Football, re-opening, labour issues, City Pub Group, Gregg’s, ESC etc.:

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A DAY IN THE LIFE:

Our dog, like many canines, is an expert at making people feel guilty because, boomerang-like, he can project pathos by a glance at anyone failing to feed him when caught in the act of carrying a plate and then gather it up to throw out again at whoever might be opening a packet of biscuits or a bag of crisps.

His eyes will dart hither and yon until he spots his target. Then he’ll look up through his furrowed brow and chuck in a whimper for good measure but, if you weaken and feed him, he’ll remember it for years and simply redouble his efforts going forward as he’s done the maths, it’s worth his while.

And I can identify with this exchange in Uncle Buck (as Buck asks for advice on his dog-sitting role for his sister): Buck Russell : How many times a day does the dog eat? Cindy Russell : How many times do you think? Buck Russell : I don’t know, four or five. Cindy Russell : He eats once a day.

Anyway, Langton’s back in The Smoke this week where the weather, for once, is set to be worse than it is up north. On to the news:

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PUBS & RESTAURANTS:

Trading issues:

• KAM Media has produced a report alongside Zonal that ‘examines the customer decision process from deciding whether to go out and researching a venue, through to ordering, paying, reviewing and choosing whether to return.’ Getting this right is pretty critical to financial success. KAM says ‘the research identified increased competition from ‘in-home entertainment’ with a 167% increase in consumer spending on TV subscription services, such as Disney+ and a 143% increase in spending on video gaming meaning that hospitality must work even harder to ensure every interaction with their customers, at every stage in the customer journey, is as near perfect as it can be.’

• Further comment. KAM says ‘customers now search online when deciding which venue to visit, with most people doing a ‘general internet search’ (38%) followed by Google’s ‘Near Me’ search tool (25%) and then using hospitality review websites/apps e.g. TripAdvisor (22%.) This represents a huge opportunity for operators to either influence potential customers or risk losing them during the critical ‘research’ stage.’ Social media ‘obviously plays a considerable role here too, but not surprisingly with huge generational swings. Gen Z and Millennials, in particular, are heavily reliant on Instagram, Facebook and TikTok for ideas and inspiration on which venues to visit.’

• KAM adds ‘the role of digital when ordering has obviously grown too, with 42% saying a venue that offers mobile phone ordering and payment become more important to them over the last 12 months (65% for Millennials.) Yet almost half (47%) get frustrated when they are ‘forced’ to order via an order and pay app. The key is to give customers the choice.’ Given the impact of Covid, KAM says ‘pubs, bars and restaurants have taken the initial steps into the world of tech quite cautiously, and then been thrown in at the deep end in recent months- but it is essential we remember that ‘tech for tech’s sake’ does nobody any good- implementation of any tech MUST have the end results of adding positively to the customer experience.’

• The BBPA predicts that England fans will buy 5.25 million pints on Tuesday 29th June when the national team plays against Germany in the round of 16 in the Euros. However, the boost to pubs from beer sales during the match would be greatly altered by the ongoing restrictions still in place on the trade, according.

• CEO of the BBPA Emma McClarkin said ‘Whilst that is a very welcome boost to our trade, it is over 1 million fewer pints sold than if all the restrictions on pubs had been lifted on 21st June as per the original roadmap. To secure our pubs for future tournaments and national occasions like the Euros, there can be no further delays to the lifting of restrictions. On July 19th all restrictions on pubs must be lifted.’ 

• The Welsh Beer and Pub Association (WPBA) predicted that Wales fans would have bought 500,000 pints on Saturday when Wales played against Denmark at the Euros.

• Per Lumina Intelligence, the eating out market in the UK is set to grow by 33.4% in 2021, reaching a value of £63.6bn, with the industry set to exceed its 2019 market value by 2022.

• UKHospitality states that Phase 1 of the Government’s Events Research Programme will  help businesses running mass events begin preparations for their resumption and boost confidence across the industry. CEO Kate Nicholls said ‘The report’s findings that there were no substantial outbreaks of Covid-19 identified following any of the first phase of test events, along with the continued success of the vaccine programme, should give the Government confidence to go ahead with a full and final lifting of restrictions next month.’

• UKHospitality Scotland Executive Leon Thompson said ‘UKHospitality Scotland continues to be clear in calling for the introduction of a much needed and overdue licensing scheme for short-term lets. This is the third consultation on the introduction of licensing for this area, and the need for this scheme only continues to grow.’

