Langton Capital – 2021-06-23 – Trading, WFH, inflation, aggregation, Krispy Kreme, Soho House etc.:
Trading, WFH, inflation, aggregation, Krispy Kreme, Soho House etc.:A DAY IN THE LIFE: A little bit pressed for time after emergency beers accompanied match last night. England progress but Scotland, sadly, out of the competition. On to the news: ADVERTISE WITH US: Langton’s free email now carries adverts. See front page of website for today’s copy & contact us for further details. CHANGED EMAIL FORMAT: The Premium Email is unchanged. The Free Email is written and pre-sent the evening before. It may not include breaking stories nor Langton comment. See Twitter for in-day comment. Let us know if you would like an example of the Premium Email. Prices: £295 for one subscription, £495 for multiple, both plus VAT. Or sign up for easy in, easy out monthly option: PUBS & RESTAURANTS: Trading: • The BBPA predicts that England fans bought 3 million pints in pubs as England face Czechia in the Euros. CEO Emma McClarkin said ‘While that is a good boost to typical trade on a Tuesday, it will be 750,000 less pints sold than if pubs were operating without any restrictions. So the restrictions will cost pubs over £3 million on Tuesday alone.’ • Further comment: See premium email • The Labour Party claims the delayed reopening will cost businesses almost £50m in wage costs once the government’s furlough scheme is cut back on 1 July. Labour said the figures, which are based on official data, showed that the chancellor, Rishi Sunak, should delay the tapering of the furlough scheme until the government could safely lift restrictions. • Research by KAM Media and Zonal finds that over half of Gen Z-ers (defined here as those aged between 18 and 24 years) get frustrated when they are forced to wait for the servers attention when ready to pay. A similar proportion get stressed when they’re not able to split the bill easily at the end of a meal (55%). Scotland: • First Minister Nicola Sturgeon has announced all of Scotland could move to Level 0 on 19 July, but she cautions that some restrictions could remain in place to be potentially removed on 9 August. Whilst the rollout of the vaccination programme continues, the UK yesterday recorded its highest number of deaths since end-April. The extension of restrictions is likely to further impact planned cruises around the UK and to Scottish destinations in particular.
• The Scottish Beer & Pub Association has responded to the announcement by the First Minister that there will be a delay in Scotland to the easing of COVID restrictions saying ‘it is very disappointing for our sector that we have yet another delay to the easing of restrictions. The hospitality industry has borne the brunt of these measures since March 2020, and every day that goes by with them in place causes more hardship and will result in further business failures. It is positive that we now have indicative dates alongside vaccination milestones, but we desperately need to see an end to these restrictions altogether. Our sector’s recovery does not begin until that point. The 9th August cannot come soon enough.’ CEO Emma McClarkin says ‘we also desperately want to see some accommodations on curfew which would allow pubs to show the full Euro 2020 knock-out matches, which we • The SBPA announced yesterday that Scottish pubs would have received a £2.8m boost to revenues if the national team had qualified for the next round of the Euros. The SBPA said ‘we expect Scotland fans to buy 360,000 pints in the pub while watching the match against Croatia and if we manage to qualify, an additional 720,000 pints will be sold for the next round, giving the trade a boost of £2.8m.’ Results went the wrong way and this did not happen. • Scottish Licensed Trade News reports that ‘the Scottish hospitality industry faces “continuing uncertainty” following yesterday’s announcement from the first minister that the easing of coronavirus restrictions is likely to be paused for three weeks.’ UK Hospitality Scotland says this ‘adds to the continuing uncertainty for hospitality businesses’. It quotes one operator as saying ‘currently, we can only operate at around 30% of our capacity, but with increased staff costs to provide table service and fewer tables because of social distancing rules, most business continue to operate at a loss, racking up further debt every time they open the doors.’ Working from Home: • As we tweeted yesterday, the battle lines are firming up and, at least while the sun’s shining and the football is on, disingenuity could reign. Lord Bilimoria, president of the CGI, has warned against giving workers the legal right to demand remote working. He says it could harm young employees and city centre economies. He says workers should ‘have the right to request it. But every employer should make that decision about the mix of working from home.’ • There are many instances in the Press re worker push-back to requests to return to the office. This makes interesting Press but, at this stage, the scale is unclear. It is beginning to feel, however, that the issue will not simply fade away in the way that city centre coffee shops, sandwich shops and bars (and, indeed, their landlords) would like it to. • Further comment: See premium email Inflation – is it as temporary as some observers suggest? • Hopefully, yes, because inflation has little to commend it. However, with some suggesting that wage growth could spike at 8% over the summer (see Sky News for sources), we are asking somebody in the supply chain to ‘suck-it-up’ and not pass on price rises to their customers. • Further comment: See premium email The danger of aggregation: • The hospitality industry may be 90% open and doing 80-85% of normal revenues, but individual units will face more binary choices. They will be either open or shut. In the latter case, they are running at 0% of 2019 and in the former, they may be running anywhere from 40-50% through to 150% or even more. • Further comment: See premium email Company news: • Krispy Kreme owner JAB Holdings intends to IPO its glazed donut company in a listing that could value it at around $3.8bn. Some $600m of new money could be raised as a part of the IPO later this year. This will be the second time that the company has been listed. Krispy Kreme has around 1,500 units. The company says ‘in recent years, we substantially invested in our business to accelerate performance and position us for long-term, sustained growth. We have invested in our omni-channel model, brand positioning, product quality and innovation capabilities.’ • Krispy Kreme generated some $1.12bn of net revenue in 2020, with a net income loss of $60.9 million (albeit during the pandemic). The company made $321.8 million in revenue for the first quarter of 2021, ended April 4, up 23% from $261.2 million the same quarter the year prior. • Shake Shack has announced that it is continuing its ‘momentum in China with an expanded partnership to open 10 Shacks in new territories by 2031, including locations in Sichuan, Chongqing, Yunnan, Hubei, Shaanxi, Anhui, Henan and Guizhou.’ The company says ‘we are humbled by the enthusiasm our fans have shown us in China and see this extension to Chengdu and beyond as a natural next step for Shake Shack.’ It adds ‘China is incredibly fast paced, dynamic and remains our fastest growing international market. Maxim’s continues to raise the bar in spreading the Shack love across China and we can’t wait to show our guests what we have in store.’ Maxim’s has more than 60 years of experience operating in the food, beverage and retail sectors including full-service and quick-service restaurants, bakeries and coffee shops. • Soho House appeals to its members to support its plans for an IPO in New York which would value the company at £2.2bn. The filing revealed that net losses widened from $45m to $93m for the first three months of this year after Covid restrictions prevented Soho House from opening its UK sites. • Uber has become the sole owner of Cornershop, a Latin American delivery startup, purchasing the remaining 47% interest in Cornershop in exchange for 29 million shares. • Crust Bros, a Waterloo pizza restaurant, will launch its second site this summer at a Wandsworth brewery. Other news: • The Australian govt will complain to the WTO about the 218% tariffs China imposed on Australian wine last year. China says the tariffs were increased due to trading malpractice, which Australia denies. HOTELS & LEISURE TRAVEL: Air travel: • The Times reports that govt sources have ‘downplayed hopes of a mass reopening of international travel this week’ at the next review of the traffic light system. Ministers are likely to unveil plans to exempt travellers with two vaccine shots from the requirement to quarantine for 10 days after visiting an amber list destination, with ambitions to implement the scheme by August. • CEO of ABTA, Mark Tanzer, calls for greater transparency in the financial flows in the travel industry, saying ‘We need a transparent system where each player recognises and fulfils his or her obligations, and has in place the level of insurance or other cover appropriate to the risk being borne.’ • Tanzer also said that ABTA could bring legal action against the govt in order to get the travel industry the support it needs to survive the pandemic. • Andrew Flintham, MD of Tui UK & Ireland, said the company hasn’t had a single meeting with prime minister Boris Johnson or chancellor Rishi Sunak during the Covid crisis. Flintham said it was indicative of the lack of support and engagement with travel at the highest echelons of government, despite the industry’s £37bn annual contribution to the economy. Hotels: • STR picks up on the staffing issues faced by the UK hotel industry as it says ‘furlough schemes, the huge reduction in revenue, employees seeking and finding new industries to call home and the lingering effects of Brexit all have created concerns for hoteliers.’ • STR comments that the events industry globally could return in a hybrid form where some guests attend remotely and others in person. Referring to the US, where distances are potentially large, STR quotes operators as saying that regionalisation is another trend, in order to allow attendees to drive rather than fly. Marriott says that hybrid meetings are ‘more complex and expensive’ than traditional, face-to-face seminars, events etc. OTHER LEISURE: • The EU plans to stop defining British TV programmes as ‘European works’ as a ‘disproportionate’ amount of British television and film content is being shown in Europe. Under the EU’s audiovisual media services directive, a majority of airtime must be given to such European content on terrestrial television and it must make up at least 30% of the number of titles on video on demand (VOD) platforms. • The Chemical Brothers, Blur, Primal Scream and Radiohead are among the artists urging the government to make it easier for British musicians to tour in the European Union post-Brexit reports Sky. The government is told that UK acts face “insurmountable financial and logistical barriers” following the UK’s departure from the EU without agreement on such issues. FINANCE & MARKETS: • Government borrowing in May was £24.3bn. This is a) down on the same month last year but b) roughly equivalent to the total borrowings in the full financial years running up to those impacted by the pandemic. Total borrowing is now 99.2% of GDP. • Downing Street seems to be boxing itself in by saying what it will not do (ditch the triple lock, raise income taxes or VAT etc.) A raid on pension pots is possible. Or a hike in death duties (which are rarely noticed by the deceased person impacted). • Sterling up at $1.3931 and €1.1686. Oil higher at $75.25. UK 10yr gilt yield up 2bps at 0.79%. World markets nearly all better yesterday but London set to open down around 8pts. RETAIL WITH NICK BUBB: • Further comment: See premium email TRADING STATEMENTS & EVENTS: Upcoming results are set out below: • 22 Jun 21 Coca Cola HBC AGM • 23 Jun 21 UK Markit Flash PMI numbers • 24 Jun 21 Carnival Cruises Trading Update • 24 Jun 21 Bank of England MPC meeting • 25 Jun 21 GfK Consumer Confidence • 28 Jun 21 Escape Hunt AGM & Q1 update • 30 Jun 21 Constellation Brands Q1 • 8 Jul 21 Fuller’s FY numbers • 13 Jul 21 Pepsi Q2 numbers • 21 Jul 21 Loungers FY numbers • 23 Jul 21 Premier Foods AGM & 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 • 22 Oct 21 Intercontinental Hotels Q3 numbers • 26 Oct 21 Campari Q3 numbers • 8 Dec 21 TUI FY numbers LANGTON CAPITAL: Made in Hull. Like all the best things. 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