Current trading, WFH, consumer costs, Everards, Netflix & other:

A DAY IN THE LIFE:

I don’t know whether the ‘paperless office’ has truly come to fruition but there surely must be less of the stuff getting used these days?

Because, though it’s always dangerous to rely too much on a sample of one, we were clearing out some docs the other day and noticed that a supplier, fairly typical, used to send us 7pg statements quarterly printed on (one the one side of) very grand, 100g paper.

Then, judging by our delve through the archives, it decided to print on both sides, then move to 80g or 70g paper and then it moved to email notifications and we haven’t seen any paper from them for a couple of years.

And, though paper suppliers may disagree and this leaves us with empty filing cabinets and with reams of unused paper that Langton itself now rarely uses, this must be a move for the better. On to the news:

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TRADING & CURRENT COVID TRADING RESTRICTIONS:

Backdrop:

PM Boris Johnson told the nation yesterday that there will be no new Covid restrictions in England. That news has been welcomed (but has been accompanied by calls for more support). Other observers have pointed out that U-turns have not been in short supply and that a change of direction cannot be ruled out.

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Trading (and thanks to those providing feedback).

The smooth upward trend hoped for after the ‘irreversible’ reopening of July last year was arguably stalling before Omicron appeared on the scene. That is a massive simplification of what is a complicated picture but we would pick out a number of threads that may be common across the market.

• Food vs wet. Food sales tend to be better than wet. This comes and goes and is impacted by the current, reduced, 12.5% rate of VAT.

• Volumes vs spend. Footfall is down but spend is up.

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The outlook:

• As a number of operators have pointed out recently, hurdles remain on the road to recovery. Business rates will return to normal levels in the spring as will VAT on food and soft drinks and landlords will once again be able to take legal action in order to enforce rental terms.

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PUBS & RESTAURANTS:

City centres:

The FT reported yesterday that ‘the amount of office space in England has plunged by millions of square feet during the pandemic and is expected to continue falling, with workplaces languishing empty and questions about the future of work unresolved.’ This will not be without consequence for those operating bars, restaurants, coffee shops, cafes & sandwich shops in or around commuter areas.

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The consumer:

Mortgage costs are rising and many news sources are flagging up sharp rises in utility and energy costs to come. The price of gas is 5x what it was early in 2021. National Energy Action says ‘those on lowest incomes and in less-efficient homes will not just face financial hardship but intolerable living conditions, ill health and, for too many, a shortened life.’ The government is coming under pressure to divert resources (or borrow) in order to subsidise energy costs.

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Downing Street has said that it does not believe that cutting the VAT rate on energy costs for consumers is a “blunt instrument” that would only favour wealthier consumers. Sky points out ‘during the Brexit referendum campaign, Mr Johnson advocated cutting energy taxes as one of the dividends of leaving the EU.’ He says currently ‘we will continue to listen to businesses and consumers about ways of abating the cost of energy, there are things we can do, and we appreciate the problems people are facing.’

Costs:

The BRC reports that shop prices rose at their fastest rate for around 3yrs in December. It says the rise was led by the cost of food. It adds ‘consumers may have noticed that their Christmas shop became a little more expensive in December. Not only did prices rise, but did so at a faster rate, especially in food.’

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UKH reports that pubs, bars and restaurants lost an average of £10,335 in revenues in the week leading up to Christmas.

S4 Labour reports that ‘hospitality sales for December were down 12% compared to December 2019.’ It says both drink and food sales experienced declines, with sales down 11.5% and 13% respectively on 2019 levels and adds that ‘London sites’ sales were hit the hardest as like-for-likes fell by 23% on 2019 levels. Non-London sites also saw downfalls, however by a lesser figure of 10%.’

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COMPANY & OTHER NEWS:

Everards has reported results for the year ending September 2021 saying that ‘trading restrictions for 9 months of the year resulted in an operating loss of £3.4m for the financial year ending September 2021 (£1.3m loss year ending September 2020).’ It says ‘this was driven by the reduction in the volume of drinks supplied to the pub estate but also significant cancellations of rental income.  There was no material uncertainty and the accounts have been completed on a going concern basis.’

MD Stephen Gould adds this was ‘clearly a tough financial year but our Employees and Business Owners have been remarkable while faced with unprecedented challenges.  We have and will continue to invest in our People, Communities and Business.  Our level of pub vacancies is very low after nearly 21 months of disruption, and interest in joining our company as an Employee or Business Owner has never been stronger.’

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As part of a new pledge to make its menu 50% meat-free, Burger King will launch a range of vegan nuggets across the UK. The move will also help the company achieve its goals to reduce greenhouse gas emissions by 2030. 

The MCA reports that Burger King has acquired 12 restaurants from existing franchise partners, increasing the company’s direct-owned portfolio to 172 restaurants. 

The Oxford Partnership reports that in the 14 days to 30 December 2021, hospitality venues lost an average of £4,300 in draught beer and cider sales. The City of London draught beer and cider sales were more than £11,000 less than two years ago.