• Kantar data shows that supermarket sales of alcohol increased by £29m in June, boosted by good weather, the long bank holiday weekend and the run up to the football. Beer, sparkling wine, flavoured alcohol beverages (FABs,) and non-alcoholic beer in particular did well in June. 

Variable reopening patterns:

• The British Beer & Pub Association reports the finding that ‘4 in 10 Brits say their favourite pubs are still closed due to ongoing restrictions.’ The BBPA says ‘pubs remain closed across the UK due to the current restrictions they face, which require them to ensure social distancing at all times, no standing and maintaining the rule of six to a table. It says that pubs still closed do not have the space to operate the social distancing and table service only rules viably, hence why they have remain closed.’

• Further comment: BBPA CEO Emma McClarkin says ‘the current restrictions on pubs are flatlining their recovery before its even had a chance to begin. It is very revealing that 4 in 10 Brits say their favourite pubs are still closed. Clearly there are a lot of locals out there still closed that play an important role in people’s lives.’ McClarkin adds ‘pubs and licensees are struggling to recover with the current restrictions they face and debts are accumulating. Every week the current restrictions stay and uncertainty continues, the likelihood of pubs being lost forever increases.’ McClarkin concludes ‘no ifs, ands or buts, pubs across the UK must open without restrictions as soon as possible.’

Labour shortages:

• Tons of comment over the weekend in the press, from trade bodies and from operators on just how hard (or otherwise) it is to recruit staff. The Daily Mail says there are vacancies for 100,000 lorry drivers in the UK as EU staff is less available. It adds there are plenty of jobs in meat processing and throws in hospitality for good measure. Fruit pickers and care worker demand will also be high. The Mail says ‘the UK HGV driver shortage has hit catastrophic levels’. Hyperbole, but transport difficulties can feed through to many sectors of the economy quickly. If haulage firms jack wages to source staff, cost increases could be similarly spread. The Caterer says ‘a shortage of delivery drivers has led to two of the UK’s biggest suppliers warning customers including schools that they will be unable to fulfil food orders.’

• Elsewhere, The Telegraph says there is a ‘scramble’ to find the staff needed to cope with ‘another staycation summer’. It says tourist – but not hospitality workers – are flooding to Devon as well as to other UK holiday hotspots. The paper says ‘instead of workers fighting to land the jobs that have survived the pandemic, it is bosses who are competing for the employees. Many have left the area and returned to their families during the pandemic, been poached by online delivery giants or have decided to change roles while on furlough.’

• Further comment: The Telegraph says ‘a recent survey of 500 tourism businesses carried out by the national Tourism Alliance found that only 18pc of businesses have all the staff they need, with almost a third having to cut hours or services as a result.’ We have commented on a number of occasions that, as with a convoy, a business can only move at the speed of its slowest part. If the bottleneck is labour, shifts may have to be reduced and revenues will likely fall accordingly.

• Leads to inflation? The Telegraph quotes Reed.co.uk as saying that restaurant salaries ‘have risen by 7pc nationally and 9pc in the south-west between the second quarter of 2020 and the second quarter of 2021. The highest rises are in the east of England (40pc), followed by the north-east and Scotland.’ It says ‘bosses stress there is a limit to how far the industry can offer higher pay.’ There will, at some point, be pushback from customers if most, all or more than all of the increase in wage costs are passed on via price increases.

Other Covid issues:

• A survey undertaken by The Morning Advertiser has found that more than half of respondents were “not at all confident” that restrictions would be lifted on 19 July. A further 26% were only ‘somewhat’ confident with 11% ‘very confident’. Trade bodies are urging the Government to stick to the 19 July date, which ministers have been referring to as a “terminus point”.

• The Furlough scheme is to wind down from the end of this month, i.e. from Thursday morning, after which time the scheme will pay just 70% of wages rather than the earlier 80%. The Telegraph reports that more than 3.4 million people continued to rely on the Government to pay their wages at the end of April 2021, but this will have come down since. At some point, the terms furloughed and unemployed will be so similar as to have no discernible differences.

Company & other news:

• The City Pub Group has updated today saying that ‘trading since the reopening of pubs on 12 April has been encouraging at 90% of 2019 levels for the 42 pubs that have reopened to date.’

• Further comment: It says ‘we are already benefitting from the hard work carried out over the past year with our cost base significantly reduced and consequently the Group is trading profitably at today’s volumes. While our performance has been very pleasing, the continuing social distancing rules and absence of large bookings have limited trade. This became apparent at the start of the European Football Championships where many customers did not want to watch live sport at pubs because of the social distancing restrictions. We look forward to all restrictions being lifted on 19 July and we believe that once restrictions are lifted, trade will build over the remainder of the year to above 2019 levels, although it is difficult to predict at this stage exactly when this might happen.’

