Langton Captial – 2017-04-12 – March Tracker, Comptoir, Tesco, WH Smith & other:
March Tracker, Comptoir, Tesco, WH Smith & other:
A DAY IN THE LIFE:
With the out-of-office replies coming in thick & fast, it’s beginning to feel as though there might be something of a business void out there.
An echo-chamber where the offices are empty and the beer gardens are full and, you might ask, what’s wrong with that?
Anyway, it’s a short week so we’ll get into the mood, keep this brief. We’re still around tomorrow but here’s a chance to say Happy Easter to all our readers. Don’t be too embarrassed to send us chocolate, beer or money. Or expensive man-trinkets. No chocolate-beer. And definitely no cards or flowers. On to the news:
MARCH 2017 TRACKER
• March Tracker. UK poor but London good. Pubs (helped by weather) performed more strongly than restaurants.
• Coffer Peach March Tracker suggests ‘late Easter dampens March sales for restaurant and pub operators’
• March tracker shows LfL sales down 0.5% nationally but up 2.9% in London. Suggests rest of UK down c1.7%
• Tracker reports restaurants performed poorly with LfL sales down 1.4% in March. Managed pubs were flat
• CGA Peach’s Peter Martin comments ‘Easter can usually be relied on to provide a significant boost to the eating and drinking out market, but with it falling in April this year, a month later than last time, it has skewed March trading figures. But with only a 0.5% decrease overall, operators will be hoping for an extra uplift when April numbers appear.’
• CGA continues ‘with or without Easter, London saw strong trading during the month, with a 2.9% like-for-like increase across the market, driven in particular by robust sales in pubs and bars. The capital showed no immediate or obvious reaction to the Westminster terror attack either. However, outside the M25 like-for-likes dropped 1.7% in March.’
• CGA comments ‘with growing cost pressures on the sector from business rates, food price inflation and wage increases, the fact that consumer spending on out-of-home food and drink appears at least to be holding up will be some relief for operators.’
• CGA reports yearly growth now +0.8% across the UK. Significantly less than half the rate of inflation (at 2.3%). Particular cost pressures (some commodities, NLW, NMW and business rates) mean that margins across the UK will be under material downward pressure.
• Davis Coffer Lyons comments ‘the strength of the London market shows that the capital is much more resistant to terror attacks, in commercial terms, than in previous years. Consumer spending in the UK remains firm, with London benefitting most from the weaker exchange rate which is under-pinning overseas visitor and staycation spending. The slight dip in sales at the national level should be recovered in April with the benefit of the late Easter.’
PUB, RESTAURANT & DRINK PRODUCERS:
• Comptoir Group reports H1 numbers, says revenue +21% at £21.5m with adjusted EBITDA +7% at £2.7m.
• Comptoir warns on current trading, cuts opening schedule.
• Comptoir H1 PBT down by 4% at £1.6m with a reported loss before tax of £1.0m. Earnings per share (adjusted) of 2.9p vs 3.0p last year.
• Comptoir opens 6 restaurants in H1 to take total to 22 as at end-Dec. Chairman Richard Kleiner reports ‘I am pleased to present the Group’s results for the year ended 31 December 2016, being our first set of full-year results since successfully listing on AIM. I am also pleased to report considerable progress with our strategy to grow our operations and extend the presence of our brands to new locations both in and outside of London.’
• Comptoir re outlook comments ‘during the first quarter of 2017 we have experienced the UK consumer being cautious.’
• Comptoir reports ‘trading in January and February, traditionally the Company’s quietest months, was below expectations, however, we saw improved trading in March. The Group expects further positive trading in April (which includes Easter) and into the summer months.’ The group adds ‘the Board has made the decision to reduce its opening schedule for 2018 to 4 restaurants in 2018 (4 in 2017), which will impact the financial performance in 2018. The Board will increase the numbers of openings ahead of this revised 2018 target if suitably attractive locations become available and dependent on market conditions.’
• Mitchells & Butlers has introduced a new American-inspired concept called Lunch & Supper Counter at 11 of its sites, per MCA. The new format focuses on quick service, a simple food menu, craft beer and milkshakes.
• Heineken is investing a further £20m in its Star Pubs & Bars estate this year, taking its total investment up to £100m over the last five years.
• Ei Commercial Properties, the commercial property arm of Ei Group, has signed an agreement with fast-growing London craft brewer Hammerton Brewery. Richard Broadribb, Commercial Property Director at Ei Commercial Properties, said: ‘We are delighted to have signed this commercial free-of-tie agreement with Hammerton Brewery. They have exciting plans for the site and we are very pleased to be able to support a thriving and popular local business.
• Group says ‘we are continuing to build a high-quality commercial property portfolio, the vast majority of which trade as pubs on a free-of-tie basis. Our aim is to maximise the value of Ei Group assets using our commercial property expertise and, through our flexible agreements, look forward to partnering with a further number of exciting operators in the future.’
