Langton Capital – 2017-01-16 – More on M&B, Goals, inflation, debt, Sterling & other:
More on M&B, Goals, inflation, debt, Sterling & other:A DAY IN THE LIFE: It’s possible that witch doctory is alive and well and living on the fringes of the stock market. I’m referring to experts who aren’t experts (rather simply opinionated people with a computer model and/or a wide vocabulary) and, particularly, chartists. Because I accept that charts represent human nature on a page but the suggestion that there are ‘long-legged rising doji candles’ or ‘engulfing candles’ driving the market or that the ‘moving average convergence / divergence index’ tells you what to do of a morning I find harder to believe. Indeed, I was told recently that the market’s at an interesting point and could go in either direction and that the ‘fear of missing out trade’ is driving prices. All of which may be partly true but, surely, to suggest that charts are driving markets is taking causality for granted and may be getting the cart before the horse. Anyway, what do I know? Chartists are clearly all retired billionaires who have never made a losing trade. It’s time for the news but if you would like to come off this email list please simply hit the unsubscribe button above. Similarly, if you are getting it forwarded and would like to go on directly or if you would like to recommend it to one of your colleagues, please just hit the subscribe button and/or suggest that your colleague does too. PUB, RESTAURANT & DRINKS PRODUCERS: • See our comments on inflation at – http://tinyurl.com/jevyokq • M&B shares reacted well on Friday to news that current trading was positive & that trading was strong. We hear from JDW on Wednesday and from Marston’s, Restaurant Group & Whitbread next week with Punch & Greene King updating in February. • Pizza in York. £34 for 3 pizzas, £14.50 for 4 OJs. Something wrong there. Should have been half that price. Pizza in London, Franco Manca, was. Clear opening for better, cheaper, more relevant competition. • JD Wetherspoon Thursday & Fri bought back 105k of its own shares for cancellation at c890p per share. • Luke Johnson has suggested in his Sunday Times column that the board of Whitbread is too big and lacking in operational experience. Likening the situation to that of Tesco’s a few years ago, Johnson questions of Whitbread’s board of ten directors: ‘So who really holds the operational management to account? I am confident I could put 25 key questions to the non-executives about the detailed economics and markets with which Whitbread is engaged that they would be unable to answer – because they simply do not possess the hands-on learning and judgment that comes from being in the industry for many years. One of the reasons this makes me despair is that it shows such contempt for the tens of thousands of staff working in the field at Premier Inn, Costa and Whitbread’s pub restaurants.’ • Brewers have begun to increase their prices as the industry faces rising cost pressures, with Molson Coors and AB InBev both pushing through rises. Molson Coors has raised the wholesale selling price on the majority of its draught beers by 2.4%, while AB InBev is bumping its products up by 2.3% on average from 1 February. • More inflation. Own brand tissues 55p to 60p in early-Jan & now 65p. Three packs of tuna 190p, now 200p. Two packs of Lavazza coffee. Was 570p, now 580p. • Burger & Lobster has reported a £7m loss for the year to 3 Jan 2016. Pre-opening costs hit profitability. Head office costs and product costs had also risen. The group’s accountants caution in their report ‘the existence of a material uncertainty that may cast significant doubt of the group’s ability to continue as a going concern’. • Burger & Lobster director George Bukhov told The Caterer ‘a big part of the loss is related to a very fast expansion and a weak performance of our restaurants outside London.’ He adds ‘this was a strategic mistake to open outside London. Also the lobster price has grown significantly in 2015 and 2016 and weak pound didn’t help either.’ Mr Bukhov adds ‘like many other brands we’ve grown too fast and made some mistakes. It’s normal for restaurant business. But the brand is very strong and the group is profitable in 2016. And what is more important – we learned a lesson from mistakes we made. This made us stronger. We believe in a future for Burger & Lobster. We had a great year in our US restaurant and we are building a second one in Manhattan. Also the opening in Malaysia was a great success. We see the future of Burger & Lobster is in the US and Asia.’ • Five Guys, the US burger brand that now operates 60 sites across the UK after arriving in 2013, is trialling a delivery service with Deliveroo for the first time. MCA writes that customers will be able to order food for delivery from Five Guys’ units in Covent Garden, Putney, Kingston, Bristol and Cambridge Leisure Park. • Christie + Co’s Business Outlook report shows that average prices in the restaurant sector rose by 14.1% and the value of pubs grew by 4.4% in 2016. • Four-strong London cocktail group The Adventure Bar has reported record festive trading, with like-for-like sales jumping by more than 10% over the 8-week period. Director, Tom Kidd said: ‘Our hard-working teams delivered a spectacular Christmas to all our guests, with take up of special packages and pre-bookings hitting record levels. It has created an excellent springboard for the new financial year, with healthy growth in EBITDA ahead of expectations. It means we can significantly bring forward our growth plans, with an additional 2 new openings planned for 2017.’ • West Country-based better burger concept Hubbox is poised for further growth across the South West after securing £2.2m from Provenance Investment Capital, per MCA. The investment values Hubbox at c£5m and will fund a roll out targeting two to three new openings per year for the next four to five years. • The Bank of England’s Credit Conditions Survey shows that default rates on unsecured debt grew in the final three months of the year. Lenders reported a rising number of borrowers struggling to repay loans and overdrafts amid growing supply and demand of credit. The total level of unsecured debt has been growing at its fastest pace in 11 years in what the BoE calls a ‘shift’ in consumer habits and credit standards. • Online sales at luxury brand Fortnum & Mason grew by 22% year-on-year in the five weeks to 1 January. • Amazon plans to create more than 100,000 full-time jobs in US fulfilment centres over the next 18 months. LEISURE TRAVEL & HOTELS: • A study of the top ten best value destinations by Post Office Travel Money suggests the Portuguese Algarve will provide the best value for money for the second year running. The 2017 holiday costs barometer is based on the local bill for a basket of eight typical tourist staples, ranging from a meal out for two with wine to a bottle of beer and a cup of coffee. • British Airways members of Unite are planning a 72-hour walkout from 19 January in a row over pay. The union’s national officer Oliver Richardson said: ‘British Airways should be under no illusion about our members’ determination to secure a settlement that addresses their concerns over poverty pay. They work tirelessly to serve and keep passengers safe, while contributing massively to the success of British Airways and the billions of pounds in profits it makes.’ • Luton airport saw an 18.5% year-on-year increase in passengers to 14.5 million in 2016 as part of a run of 33 consecutive months of passenger growth. • Intrawest Resorts Holdings, whose ski properties include Stratton Mountain in Vermont, Mont Tremblant in Quebec and Steamboat in Colorado, is working on a possible sale. • Passengers using Newcastle airport rose by 6% in 2016 to more than 4.8 million, up by 250,000 year-on-year, giving the hub its sixth year of consecutive annual growth. The airport ended 2016 by recording its strongest December in more than ten years, with over 300,000 passengers. It was recently announced as the most punctual small airport in the world in the OAG’s 2016 Punctuality League. OTHER LEISURE: • Goals updates on FY trading, says sales +1.3% to £33.4m with LfL sales +0.6%. • Goals FY update, says ‘demonstrates the significant improvement which has taken place within the business during H2’ • Goals FY update. Says ‘football volume stabilised and ended the year positively, recording a y-o-y increase of c1%.’ H2 was +3.1% • Goals FY update, says ‘with our robust trading driven by the implementation of our strategic plan, a strong balance sheet and solid growth prospects, we look forward to delivering continued progress in 2017, as we move our focus to upgrading our UK clubhouses to the new Clubhouse 2020 format and the opening of our second centre in the US in February 2017, we look forward to the future with growing confidence.’ Chairman Nick Basing reports ‘I am positive that we have turned the corner with this result. The new refocused strategy under strong new executive leadership is working and I hope momentum will build further in 2017’. FINANCE & MARKETS: • MPs have called upon PM Theresa May to say whether or not she wants the UK to remain in the single market when she speaks tomorrow • Weekend leaks would have it that a Hard Brexit is planned whereby the UK leaves the single market & trades independently • Chancellor Philip Hammond has said the UK may be forced to change its “economic model” if it is excluded from the single market • Labour leader Jeremy Corbyn Hammond’s comments were ‘like a recipe for some kind of trade war with Europe’. • Donald Trump has supported the UK’s move to leave the EU. He has called the body ‘a vehicle for Germany’. • FT quotes research quoted by Deutsche Borse as saying that billions of pounds worth of derivative trading will move to Frankfurt. • Premier Li Keqiang has said that China’s economy will face more pressure and problems in 2017 • World markets: UK rises for 14th session on Friday, hits 12th high. Europe up, US up but Asia mostly down in Monday trade • Brent up a little at around $55.65 • Sterling fell below 120c vs US$ in wake of May comments on hard Brexit. Now trading around 120.25c. • Sterling down vs Euro at 113.2c. • UK 10yr gilt yield up sharply to 1.36% (Friday 1.30%) on Sterling fears & concerns re rising interest rates. US 30yr bond yield down 2bps at 2.99%. • Rightmove says UK house prices rose by an annualised 3.2% in the year to January • The world’s 8 richest individuals have as much wealth as the planet’s 3.6bn poorest individuals reports Oxfam TODAY IN A NUTSHELL – TWEET VERSION & YESTERDAY’S LATER COMMENTS: • M&B shares reacted well on Friday to positive trading news. We hear from JDW, MARS, RTN, WTB, PUB & GNK in next few weeks • Luke Johnson suggests WTB could go wrong because its NEDs have no experience or running like businesses • Pizza in York. £34 for 3 pizzas, £14.50 for 4 OJs. Something wrong there. Should have been half that price. Pizza in London, Franco Manca, was • JD Wetherspoon Thursday & Fri bought back 105k of its own shares for cancellation at c890p per share. • Brewers have begun to increase their prices as the