• City Pub Group says ‘whilst uncertainty remains, progress will be made on a step-by-step basis. The Group has a very strong balance sheet, with over £16m of unutilised banking facilities, is cash generative, and is starting to – on a selective basis – identify new acquisitions.’ Chairman Clive Watson says ‘we have been very encouraged by how we have traded since reopening despite the continuing restrictions. We are cash generative and trading profitably demonstrating the strength of our business model.’

• Gregg’s has updated positively on trading saying that it is seeing a ‘continued strong recovery in performance.’ The company says since 10 May (when it last reported), it says ‘we had expected to see increased competition as cafes and restaurants were allowed to compete more effectively with our largely take-out offer. In recent weeks the impact of pent-up demand for retail has reduced but, nonetheless, like-for-like sales growth in company-managed shops has remained in positive territory ranging between one and three per cent when measured against the same period in 2019.’ Gregg’s says ‘this level of sustained sales recovery is stronger than we had anticipated and, if it were to continue, would have a materially positive impact on the expected financial result for the year. We will provide an updated picture when we present our interim results on 3 August 2021.’

• Coca-Cola HBC has announced that it has ‘reached an agreement to acquire a 30% equity shareholding in Casa Del Caffè Vergnano…a premium Italian coffee company.’ Caffè Vergnano ‘is a family-owned Italian coffee company headquartered in Santena, Italy. It is one of the oldest coffee roasters in Italy with roots dating back to 1882.  Its product offering consists of truly premium, high-quality coffee that represents Italian heritage and authenticity at its best.’ CEO Zoran Bogdanovic says we ‘are excited by the opportunities ahead with this terrific brand.’

• Sports bar chain Riley’s has retained Christie & Co to help it acquire new sites. Riley’s Chief Executive Officer, Craig Mayes says ‘we are actively seeking property to expand our coverage across the United Kingdom.’

• The founders of restaurant group Kricket are to open their first bar later this year, Soma, which will be next door to Kricket on Soho’s Denman Street.

• The Sunday Times carries a big story elaborating on earlier news that McDonald’s is to add 20,000 jobs in the UK.

• Oakman Inns has revealed it is introducing further shareholder benefits such as access to the soon to be launched Oakman Wine Club and the Oakman Development Club. The company said  the last few months of trading has both been positive and at odds with the national media commentary on the sector. 

• The Australian govt will file a formal complaint to the WTO regarding the 218% tariffs imposed by the Chinese govt on Australian wine last year.  

HOTELS & LEISURE TRAVEL:

• Some two-thirds of UK adults say they are unlikely to take an overseas holiday this year per Travel Weekly. Only 7% ‘strongly’ believed that they would take an overseas holiday in 2021.

• Grant Shapps has said there is “no guarantee” that all of the countries currently on the green list will remain on it.

• Portugal from today will only allow fully vaccinated British holidaymakers to visit the country quarantine-free. Other visitors from the UK will have to quarantine for 14 days. French president Emmanuel Macron and German Chancellor Angela Merkel tried (but failed) last week to impose a Europe-wide quarantine rule for people flying into the EU from the UK.

• P&O Cruises and Saga resumed cruising yesterday for the first time since March 2020.

• Per Travel Weekly, Jet2holidays and Jet2.com reports a ‘huge surge’ in holiday bookings to the Balearic islands, Malta and Madeira after they were put onto the green list for travel.

• TravelSupermarket reports that Malta jumped from 17th to the fifth most searched spot for a package holiday for the first time after being put on the green list, up 837%. Spokeswoman Emma Coulthurst said ‘it shows an immediate interest in getting away to the new green list destinations’.

• Ryannair and WizzAir have added capacity to green list destinations Malta, Majorca, Ibiza and Madeira. Dara Brady, Ryanair’s marketing and digital director, said ‘we urge the government to immediately add equally safe destinations such as Cyprus, the Canaries and the Greek islands, and also to immediately allow vaccinated UK and EU citizens to travel freely between the UK and the EU without restrictions.’

• Per STR, US hotel demand was at 90% or more of 2019 levels for the week 13-19 June. The demand was heavily skewed toward leisure transient as occupancy in hotels that cater to groups and meetings remained weak at 43%.  

