink manufacturing remain as real as ever.’ • Some commentators believe that the real crunch will be this week. • A Berlin court has overturned the city’s 11pm curfew. • The House of Commons has banned the sale of alcohol. This comes after reports that MPs, including Matt Hancock, were drinking past the 10pm curfew that the House imposed on all other consumers across the country. • Coffee Week founder and CEO of World Coffee Portal Jeffrey Young, has said that ‘Covid is providing a number of challenges for our industry’ as more people work from home and some customers remain nervous about visiting venues. He says coffee lovers can support UK Coffee Week by their local shop, restaurant or roaster; in-person or online. • North west food retailer Booths has reported a sales surge thanks to staycation boom and the move towards dining in home. HOTELS & LEISURE TRAVEL: • New cruise protocols are to be brought in designed to make cruising safer. The UK Chamber of Shipping says ‘cruising is going to be one of the safest modes of travel and tourism because with these protocols in place and the extra measure that we are going to take, they will have a much closer oversight of their passengers when they embark than at a hotel when a client walks into the lobby. Likewise when a passenger steps on to an aircraft.’ Many cruise passengers may still have images of the Diamond Princess in mind when they consider their next holiday. • Travel Weekly reports that river cruise specialist Riviera Travel has unveiled its first collection of UK tours in response to customer demand. • Eurocontrol has cut estimates for air traffic volumes saying that September was down 60%. October looks to be broadly similar. Passenger volume is down 78%, implying that load factors are reduced. • The AAA in the US has said that 67% of U.S. adults planning a vacation before the end of the year report some degree of uncertainty they will actually be able to take their vacation. FINANCE & MARKETS: • Downing St says talks between the UK and EU over a post-Brexit trade agreement are “over”. Some observers suggest that this week is (and was always) the critical week. • Michael Gove told Sky he believes there is a less than 50% chance of the UK striking a post-Brexit trade deal with the EU, a senior Cabinet minister has told Sky News. • British Airways and Virgin were paid £73m earlier this year to fly PPE into the UK. • Jolyon Maugham of The Good Law Project reports that micro-company Crisp Websites Ltd (trading as Pestfix), which had net assets of £18,000, has been handed PPE contracts totalling £345m. Good Law is demanding details. Good Law says there have apparently been five more contracts awarded and not included in the £345m above. • China’s economy has continued to bounce back from its Covid-19 setback earlier in the year. GDP rose by4.9% between July and September compared with the same period last year. The economy shrank by 6.8% in Q1 this year. • Sterling up at $1.2927 and €1.1039. Oil up at $42.80. UK 10yr gilt yield unchanged at 0.18%. World markets higher on Friday. London set to open little changed. RETAIL WITH NICK BUBB: • Saturday’s Press and News (1): We expected the front page headlines of the Saturday papers to be split between the Government showdown with Manchester over the Tier 3 lockdown plan and the apparent collapse of the Brexit trade talks and indeed the Guardian went with “PM threatens Northern leaders in Covid standoff”, whilst the FT ran with “Johnson breaks off Brexit trade talks”. But the Telegraph flagged “Teachers call for two-week half term” and the Times trumpeted “Scientists predict 1m tests a day”, whilst the Daily Mail noted “£200 fine for even touching mobile at the wheel”.
• Saturday’s Press and News (2): In terms of Retailing stories, the big focus was on Friday’s John Lewis Partnership strategy update, although there was no consensus in the newspapers on what was the most important news. The Daily Mail and the Telegraph had near identical headlines about how John Lewis will cut prices in an Online push, but the FT highlighted the much increased £300m figure for annual cost savings, whilst the Times noted “Finance and housing open new doors at John Lewis” (as well as the commitment to revise the John Lewis price pledge, even though there was no new news about that) and the Guardian flagged that 20 Waitrose supermarkets are to be developed for their housing potential. The Guardian also had a comprehensive list of all the new JLP measures, as well as some positive “vox pop” from shoppers in John Lewis Kingston, whilst the Times highlighted the lack of • Saturday’s Press and News (3): In other news, the big story was the FT scoop that PwC is set to resign as auditor to Boohoo over corporate governance concerns, as also noted by the Telegraph and by the Times. The Guardian (and others) noted the 1000 High Street jobs lost through more store closures at Edinburgh Woollen Mill and Pret A Manger, whilst the Times and the Daily Mail noted the upbeat profit figures announced by the Issa brothers for their EG garage group. There were a few snippets about the news that Nick Gresham, the FD of Superdry, has suddenly resigned, little more than a year into his new job, even though the share price barely moved on Friday. And the Times flagged that John Allan of Tesco told Bloomberg TV that Brexit is likely to lead to food shortages in January. • Sunday’s Press and News (1): Given everything that’s going on in the world, it was a bit surprising to see some of the headlines on the front pages of the Sunday papers: the Sunday Times ran with an exclusive about a #MeToo scandal involving a Gulf Minister, whilst the Sunday Telegraph went with the allegation that Tony Blair broke the quarantine rules after a recent US trip and the Mail on Sunday focused again on its revelation last week that the Health Minister recently broke the 10pm curfew in the House of Commons bar. However, the Observer flagged that “One million young Britons “face jobs crisis within weeks””.
