Covid, inflation, WFH, Burger King, Heavitree, Autogrill & more:

A DAY IN THE LIFE:

It looks like Langton’s next trip down to London is going to be changed, postponed or cancelled and, this time, it’s not Covid or even Brexit that’s to blame.

No, it’s the good old English weather and LNER, trying now to get ahead of the curve, is sending out emails advising people not to travel for the next few days for fear of either finding yourself firmly unmoved altogether or alternatively getting stuck somewhere completely random and certainly not your destination.

Neither of the above are ideal, of course. It might time to sit in front of the fire with a good book. Although we might have to do that in the dark as Northern Powergrid is also sending us texts and emails saying that Storms Dudley and Eunice might cause ‘disruption lasting more than 24hrs’. Both LNER and Northern Powergrid are ‘monitoring the situation closely’.

So that’s alright then. If the email doesn’t go out tomorrow, then apparently it wasn’t. Quiet news week, this week. But on to what there is of it:

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PUBS & RESTAURANTS:

Inflation – business:

Rising inflation numbers and the subsequent squeeze on disposable incomes are hogging the headlines. Heineken yesterday said that rising costs might mean that it would miss estimates in the current year and other operators, trade bodies and other organisations have responded to the numbers. Heineken, for example, said that inflation was ‘off the charts’. It told Reuters ‘these kind of price increases and inflation, I think we have not seen in a generation.’ CEO Dolf van den Brink says ’the big unknown is how this will affect the more developed markets that have not seen this kind of pricing before.’ Other bodies have said that rising prices highlight how the government should delay tax increases, step up moves to reform business rates or do more to help industry.

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The ONS has pointed out that less-generous-than-usual January discounts on clothing helped to push inflation higher. Mark-downs were at a 30yr low suggesting, perhaps, that some retailers believe that the public has been softened up to expect price increases that could otherwise have been difficult to push through. For hospitality, January is a soft month and a tough one in which to attempt to push prices higher.

Inflation, the consumer:

Inflation punishes the weak. This goes for consumers, typically those without index-linked income or strong Trades Unions, as well as it does for corporations. Real wages are currently in negative territory and, as energy price rises that are already baked into the system mean that prices will rise by a further 1.6pps in April, this will get worse before it gets better. Chancellor Rishi Sunak says he feels consumers’ pain but this doesn’t help much in practical terms when it comes to paying bills. It is likely that discretionary spending will come under some downward pressure.

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The ONS has reported that job vacancies in the hospitality sector have risen by a factor of almost 7x in the quarter to January 2022 compared with the same period a year ago. The impact of the disappearance of some staff due to Brexit had been masked by the Coronovirus pandemic but, with venues now open again, shortages are making themselves felt.

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The US is now the largest importer of Champagne by volume.

The MCA reports that average eating and drinking out spend increased by +3.7% in the four weeks to 23 January 2022, according to new data from Lumina Intelligence.

WFH.

Bloomberg’s latest ‘Pret Index’ has suggested that in ‘London’s City and Canary Wharf financial districts, efforts to restaff offices are much further ahead, which is reflected in Pret’s transactions being almost entirely back to normal in those areas. The surge in omicron infections that caused havoc for many companies’ return to office plans began receding earlier in the U.K. than in the U.S.’

The move back to the office could be more of a drift than a flood.

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COMPANY & OTHER NEWS:

Restaurant Brands International, owner of Burger King has removed the Whopper from discount menus and will raise menu prices again this year to offset higher costs. The company topped results estimates for Q4, led by soaring online sales and better-than-expected same-store sales growth at Burger King in the United States and Tim Hortons in Canada.

The FT reports that Corbin & King has fought off a High Court challenge, and now will pursue funding from US investment firm Knighthead.

Heavitree Brewery revenue fell by almost 8% to £4.6m in the year ended 31 October 2021. The group, which owns more than 60 pubs in Exeter and south west Devon, returned a small operating loss of £59,000. Profit before tax was £1.1m.

