Langton Capital – 2021-05-24 – Indoor trading, staffing, inflation, holidays, staycations, Cineworld etc.:
Indoor trading, staffing, inflation, holidays, staycations, Cineworld etc.:
A DAY IN THE LIFE:
Not cutting the grass for a few weeks due to lawnmower issues has encouraged a level of dandelion growth that needs to be seen to be believed.
Add in an accelerated life-cycle, a single dry afternoon, a bit of sunshine, a modest breeze and little else and the air over the weekend was thick with dandelion seeds as, blizzard-like, the little germs wafted around before finding their way into every nook and cranny in our garden, the cracks in our paving, every speck of mud or dollop of rotted leaves in the gutters and pretty much everywhere else, including the mud under my fingernails.
All of which promises a monster surfeit of the weeds later in the year and, when you take into account just how many of the seeds had their flights cut short when they alighted in our water butts, you have to envision me, watering can in hand, sprinkling them liberally onto our sad looking flowerbeds come the summer.
Anyway, dry weather on the horizon. On to the news:
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PUBS & RESTAURANTS:
Indoor trading, the first week:
• Morning Advertiser suggests trading has been ‘quiet’.
• Although a number of operators and industry analysts have suggested that Monday and the early part of last week was good (CGA said Monday’s trade, admittedly on only one days’ trading, was ‘24.9% higher than on the equivalent Monday in May 2019. Food sales jumped 29.6% as consumers took advantage of the opportunity to eat inside again for the first time this year in England and Wales, while drinks sales were up by 21.2%’), the Morning Advertiser quotes operators as saying trade has been quiet (one saying “shockingly quiet”). The MA quotes on operator as saying he had just registered the ‘quietest day in five weeks’ and another as saying its unit had been ‘busier with only the outside open’.
• Langton comment: See premium email.
• The Telegraph reports that ‘as pubs and restaurants throw open their doors, Britons prove too scared to enter.’ It seems a little early to be making such suggestions but the paper quotes a number of operators as saying they were quite. Langton comment: See premium email.
• Labour problems:
• We mentioned this a while back but staffing issues have gone mainstream with the Sunday Times and the BBC both suggesting that hospitality is having some difficulties sourcing staff. The Sunday Times says ‘pub and restaurant bosses are pushing ministers to introduce a “coronavirus recovery visa” to persuade foreign workers to return, as they resort to increasingly desperate measures to attract staff.’ It says ‘bosses are offering generous perks to tempt workers. Steak chain Hawksmoor, which has eight restaurants in the UK, has offered employees up to £2,000 if they recruit friends. Caravan, the London restaurant chain, last week emailed customers to offer a £100 gift card if they successfully recommend staff.’
• UKH says ‘the government urgently needs to review the ‘shortage occupations’ list. We’ve also suggested an Australian-style coronavirus recovery visa for lower-skilled workers who don’t meet the point-based system [but] who are crucial to the recovery.’ The minimum required salary for allowing recruitment from overseas is too high to allow hospitality to recruit on existing salaries and there have been problems tempting Brits to do the jobs. The BBC says ‘pub chains Marston’s and Mitchells and Butlers both warned last week that they were finding it hard to recruit workers, blaming overseas staff returning home and the stop-start nature of lockdown forcing people to give up on the sector.’
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• Some similar trends are evident in the US. The BBC reports on a restaurant in Texas offering ‘a $300 (£211) sign-on bonus for cooks and $150 for waiting staff.’
Covid variants, etc.:
• The race between the vaccine rollout (which should limit the damage caused by any further waves) and variants continues. The Guardian suggests that data suggests ‘Covid infection levels are showing early signs of an increase in England.’ The ONS says ‘there were early signs of an increase in the percentage of people testing positive in the north-east, Yorkshire and the Humber and the south-east in the week ending 15 May 2021.’
• A poll by Ipsos has suggested that families remain concerned that the pandemic will adversely impact their finances. The poll finds that one of the major attitudes (‘the important thing is to enjoy life today, tomorrow will take care of itself’) has shifted a bit due to Covid.
• Landlord Grosvenor’s investment fund is supporting expansion by its tenant Atis, a healthy salad bar concept. Langton comment: See premium email.