• The UK is leading the European market in online booze sales, with more than three time as many consumers buying online than the global average, according to a report from global e-commerce analytics Profitero. The study of 30,000 respondents with online access in 63 countries, in conjunction with Nielsen, showed that only China (27%) and Japan (22%) had higher proportions of consumers who had bought alcohol online than the UK (21%).
• ALMR adds members, says it ‘has strengthened its status as the voice for the UK eating-out and drinking-out market.’ It says ‘the latest membership additions mean that ALMR now represents well over 90% of all casual dining brands, managed pubs as well as leading nightclubs and bar operators.’ Companies that have recently signed up include Busaba Eathai, Leon, Mighty Local Pubs, New World Trading Company, Pizza Express, Wagamama & Wahaca.’
• Pret A Manger and Paul are introducing discounts for customers who bring in reusable coffee cups.
• Tesco reports full year ‘strong food performance drives sales growth’. Group says ‘profit recovery continues – ahead of expectations’
• TSCO reports sales +43% (+1.1% at constant exchange rates) with operating profit +29.9% (+24.9% underlying)
• TSCO reports EPS of 7.9p (2015/16: 5.6p) with net debt down 27% at £3.7bn. Group has seen ‘positive volume growth in both UK & ROI and International.’ CEO Dave Lewis reports ‘today, our prices are lower, our range is simpler and our service and availability have never been better.’ He says ‘we have increased profits, generated more cash and significantly reduced debt.’ Mr Lewis continues ‘we are ahead of where we expected to be at this stage, having made good progress on all six of the strategic drivers we shared in October.’ He concludes ‘we are confident that we can build on this strong performance in the year ahead, making further progress towards our medium-term ambitions.’
• Re Booker, TSCO reports merger ‘will bring together two complementary businesses, driving additional value for shareholders by realising substantial synergies and enabling us to access the faster growing ‘out of home’ food market.’
• WH Smith H1 numbers, says has had a ‘good first half across the Group with EPS up 7% and interim dividend up 9%’
• WH Smith CEO Stephen Clarke reports ‘in Travel, we continue to see strong sales growth, with like-for-likes up 5%, driven by continued investment in our UK and international businesses and growth in passenger numbers. As a result, profit in Travel was up 11% in the half.’
• WHS reports ‘in our growing international business, we have now won 255 stores including 10 stores in Singapore following a significant tender win in Changi Airport – one of the world’s largest international airports and a key hub in Asia.’ Re High Street, the company reports ‘profit was in line with expectations, matching a very strong performance from last year. Stationery performed particularly well over the Christmas period driven by strong sales from our new seasonal product ranges and Books benefitted from good sales of spoof humour titles.’
• Re the future, WHS reports ‘looking ahead, 2017 is a significant year for us as we celebrate 225 years since the business was founded. And, while there is some uncertainty in the broader economic environment, we will continue to focus on profitable growth, cash generation and investing in the business which positions us well in the current year and into the future.’
HOLIDAYS, LEISURE TRAVEL & HOTEL
• When asked to identify the top three priorities for the tourism deal, UKinbound members cited a flexible and cost-effective visa and immigration system; government incentives and funding to develop new and innovative tourism product; and jobs and skills. Figures from the trade body’s latest ‘business barometer’ survey of members show that more than three quarters (78%) agreed that there should be a ‘sector deal’ for tourism.
• HotStats reports Heathrow Airport hotels recording worsening trade. It says ‘profit per room at nearby hotels fell by 4.3% as a result of falling RevPAR and rising costs.’ HotStats says ‘Heathrow Airport accommodated a record 5.27 million passengers in February. However, a 2.0 percentage point increase in achieved average room rate was not sufficient to offset a 1.7 percentage point decline in room occupancy, and RevPAR at hotels at Heathrow Airport fell by 0.2%.’
• Viral videos of a man getting knocked unconscious as he is dragged away from a United Airlines flight has brought the industry practice of over-booking into question. As many as 50,000 passengers a year are being bumped off flights in the UK as airlines overbook to maximise profits. Experts said ‘denied boarding’ is becoming increasingly common because of competition among airlines, which has led carriers to sell too many tickets to avoid flying with empty seats.
• December saw the first signs of a recovery in overseas tourist numbers to Paris after being plagued by terrorist attacks in 2015. Official figures show a 19.5% increase in hotel stays in Paris yoy and a 28% increase in foreign guests. A stronger January saw a 28.7% increase in overseas hotel visitors.
• Egypt has declared a state of emergency after the bombing of two Coptic churches over the weekend. Now a three-month period with restrictions on freedom of movement and gatherings will be enforced. 44 people were killed in the bombings with IS claiming responsibility.
• Continued double-digit growth at Manchester airport has seen it process 26.2m passengers over the last 12 months, up 2.7m passengers yoy. The Manchester Airport Group said the figures show it is the second fastest growing airport in Europe, the fastest being Moscow Sheremetyevo.