UKH Cymru has called for more financial support and the lifting of trading restrictions in order to prevent closures and job losses in the Principality. The rules are due to be reviewed on Friday.

Gino D’Acampo’s restaurant chain, My Pasta Bar, is reported to have fallen into liquidation with debts of £5 million. The operator has sites in London in Fleet Street, Leadenhall Market and Bishopsgate.

The Times reports that Trinity Group, which owns Gieves & Hawkes, has gone into liquidation.

Starbucks will require US employees to be fully vaccinated 9 Feb or alternatively to take weekly Covid-19 tests. Starbucks says ‘if vaccination rates rise and community spread slows, we will adapt accordingly. But if things get worse, we may have to consider additional measures.’

Workers United, in the US, has made moves to promote unionisation in additional Starbucks stores. It is reported to have petitioned for elections at six Starbucks stores in Boston; Chicago; Seattle; Knoxville, Tennessee; and Louisville, Colorado.

Papa John’s has completed store openings in Kenilworth, Bridgend, Melton Mowbray, Sheerness, Warwick, Stanford-le-Hope and Midsomer Norton. Amit Pancholi, UK director of business development, Papa John’s UK said ‘we’ve opened double digit stores across the UK this year, growing our brand presence both on the high street and also in non-traditional locations such as holiday resorts, leisure venues and more.’

Delivery Hero is set to acquire a 39.4% stake in Spanish delivery app Glovo, valuing the company at €2.3bn. The company currently holds about 43.8% in Glovo shares on a non-diluted basis.

The MA reports that Barclaycard data shows that consumer spending in the hospitality and leisure sector was down 18.5% in 2021 compared to 2019. Overall, consumer spending grew by 5.9% in 2021 compared to 2019, driven by online shopping, at-home experiences and outdoor pursuits. 

Jean-Marie Barillère, president of the Union des Maisons de Champagne (UMC), predicts that total Champagne turnover for 2021 is expected to reach a new record of €5.5 billion, 10% higher than its previous peak in 2019. 

LEISURE TRAVEL & HOTELS:

The Telegraph reports that several senior government figures are pushing for pre-departure tests for holidaymakers to be scrapped in the government’s review of travel rules on Wednesday. Sir Graham Brady said ‘if a more relaxed approach is good enough for the domestic economy given what we know about Omicron, it should be good enough for travel too.’

The FT has predicted that more customers will turn to travel agents for expert advice and guidance over the coming 12 months. The owner of Haslemere Travel told the FT ‘We have found that a significant amount of our new business is from clients who have never previously used an agent.’

Travel Weekly reports that homeworking agency Not Just Travel claims its sales in the week after Christmas were up by about 50% year-on-year, with nearly half (43%) of bookings for travel in the next 12 weeks.

German authorities have announced that the country will reopen to UK visitors from Tuesday 4 January. Fully vaccinated UK travellers will be able to enter the country without having to provide a negative Covid-19 test nor will they need to quarantine upon arrival.

Research from Knight Frank shows that the London hotel sector steadily continued to recover throughout October, with occupancy rising 2.6% to 48.2%. Profitability increased by 37%, marking the highest profitability levels London has achieved since the outbreak of coronavirus in early 2020.  

OTHER LEISURE:

In the UK, Netflix is estimated to have only attracted 800,000 new subscribers in 2021 as it approaches saturation point in British homes. Globally, Netflix has said it expects to report 18.4 million new subscribers for 2021, when it reports its full-year figures next month, taking its global base to 222 million.

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Playtech has announced that it is adjourning its General Meeting scheduled for 12 Jan to 2 Feb. The meeting was to consider the offer for the company announced by Aristocrat Holdings. The company says the new date coincides with the date by which JKO must clarify its intentions in relation to Playtech. Playtech says ‘discussions with JKO are progressing. As such, JKO has asked that it be provided with more time to develop the terms of its potential offer for the Company. Given the circumstances, the Board consider it to be in Playtech shareholders’ interests to adjourn the Court Meeting and General Meeting.’

Pragma Consulting looks at Fitness Apps and says that, as January is ‘traditionally the time when people seek to kick-start their fitness, with a resultant upturn in membership numbers at health and fitness clubs’, Apps could remain popular.

FINANCE & MARKETS:

Markit’s December manufacturing PMI for the UK came in at 57.9 in December. This is little changed from November’s three-month high of 58.1 but is slightly ahead of forecasts.

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Markit says that ‘although supply chains remain severely stretched, there are at least signs that the situation is stabilising, with vendor delivery times lengthening to the weakest extent for a year in December.’

In its European PMI, Markit reports ‘we’re seeing some tentative, but very welcome signs that the supply chain crisis which has plagued production lines all across Europe is beginning to recede.’

The Bank of England reported yesterday that UK consumers added £862m to their credit card bills in November, the biggest monthly increase in credit card borrowing since July 2020.

Sterling stronger at $1.3526 and €1.1975. Oil price up at $80.09. UK 10yr gilt yield up 11bps at 1.08%. World markets better yesterday but Far East lower and London set to open down around 18pts as at 7am.

RETAIL WITH NICK BUBB:

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