Scoffs Group has acquired nine Costa Coffee stores in Cornwall, previously owned and operated by Costa. The acquisition brings them to a total of 101 Costa Coffee franchises.

Autogrill expects to post a smaller loss and higher cash flow than previously forecast for 2021. The Italian group, which runs restaurants and bars on motorways and in airports around the world, now sees an underlying net loss of €110m, compared to the €150-170m range previously expected.

DTZ Investors has greenlit a multi-million pound refurbishment of Printworks, with investment including the installation of a 900m2 digital ceiling.

Kirin Holdings is to sell its stake in joint venture that it had formed with China Resources Holdings for around US$1 billion.

The WTTC says that there should be a healthy recovery for the UK Travel & Tourism sector provided no further travel restrictions are imposed in the coming year.

LEISURE TRAVEL & HOTELS:

The ETC predicts tourist arrivals to be just 20% below pre-pandemic levels this year. Domestic travel is expected to exceed pre-pandemic peaks, while international travel will be slower to return and is not likely to fully recover until 2024.

Pragma Consulting reports that the gradual return to travel on trains and planes has seen travel hubs starting to look at how their commercial offer needs to adapt to the post-Covid environment and the potential for passenger volumes to exceed earlier forecasts. One of the key questions facing transport hubs is how the pandemic has changed the passenger demographic.

A study by AllClear shows that 32% of respondents were impatient for guaranteed sunshine abroad, whilst 30% said they had missed travelling and wanted to have multiple holidays this year. The over-65 age group were inclined to spend the most, with an average planned spend of £1,457 per head.

Sabre Corporation reports a 2021 net loss of $950m compared to $1.3bn a year earlier, with revenue up 27% to $1.7bn. The improved revenue in the three months was driven by an increase in global air, hotel and other travel bookings.

Mayor of London Sadiq Khan has committed to invest £10 million in new domestic and international campaigns to attract more tourists to London.

Several more countries have announced the easing of travel restrictions including Canada, Finland & Vietnam.

The BBC reports that around a fifth of train services that were running before the Covid pandemic have not returned to service. The government is thought to have spent more than £14bn supporting railways over the pandemic.

OTHER LEISURE:

FitOn has raised $40m in a funding round led by Delta-v Capital. FitOn is also expanding its reach in wellness by acquiring Tampa-based corporate wellness platform Peerfit.

The Times reports that gym group Frame has closed two of its venues in London after undergoing a pre-pack administration. The company says it took the “extremely difficult decision” to close the two sites and it says ‘as with many other businesses, Covid has not been kind to us, and growth plans have been halted.’

Sir Nick Clegg has been promoted to become Facebook’s president of global affairs. Founder Mark Zuckerberg says ‘Nick will now lead our company on all our policy matters, including how we interact with governments as they consider adopting new policies and regulations, as well as how we make the case publicly for our products and our work.’

FINANCE & MARKETS:

Labour leader Sir Keir Starmer has said that workers are entitled to ask for a pay rise in light of the current cost-of-living crisis. This has the potential to give the inflation plate another spin.

Interest rate rises. City AM suggests that the Bank of England ‘will look through weaker than expected economic growth this year and send interest rates to levels not seen since the financial crisis.’ That’s certainly where the big money is.

The British Chambers of Commerce comments on the current state of affairs regarding trade with the EU and says ‘71% of exporters say [the] EU trade deal is not enabling them to grow or increase sales.’ It says only ‘1 in 8 exporters think it is helping them grow or increase sales’ and adds the ‘majority think it has pushed up costs, increased paperwork and delays, and put the UK at a competitive disadvantage.’

Sterling up at $1.3582 and €1.1956. Oil price down a fraction at $93.31. UK 10yr gilt yield down 6bps at 1.52%. World markets lower yesterday & London set to open around 21pts down as at 6.45am. +

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