Langton Capital – 2022-02-23 – Restrictions, rates, inflation, US news (Cracker Barrel, Texas RH) etc.:
Restrictions, rates, inflation, US news (Cracker Barrel, Texas RH) etc.:
A DAY IN THE LIFE:
In an attempt to brighten up the office (and in the wake of the lockdown-inspired demise of their predecessors) we introduced some potted plants into Langton’s global HQ a few weeks back.
And, apparently, we also welcomed a bunch of blackfly eggs and, as the gestation period of said pest seems to be measured in days rather than weeks, the air is now thick with the silly things as they drift around making a nuisance of themselves and landing in my tea.
This has led to much manic arm waving and flapping and, whilst that’s less of a big deal when you’re on the phone, it can give completely the wrong signal if you’re on a Zoom call.
Furthermore, if you swat one of the blighters every hour or so it pays to remember that the average female blackfly can lay up to 600 eggs every couple of weeks and, though I left maths behind some time ago, even I know that if you compound that up to the power of 20 or so you’ll get to some very big numbers, very quickly.
Hence a chemical, nuclear or biological solution may be required. Either that or push the plants out of the door and hope they don’t come back. Anyway, on quite another topic, our long-weekend marathon hospitality spending session will be ending soon. Details tomorrow. On to the news:
The Free Email is now written in short form. Full stories are in the Premium Email. Reply to this email if you would like to upgrade.
See Twitter for in-day comment. Let us know if you would like an example of the Premium Email or to comment on the new format.
Prices for the Premium, unchanged for 2yrs, are £295 for one subscription, £495 for multiple, both plus VAT. Reply to this email to order & request invoice.
Or sign up for easy in, easy out monthly option HERE
PUBS & RESTAURANTS:
Trading restrictions dropped.
Concerning the dropping of restrictions tomorrow, UKH says that it’s ‘heartening to hear that we are now moving to trading based on the safety measures that businesses have put in place and we hope that this will ignite consumer confidence in our sector and beyond.’ It adds that ‘the hospitality industry has proved that its venues are safe for staff and consumers and that, when allowed to trade without restrictions, it can be a major driver of economic growth and recovery.’
• See premium. Reply to this email to upgrade.
Lumina Intelligence’s UK Restaurant Market Report 2021/22 shows that the size of chain restaurant menus has reduced by 20% since 2019. Dish counts have been slimmed down to cope with the challenges of staff shortages, supply chain disruption, and, increasingly, rising food prices.
UK Hospitality has said that the ‘Government must act to address the unfair burden of property tax on the hospitality sector.’ It says that in the ‘decade before the pandemic, hospitality business rates rose by more than 58% or £1 billion.’ UKH says ‘a hospitality tax rate is now one of the changes needed that will be essential to aid recovery. The sector overpaid by £2.4 billion relative to its turnover pre-pandemic.’
• See premium. Reply to this email to upgrade.
The BII believes that the hospitality sector has been unfairly overburdened with high tax for many years, it says that Business Rate reform is needed to address the imbalance that leads to pubs overpaying £570m a year.
The Drinks Trust has opened Develop to applicants, an initiative to alleviate long term hardship with a proactive funding and training programme that delivers opportunity and skills to those within and looking to enter the industry.
UK Hospitality Scotland has commented on the removal of the last restrictions north of the border, saying that ‘hospitality businesses will be encouraged by the First Minister’s statement, with the move away from legal measures to a greater reliance on guidance. Ahead of today’s announcement UK Hospitality Scotland called for the Scottish Government to demonstrate trust in the public and businesses. It is heartening that we are moving in that direction.’
Chef, Tom Aikens is to lead a ‘Pedalling for Pubs UK Bike Ride’ to Jordan, Middle East, between 7-15 March 2022.
NEWS FROM THE USA:
Industry-wide stats in the US:
Occasionally, it’s worth looking a little further afield to see what’s happening elsewhere. Stats suggest that the restaurant downturn that began in December with the appearance of the Omicron variant, continued into January. Stats suggest a drop of 0.9% in sales in the month and a drop of 2.9pps vs the growth rate seen in December. Footfall is down sharply, by around 15.6%, whilst spend per head is higher.
Companies reporting in the US:
Subway has reported that sales in its domestic market were ahead of its projections. The company says ‘despite challenges brought on by the pandemic, such as reduced operating hours, 75% of the system, representing more than 16,000 locations, experienced a 7.5% increase in same-store sales in 2021, compared to 2019,” the company said in a press release.’ It adds ‘overall U.S. restaurant same-store sales for the entire system were positive for the last three quarters of the year, progressively getting better and resulting in December sales up 8.7% vs. the same period in 2019.’
Comments from the US on inflation:
Cracker Barrel Old Country Store has said that it will raise menu prices about 6% for the latter half of the fiscal year. It says ‘we are comfortable with the elevated pricing in this current environment and continue to see minimal impact to traffic and mix from our pricing actions.’ The company has said that commodity inflation will peak during Q3 at about 15%. It suggests that hourly wage inflation could be in the 11% to 12% range. Cracker Barrel grew revenues 6.2% above 2019 to $862.3 million during Q2.