OTHER LEISURE:

• Escape Hunt has updated on trading saying that ‘trading in the five weeks to 20 June 2021 has been encouraging in both the Company’s established sites and in its new sites.’ The company says ‘revenue during the five-week period was 47 per cent. higher than in the same five-week period in 2019’ and it adds ‘on a like for like basis, revenue in the five-week period to 20 June 2021 from the Company’s eight established UK owner-operated sites which were open in the same period in 2019 represented 87 per cent. of the revenue in the same period in 2019.’

• ESC says EBITDA ‘at site level for the five weeks to 20 June 2021 was 310 per cent. of the site level EBITDA in the same five weeks in 2019.  On a like-for-like basis, site level EBITDA from the Company’s eight established sites was 189 per cent. of the equivalent site level EBITDA in 2019.’ The company says ‘further progress has been made on the Group’s UK rollout’ and CEO Richard Harpham says ‘we are delighted to have seen a healthy return of demand from consumers in the short period since our UK sites have been able to re-open and are pleased that we are realising the benefits of the efficiency measures implemented, leading to a significant improvement in our UK site level EBITDA.’

• Mr Harpham says ‘the performance of our new sites in particular, gives us confidence in our strategy to continue to expand our network and we have a well-developed pipeline of attractive opportunities within a favourable property landscape. Where our franchisees have been able to operate without undue restriction, demand appears to be returning.  Whilst there are undoubtedly still COVID-related risks to trading in the near term, performance in the last few weeks gives us cause for cautious optimism.’

• Panasonic Corp has sold its stake in Tesla for around $3.61bn as the Japanese conglomerate looks to raise cash for growth investment.

• Snap has announced a multiyear deal with Universal Music Group allowing users to clip songs from the UMG catalog to use in their Snaps and on Spotlight.  

FINANCE & MARKETS:

• Sterling weaker at $1.3891 and €1.1648. Oil up at $76.08. UK 10yr gilt yield up 3bps at 0.78%. World markets broadly better on Friday with London set to open down around 2pts as at 7.15am.

RETAIL WITH NICK BUBB:

• Saturday’s Press and News (1): The embarrassing photos first obtained by the Sun on Friday of the embattled Health Secretary, Matt Hancock, in a clinch with one of his aides on May 6th, were all over the front pages of the Saturday papers and the headlines made grim reading for both him and the Prime Minister: “Hancock fighting for job” said the Times, “How can he cling on?” fumed the Daily Mail, “Calls for Hancock to quit after affair with key aide” said the Guardian and “Hancock faces sack if affair turns into a “Barnard Castle moment”” warned the Telegraph. The FT also carried the story on its front page (“Johnson urged to fire Health Secretary Hancock after breach of Covid rules”), but its main story was about the EU-wide quarantine row with Germany: “Spain breaks ranks on UK tourists”.    

• Saturday’s Press and News (2): In terms of Retailing stories and news, all the papers covered the news that Ocado has won its copyright case against its co-founder Jonathan Faiman and that the private equity group chasing Morrisons, CD&R, has raised its separate bid for the healthcare group UDG. Continuing on the Food Retail theme, the Daily Mail had an investment feature on the “Supermarket Sweep” (flagging that the takeover tilt for Morrisons has seen grocery shares surge), the Guardian had a double-page spread on “Why inflation is creeping up on supermarket food prices across Britain” (focusing on the cost pressures on tinned tomatoes) and the Telegraph noted that Tesco side-stepped a revolt over executive pay at its AGM on Friday with only 8% of shareholders voting against the Director’s pay report.    

• Saturday’s Press and News (3): In other news, the silly but upbeat CBI Distributive Trades survey for “June” on Friday morning got plenty of uncritical coverage in both the Guardian (“Retail enjoys strongest sales in four years as shoppers return to the High Street”) and the Times (“Sun shines for retailers after Covid rules ease”). The boost that JD Sports got on Friday from the strong Nike results in the US was the lead story in the market reports in both the Times (“JD Sports on the front foot after Nike’s numbers smash forecasts”) and the Telegraph (“Record results at Nike help JD Sports light up the FTSE”), whilst Lex column in the FT highlighted the success of Nike’s new business model, concluding that “The focus on selling directly to the consumer means that it can command a full price for its shares as well as for its sneakers”. The FT market report noted the lift that Greggs
got on Friday from an upgrade from the broker Berenberg and the FT also flagged that, despite the upbeat noises from Capital & Regional on Friday, that High Street landlords received just 18% of the quarterly rents due on Friday…Dixons Carphone (aka Currys) was the “Share of the Week” in the Daily Mail, ahead of its upcoming final results and the Times had a couple of snippets about the strong trading reported by Marshall Motors and the IPO plans of the Online building materials supplier CMO.    