• The Telegraph reports that ‘just 15 people have tested positive for Covid-19 following government-run live event trials organised to see how mass gatherings can resume safely’. It says that this has raised expectations that all restrictions will be dropped on 21 June. The approximate 58,000 people in total who attended the events were required to take both a PCR test and a lateral flow test both before and afterwards. Multiple sources told the publication that 15 positive coronavirus cases have so far been detected.
• The Markit flash PMIs for May (see also Finance & Markets below) reports ‘the strongest upturns in demand were reported for hotels, restaurants and other consumer-facing services, though improvements were reported across the board in all sectors.’
• KAM Media says its research conducted before the 3rd lockdown was lifted suggested that 63% of customers expected price rises. It says ‘50% of UK pub customers said that it was ‘acceptable’ for pubs to increase their prices for the 1st month after they re-open from lockdown and 1 in 4 told us that they were happy to accept the price increase indefinitely.’ It will be interesting to see whether operators attempt to put prices up when VAT increases, first to 12.5% on 1 October and then to 20% on 1 April next year.
• Discounting. None to be seen on vouchercodes.co.uk and the like. Discounting had been endemic pre-Covid. Langton comment: See premium email.
• Grocery deliveries. The Guardian reports that seven key players are competing to delivery groceries. Deliveroo has also entered this market. it says most operators are currently focused on London.
• PM Boris Johnson has told Tory MPs that it is still the government’s intention to scrap the ‘one-metre plus’ social distancing rule on 21 June. The Times quotes one MP who was at the 1922 meeting as saying of the PM ‘he seemed very upbeat about removing the one-metre-plus rule next month. He told us he fully realises that it is the biggest difference the government can make to letting pubs serve customers in reasonably normal conditions and that means getting rid of any capacity restrictions.’ The news will be a comfort to trade operators and bodies.
• A new Gen Z healthy food platform has launched in bid to tackle youth obesity. London-based SMASH has today launched an app that partners with food brands to offer discounts to under 25s as part of an initiative to increase demand for healthier food.
• Hospitality venues in Northern Ireland open today for indoor dining.
• TGI Friday is set to IPO later this year with a potential value of around £275 million says it private equity owner Electra plc.
• Admiral Taverns is reportedly interested in buying rival Hawthorn Leisure, which has been put up for sale by its current owner, property group NewRiver and comprises just under 700 pubs. NewRiver could IPO if it is not bought outright.
• Stonegate Group reports that it has appointed David Roberts to the role of Property Director.
• In the US, Entertainment Studios and Weather Group, parts of Byron Allen’s Allen Media Group, have filed a lawsuit against McDonald’s alleging a pattern of racial stereotyping and refusals to contract with some minority-owned businesses. Restaurant Dive points out McDonald’s ‘currently dedicates 4% of its national advertising spending to Black-, Hispanic-, Asian Pacific American-, women- and LGBTQ-owned platforms, but plans to boost that figure to 10% by 2024.’
• In the UK, animal rights protesters have tried to blockade four McDonald’s distribution centres across the country. They are calling on the company to commit to becoming fully plant-based by 2025.
• The Telegraph reports ‘Marks & Spencer is poised to start buying more food from countries within the European Union’ because it has faced problems transferring goods to Northern Ireland.
HOTELS & LEISURE TRAVEL:
The new normal:
• A YouGov poll suggests only 11% of UK adults were confident of having a ‘normal’ summer holiday abroad this year. It says that only 8% of respondents have an overseas holiday booked despite a large number of bookings being rolled over to this summer from 2020. Some 20% of respondents had a domestic holiday booked with 71% having no booking for the summer either in the UK or abroad.
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• Spain has said UK residents will be allowed to enter the country from today. The Spanish Tourist Office says travellers from the UK are allowed to “freely enter Spain for non-essential purposes, such as tourism and any other purpose” from May 24. As we have mentioned before, it takes two to tango and, with Spain being on the amber list as regards UK regulations, the official advice is not to travel there other than for emergency reasons. Holidays, whilst not banned, would appear to be banned. UK residents returning from Spain would have to quarantine for 10 days at home and take two PCR tests.
• The BBC looks at the other side of the coin, saying that ‘the owners of hotels and holiday cottages in Somerset are warning their summer bookings may not be as high as expected, after the government lifted restrictions on foreign holidays.’ It says Somerset operators ‘are reporting that many people are cancelling bookings in Somerset when they manage to secure a holiday in Portugal or Spain.’ We have commented previously that some would-be holidaymakers are booking both UK and overseas holidays in the knowledge that they will ultimately be cancelling one of them.