• Gatwick is preparing for its busiest Easter ever with 2.8m passengers forecast over the school holiday period.
• A number of Hyatt’s US hotels will introduce Netflix and Youtube in-room streaming services, through a partnership with content provider Sonifi.
FINANCE & MARKETS:
• UK CPI held steady at 2.3% in the year to March. This doesn’t mean that prices were steady, just that the rate at which they are increasing didn’t budge.
• March inflation stats suggest rising prices for food and clothing were offset by lower air fares. CPI 2.3%. Some observers expect inflation to pick up this month as Easter (with its accompanying peak pricing) falls into April in 2017.
• Brent up at $56.39
• Sterling higher at $1.2482
• Sterling also up vs Euro at €1.1769
• UK 10yr gilt yield down again to 1.06% (was 1.08% yesterday)
• World markets: UK higher yesterday but Europe & US down. Far East mostly lower in Wednesday trade
YESTERDAY’S LATER TWEETS:
• Later tweets: UK CPI sticks at 2.3% in March. Measure excluding food & fuel fell to 1.8% from 2.0%. Both numbers in line with expectations
• BRC shows weakest shop numbers in 10yrs in quarter to end-March. Shift of Easter into Q2 this year won’t have helped
• BRC shows positive numbers for food sales but negative for non-food. If all these shops didn’t exist today, would you bother to build them?
• Online non-food sales +6.6% despite Easter falling into April this year. High St numbers not so good.
• CGA makes clear that it’s inflation (more politely, trading up) that’s driving drink value numbers in pubs. Drink volumes are down
• Eurozone confidence at 10yr high. Apparently not too phased, at this stage, about losing 2nd largest net contributor to EU coffers
RETAIL NEWS WITH NICK BUBB:
• Overall View: Well, people keep thinking that JD Sports can’t go on beating expectations and that the “athleisure” craze must peter out, but yesterday’s finals brought another set of upgrades and, incredibly, their market cap of£4.3bn is now bigger than Sports Direct, SuperGroup and Ted Baker combined…
• NB As a reminder, “The Daily Retailer” is being produced this week from the ski slopes of the Rocky Mountains of Colorado (where we are 7 hours behind BST).
• Sector trends/share prices: The All-Share index was up by 0.2% yesterday, but the Food Retail sector was up by 0.7%, ahead of today’s Tesco finals (TSCO +0.5%, SBRY +0.7%, MRW +0.6%, OCDO -0.9%, BOK +0.8%, WINE +2.9%). The General Retail sector was also up by 0.7% overall (JD +8.5%, CPR +1.6%, AO +1.4%, DEB +1.9%, HWDN +1.5%, CARD -1.4%, ASC -1.5%, BWNG -1.6%). First thing today Tesco, WH Smith and Dunelm will be in focus on the Retail beat.
• JD Sports: Back on Jan 12th, little more than 2 weeks before the year-end, JD Sports flagged that, after another very successful Christmas trading period, full-year PBT before exceptional items would “exceed current consensus market expectations of £200m by up to 15%”. But JD had kept something up their sleeve and yesterday’s finals came in at £245m, up by no less than 56%. As usual, growth was driven by the core Sports Fashion division, where operating profits jumped by 50% on the back of c10% LFL sales growth, despite European expansion costs. The small Outdoor Sports Division (less than 10% of total group sales) is still not exactly firing on all cylinders, but at least it limped into a small overall profit at last. As far as the outlook is concerned, JD repeated their view that “it would be unreasonable to expect like for like sales growth to be maintained at c10% for a further
• John Lewis Partnership Sales Watch: We flagged a week ago that trading would probably look better for JLP, after a tough March, as the Easter calendar shift started to unwind. And Waitrose also got a boost from the warm weather last week (Week 10 of the new-year), as in w/e April 8th Waitrose sales were up by 7.6% gross (up c5.5% “LFL”). So over the last 10 weeks combined, Waitrose is now running 0.4% up gross (c1.5% down LFL). Over at John Lewis, things were also boosted a bit by the warm weather, with total sales up by 3.5% gross (c1.5% up “LFL”) in w/e April 8th, thanks to a 7.5% jump in Fashion sales. John Lewis is now running up 0.2% gross (c1.5% down LFL) on a cumulative basis over the last 10 weeks, but things will again look better this week.
• Today’s Press and News: The main focus is on the final results from JD Sports, with lots of headlines about the growth of “athleisure”, and the Telegraph Business editorial flags that “JD Sports leaves Sports Direct in the shade”, although Lombard column in the FT notes that “Athleisure will endure…but that doesn’t mean JD Sports won’t make fashion faux pas”. We can’t see much coverage of the news that Hobbycraft has poached the Majestic Wine Retail MD John Colley to take the reins from its CEO Catriona Marshall or the update from N Brown that its exceptional costs for FY17 will be much higher than previously indicated.
• News Flow Today: This morning brings the Tesco finals, the WH Smith interims and the Dunelm Q3 update.