• Sunday’s Press and News (1): The front pages of the Sunday papers were again dominated by photos of the hapless Matt Hancock, this time from his resignation video, after a day of merciless mockery on social media: the Mail on Sunday ran with the headline “Hancock quits his job – and marriage”, the Observer highlighted “Gone: Hancock quits after day of humiliation”, the Sunday Telegraph went with “Hancock quits: “Those of us who make these rules have got to stick by them”” and the Sunday Times flagged that “Humiliated Hancock quits”, noting that another scandal has erupted over the use of a private email account by Hancock to hide Covid contract business from his officials…

• Sunday’s Press and News (2): In terms of Retail stories, most of the papers followed up on the news a week ago that the US private equity giant Clayton, Dubilier & Rice (CD&R) had made a 230p bid approach to Morrisons. The Sunday Times had a feature headlined “Predators scent blood at grocers”, flagging that, unloved by the stock market, supermarkets are now being hunted by private equity and that “where there’s land, there’s brass”. The Sunday Telegraph highlighted that the new boss of Sainsbury’s, Simon Roberts, must execute his strategy with Daniel Kretinsky breathing down his neck (“Could Sainsbury’s be next target for the “Czech sphinx”?”) and the Mail on Sunday flagged that CD&R will soon clarify its intentions over Morrisons (“Morrisons stalker could spark bids battle “in days””), with several private equity rivals said to be waiting in the wings. 

• Sunday’s Press and News (3): In other news, the Sunday Telegraph seized the fashion model photo opportunity provided by the news that Boohoo is being sued by an American lace maker over design copyright and its Questor investment column looked in detail at the Motor dealer Lookers (“Even if Lookers is dead in a decade the shares are undervalued. Buy”). The “Stocks to Watch” column in the Mail on Sunday noted the significant shareholder revolt against Director’s pay at the Vertu Motors AGM and also highlighted that Studio Retail will reveal a plan this week to double sales to £1bn. And the Observer had a big feature on the way in which “Investors turn ire on firms whose executives are set to cash in”, with Morrisons and WH Smith amongst the companies with problems in the past and JD Sports in the list of companies currently in the firing line. 

• Sunday’s Press and News (4): In terms of all the Economics comment columns in the Sunday papers, we would, as usual, highlight the column by the Sunday Times Economics correspondent David Smith (“As inflation jumps, the Bank risk falling behind the curve”), in which he noted that growth in the economy has been stronger than expected and that there is more inflation to come. However, the column in the Observer by the veteran Economics commentator William Keegan was headlined “Don’t hit the brakes – the recovery is barely out of first gear”. In contrast, the column by the veteran City commentator Jeremy Warner in the Sunday Telegraph looked at the problems of the economy in Northern Ireland (“The sad truth: Northern Ireland is a lingering headache for all sides”), in which he flagged that the Northern Ireland economy is even more subsidised than Scotland’s.

Today’s News: The big news today is that the Marco Gobbetti has notified Burberry of his intention to step down as Chief Executive Officer and leave the Company at the end of 2021, as it feels like he’s only been in the job five minutes (he actually started in July 2017)…The Chairman of Burberry, Gerry Murphy, says “The Board and I are naturally disappointed by Marco’s decision but we understand and fully respect his desire to return to Italy after nearly 20 years abroad” and the man himself says that “With Burberry re-energised and firmly set on a path to strong growth, I feel that now is the right time for me to step down”. In other news, JD Sports has announced yet another acquisition and it’s not the one we were expecting (the Drapers website said on Friday that JD has acquired a majority stake in the Online fast fashion business Missy Empire), as the acquisition, by JD’s Spanish
vehicle, is of 80% of the issued shares in Deporvillage, a Catalonian based Online sports equipment retailer, for a total maximum cash consideration of €140.4m.

This Week’s News: Tomorrow brings the latest monthly Nielsen grocery market share figures and a Victorian Plumbing analysts teach-in. On Wednesday we get the Dixons Carphone (aka Currys) finals, the Topps Tiles Q3, the Studio Retail finals, the Lookers finals, the Kingfisher AGM and the Lookers AGM. Then July/H2 kicks off on Thursday with the AO.com finals, the ABF (Primark) trading update, the JD Sports AGM and the Walgreen Boots Q3 (in the US).