• Heathrow has said it will open Terminal 4 to deal with arrivals from red list countries. This should restrict mixing in arrival halls. Heathrow says ‘red list routes will likely be a feature of UK travel for the foreseeable future as countries vaccinate their populations at different rates. We’re adapting Heathrow to this longer-term reality. While opening this facility will be logistically very challenging, our hope is that it will enable Border Force to carry out its duties more efficiently as passenger volumes increase in line with the green list. Until then, the current red list system will remain in place.’ Langton comment: See premium email.
• Eurocontrol says it does not expect Europe’s air traffic to return to its 2019 level until 2025. It says ‘we’ll probably have around 50% of 2019 traffic in 2021. Traffic will only recover to 72% of 2019 levels by the end of next year, and will only get back close to where we were pre-pandemic by 2025.’
Other travel news:
• STR reports that the US hotel market demand was at its highest level in more than a year in the week to 15 May. STR says ‘hotels [in the US] sold more than 22.4 million rooms — nearly 1 million more than the previous week.’
• STR says bad news trading had kicked in by this time last year. It says ‘in April 2020, U.S. hotels set a record for a year-over-year decrease in revenue per available room. In the same month in 2021, hotel RevPAR rose by more than 200%.’ It says, reasonably, that ‘given the wild swings in data, it’s more insightful to benchmark U.S. hotel performance in 2021 against 2019 numbers. Since the start of the year, monthly U.S. hotel RevPAR change has stayed negative compared to the same months in 2019, but the decreases are lessening.’
• Cineworld has updated on its reopening saying it is ‘pleased to report a strong opening weekend in the UK, led by the success of Peter Rabbit 2: The Runaway.’ Langton comment: See premium email.
• The Sunday Telegraph reports that customers seem to be showing some caution when it comes to returning to theatres, cinemas and even pubs & restaurants. Langton comment: See premium email.
• Techcrunch points out that Spotify is moving further into audiobooks. It says a new partnership will allow existing Storytel subscribers to connect their account through Spotify to access their audiobooks within Spotify’s app.
FINANCE & MARKETS:
• Flash PMI’s for May point to a further recovery in the UK economy. Markit says ‘the rate of expansion was the fastest since the UK Composite Output Index began in January 1998, reflecting strong contributions from both manufacturing and services activity.’ The Composite Output Index rose to 62.0 in May, from 60.7 in April. Manufacturing was 66.1 in May, up from 60.9 in April and the Flash UK Services PMI was 61.8 in May, up from 61.0 in April.
• Markit says ‘the UK is enjoying an unprecedented growth spurt as the economy reopens. Factory orders are surging at a record pace as global demand for goods continues to revive, and the service sector is reporting near-record growth as the opening up of the economy allows more businesses to trade. Business confidence has meanwhile hit an all-time high as concerns about the impact of the pandemic continue to fade.’
• It adds ‘the output and order book growth seen in May, and record level of business optimism, are consistent with GDP rising sharply in the second quarter and for strong momentum to be sustained through the rest of the year, albeit with the current quarter likely representing a peak in the growth rate.’
• The UK has offered a free trade deal to Australia despite the impact on UK farmers.
• The CBI has said business and government should put the bitter divisions of Brexit behind them and focus on building a fairer economy.
• Sterling mixed at $1.415 and €1.1613. Oil up at $67. UK 10yr gilt yield down 1bp at 0.83%. World markets mixed on Friday. London set to open up around 17pts.
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TRADING STATEMENTS & EVENTS:
Upcoming results are set out below:
• 25 May 21 Restaurant Group AGM
• 25 May 21 Shaftesbury H1 numbers
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• 3 Jun 21 New River full year numbers
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• 22 Jun 21 Coca Cola HBC AGM
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• 23 Jul 21 Premier Foods Q1 update
• 27 Jul 21 Campari H1 numbers
• 27 Jul 21 Games Workshop FY numbers
• 3 Aug 21 Domino’s Pizza H1 numbers
• 5 Aug 21 Bank of England MPC meeting
• 10 Aug 21 Intercontinental Hotels H1 numbers
• 12 Aug 21 TUI Q3 numbers
• 18 Aug 21 Carlsberg H1 numbers
• 19 Aug 21 Rank FY numbers
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