• Sunday’s Press and News (2): In terms of Retail stories, the embattled Edinburgh Woollen Mill group remained in the spotlight, with the Sunday Telegraph running the news that it is on the brink of falling into administration its main Business story, whilst the Sunday Times flagged that the controversial boss of the group, Philip Day , is still trying to sell a stake in his struggling Peacocks discount fashion chain to the US hedge fund, Davidson Kempner. The Sunday Times said on its Business front page that #MadMike Ashley has made another “bid” for the beleaguered Debenhams, but the story was little more than a snippet. The Sunday Times had a much bigger article about the challenges the supermarkets will face in meeting demand at Christmas (“Jingling tills won’t solve a tricky midwinter for supermarkets”), whilst the Mail on Sunday flagged that industry data shows that Asda has been • Sunday’s Press and News (3): In terms of all the Economics and comment columns in the Sunday papers, we would, as usual, highlight the thoughtful column by the Sunday Times Economics correspondent David Smith (“How the “China virus” has hurt China less than most”), in which he noted that “the UK entered the crisis with an underpowered health service”, as well as the column by the Sunday Times Business Editor, Oliver Shah (“Banks are on guard against a no-deal Brexit. That’s not necessarily good for the City”). We would also flag the columns by the veteran City commentator Jeremy Warner in the Sunday Telegraph (“Our union with Scotland is dying, and we seem powerless to stop it”) and by the veteran Economics correspondent of the Observer, William Keegan (“Livelihoods are being crushed by disease and ideology”). Today’s News: Despite the FT story on Saturday that PwC is set to resign as auditor to Boohoo over corporate governance concerns, the company has issued a statement insisting that PwC is still the auditor at this point, although it is not taking part in a competitive tender process for the audit that has just been launched. We will find out at 8am what the City thinks of the FT story. Otherwise, a quiet week for Retail news kicks off today with a “virtual” Capital Markets Day for the shopping centre and office landlord Landsec: the outline statement is headlined “Positioning Landsec for growth” and refers to “an opportunity for a significant reimagining of the model within our six regional shopping centres” (which includes the St Davids centre in Cardiff, jointly owned with the bankrupt Intu Properties, as well as Westgate Oxford, Trinity Leeds and White Rose Leeds). News Flow This Week: Thursday brings the Superdry AGM and then we get the much-awaited GFK Consumer Confidence index for October first thing on Friday, along with the ONS Retail Sales figures for September. TRADING STATEMENTS & EVENTS: Upcoming results are set out below: • 21 Oct 20 William Hill Q3 trading update • 22 Oct 20 Gear 4 Music trading update • 27 Oct 20 Whitbread H1 numbers • 28 Oct 20 Texas Roadhouse Q3 numbers • 29 Oct 20 YUM Q3 earnings update • 29 Oct 20 Starbucks Q4 results • By 31 Oct 20 DP Poland H1 numbers • 3 Nov 20 DART Group AGM • 4 Nov 20 Shepherd Neame FY numbers • 10 Nov 20 Premier Foods H1 numbers • 11 Nov 20 JD Wetherspoon Q1 update • 17 Nov 20 Gear 4 Music H1 numbers • 19 Nov 20 Dart Group H1 numbers • 24 Nov 20 Compass Group FY numbers • 26 Nov 20 Britvic FY numbers • 2 Dec 20 Shepherd Neame AGM • 2 Dec 20 Stock Spirits FY numbers • 10 Dec 20 Marston’s FY results Many results are likely to be delayed. For information purposes, the results below were delivered at these dates last year. YESTERDAY’S TWEETS: • JDW says run rate since year end is minus 15%. The co won’t micro-analyse but it seems it was almost flat in August, down in Sept and quite a bit worse in Oct with Rule of Six & 10pm. Now will lurch down again. Likely minus 20% plus. This isn’t a JDW but an industry issue. • These are tough, tough decisions. HM Gov is arguably stacked with lightweight chancers & sound-bite merchants but it would be a hard call even if they were competent. Lockdowns do work but at what cost? And who should pay. Over to you, the muppet crew… • Interesting use of stats by HMG here. These must be daily rates. The 20 that was used to force quarantine from Spain, France etc was a weekly number (i.e. x7). York weekly now 274, Leeds 393, Newcastle 436. London boroughs many 80 to 120 (all per 100k) • Franco Manca’s David Page says landlords could be on the back foot for five years or more. The value of their assets has fundamentally changed and lower rents, for many years, will be the order of the day • Where’s the ‘easiest deal in human history’? Same place as the ‘oven ready deal’ I suppose. And not being rude but why’s he reading it out from what sounds like a school exercise book? Is this all new to him or is it just all a bit much to remember? • Yes, the fall guys are being lined up for the multiple-debacles currently going on. Broadly, in order: Hancock & Williamson (joint first), Whitty & Vallance, Gove, everybody else in the country, Boris Johnson 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. |
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