Texas Roadhouse has reported Q4 & full year numbers to end-December saying that revenues were up by 40.4% on 2020 and up by 23.5% on 2019 at $896m in Q4. This goes some way to illustrate that the US industry appears to have recovered more rapidly than that in the UK. Texas Roadhouse says LfL sales were up 33.1% and 21.2% compared to 2020 and 2019, respectively.
COMPANY & OTHER NEWS:
Bloomberg reports that Pret A Manger’s pre-boarding sales at London airports increased by more than 15% from a week earlier, as workers left for holidays during school half term. Consequently, sales fell 6% in London’s City and Canary Wharf financial districts.
23.5 Degrees, a Starbucks franchisee, reports revenue of £66.7m and profit before tax of £10.3m for the year ended 31 August 2021. During the year, 12 stores were opened, including 10 drive-thru and two in retail parks, bringing its total to 85.
Caffe Nero yesterday announced ‘robust trading for its half-year (June 2021-November 2021), including strong like for like sales growth. The Company also announced that its sales during the Omicron period (December 2021-January 2022) were resilient at 82% of normal trading (FY19).’ The company says ‘trading in the U.K. since many government restrictions have come off in late January 2022 has moved up to over 90% of the business’ normal pre-Covid trading pattern.’
Caffe Nero reports sales in H1 of ‘£135.7m, an increase of 211% for the same period in 2020, and an EBITDA of £29.4m, which is higher than its pre-Covid level.’ The company benefited from a lower rate of VAT in the 2021 period covered compared with pre-Covid trading. Caffe Nero says ‘during the first-half of FY22 [it] also experienced a notable and encouraging increase in several of its newly established sales channels. Its Delivery business through UberEats generated £3.4m of revenue. Likewise, its Coffee At Home business for the same period achieved sales of £1.3m.
Market Halls is set to launch its 20,000 sq ft location opposite Canary Wharf’s upcoming Crossrail station late next month. Market Halls currently operates a single location outside Victoria station, but its Market Halls Oxford Street will reopen on 10 March. The group’s inaugural food market in Fulham closed permanently earlier this month, due to the pandemic.
Shepherd Neame appoints Jonathon Swaine as Managing Director, Pubs. Prior to the last 3 years as Managing Director, Retail at the Rank Group Plc, he has spent the majority of his career in the pub industry, initially at Bass before joining Fuller, Smith and Turner plc for 14 years. CEO Jonathan Neame says ‘we are delighted that Jonathon is joining Shepherd Neame. He is an operator of considerable experience and is highly respected within the industry.’
LEISURE TRAVEL & HOTELS:
The European Council has indicated that it would like to see a unified approach across the block to travel restrictions.
The Venue Group has raised $50 million in order to expand in the US.
Sykes Holiday Cottages reports that 2022 looks set to be another excellent year for holiday let owners as bookings for staycations continue to surpass pre-pandemic levels. Bookings so far this year are up 22% versus the same point in 2020, with a 158% rise in bookings compared to the same period last year.
New plans set to be approved by the European Council on Tuesday will see all fully-vaccinated British travellers allowed to visit the EU without the need for Covid tests. Children aged six to 18 who have not been fully jabbed will also be allowed to travel into EU countries provided that they have a negative pre-departure PCR test.
Lodging Econometrics’ Europe Hotel Construction Pipeline Trend Report reveals that Europe’s hotel construction pipeline stands at 1,824 projects and 295,152 rooms at the close of Q4. The UK leads the construction pipeline with project and room counts in Q4, at 313 projects/48,770 rooms, followed closely by Germany with 277 projects/48,827 rooms.
FINANCE & MARKETS:
The ONS has reported that the UK government recorded a monthly budget surplus in January, when tax deadlines are set for many, the first such surplus since the start of the coronavirus pandemic. The surplus amounted to £2.9bn last month, smaller than that recorded in January 2020. Borrowings were down by £5.4bn on the same month last year.
Inflation pushed up debt servicing costs as a result of the surge in the retail prices index to which index-linked gilts are linked. National debt is some £2.3tn, or about 94.9% of GDP. Borrowings for the tax year to date are £139bn. This is less than the OBR’s year-to-date forecast of £156bn and it could lead to a full year reduction in estimates of £20bn or so.
The CBI reports that factory output growth picked up in the three months to February, but inflationary pressures also built. The latest monthly CBI Industrial Trends Survey suggested that the balance of businesses who expect price rises in the next three months was a positive 77 per cent in February. This is the highest since 1976. Growth in output volumes accelerated in the quarter to February compared with the same period one month earlier at 26 per cent from 14 per cent.
Sterling a shade weaker at $1.359 and €1.200. Oil lower at $96.81. UK 10yr gilt yield up 6bps at 1.46%. World markets lower yesterday. London set to open down around 7pts as at 7.15am.
RETAIL WITH NICK BUBB:
• See premium. Reply to this email to upgrade.