industry faces rising cost pressures. Around 2.4% looks to be the mark • More inflation. Own brand tissues 55p to 65p, 3-packs of tuna 190p, now 200p, 2-packs of Lavazza coffee was 570p, now 580p. • Burger & Lobster has reported a £7m loss for the year to 3 Jan 2016. Pre-opening costs hit profitability. • Five Guys, the US burger brand that now operates 60 sites across the UK after arriving in 2013, is trialling a delivery service with Deliveroo • The Bank of England’s Credit Conditions Survey shows that default rates on unsecured debt grew in last 3mths of 2016 • A study of the top ten best value destinations by Post Office Travel Money suggests the Portuguese Algarve provides best value • Goals updates on FY trading, says sales +1.3% to £33.4m with LfL sales +0.6%. • Goals FY update, says ‘demonstrates the significant improvement which has taken place within the business during H2’ • Goals FY update. Says ‘football volume stabilised and ended the year positively, recording a y-o-y increase of c1%.’ H2 was +3.1% • Brexit speech due tomorrow, Sterling down in advance of expected call for Hard Brexit. Donald Trump seems supportive • The world’s 8 richest individuals have as much wealth as the planet’s 3.6bn poorest individuals reports Oxfam • Later tweets: M&B numbers good, Xmas particularly. Will have been boosted by wet-led London but no disaggregation at this stage • US restaurants seeing 6% plus drop in visitor numbers. Overcapacity? Any read across to UK? See http://tinyurl.com/zunx7xp • Food price inflation is a thing again. Even the UN says prices are rising again. See earlier comments http://tinyurl.com/hdvcxl9 • Daily email free on website. Original & best. Now incl. tweets. News, views & analysis. Sign up & no strings. www.langtoncapital.co.uk RETAIL NEWS WITH NICK BUBB:
• Saturday Press (1): The main feature in the Saturday papers should have been on the late news on Friday afternoon that Sports Direct has decided after all to appoint RPC, its own legal adviser, to conduct the much-promised “independent” review of corporate governance…and this was picked up by the FT (and the Times and Daily Mail), but the Daily Telegraph focused instead, to a ludicrous extent, on the bumper Christmas sales reported by Fortnum & Mason’s…The Guardian had a detailed overview of the Christmas ”winners and losers” (Next was dubbed the main loser), including the 15% and 10% growth reported by Aldi and Lidl respectively, although there was no mention of the calendar distortions in the M&S and John Lewis/Waitrose figures…A similar uncritical tone was struck by the FT weekly overview about the “surge” in High Street sales at Christmas and the column by the veteran FT
• Saturday Press (2): Tempus column in the Times had a detailed look at whether Retail shares are a good bet for investors and, noting the very high ratings of the booming Online players, concluded that they are generally best ignored. Separately, the Money section of the Times featured Marks & Spencer as its “Share of the Week” and concluded that the shares are a Buy. The Daily Mail flagged that Dave Potts of Morrisons was its “Hero of the Week” and it had separately had a detailed look at whether it’s worth punting in supermarket shares and concluded that, with so many uncertainties in a sector undergoing major change, investors shouldn’t bet on the supermarkets just yet. The Wall Street market report in the FT featured the disappointing December sales reported by GameStop in the US on Friday and its UK market report noted the downgrades in Dunelm after Thursday’s disappointing • Sunday Press (1): There were no great new revelations in the Sunday papers, although the Sunday Express flagged that Microsoft is looking to open Apple-like concept stores in London and the UK and the Sunday Times highlighted that Cath Kidston is to raise its prices by 6% in August after its sterling hedge runs out. The Sunday Times also noted that mighty Standard Life has criticised the embattled Keith Hellawell again after his involvement in the Sports Direct corporate governance review U-turn, whilst the Observer’s Review of the Week flagged that it had been “a good week” for JD Sports. Burberry was in focus ahead of next week’s trading update, with the Observer mocking Christopher Bailey’s “long goodbye” as CEO, whilst the Sunday Times and the Sunday Telegraph both highlighted that Chinese shoppers have helped Burberry to return to sales growth. • Sunday Press (2): The Sunday Telegraph had a full page feature on last week’s bundle of Christmas trading updates and it took a cautious tone, with the headline “High Street’s festive sparkle gives way to darker days”, highlighting the rise in Business Rates in April faced by many retailers and noting the gloomy view of Ted Baker’s Ray Kelvin about the state of the fashion industry. The Mail on Sunday highlighted that, despite a pick-up at Christmas, fashion sales fell by 2% in 2016 according to Kantar. The Sunday Times had a snippet about the boost to Marks & Spencer at Christmas from Per Una cashmere sales, but its main feature was about the supermarkets, headlined “Stuck at the Checkout” and noting that, although the “Big 4” fought back against the discounters at Christmas, Aldi and LIdl are likely to widen the pricing gap again in 2017. • BDO High Street Sales Tracker: We flagged last Wednesday that John Lewis kicked off 2017 in fair shape, with Fashion sales boosted by Clearance activity and the cold weather, and Friday’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains flagged much the same thing, saying that w/e Jan 8th saw Fashion Store LFL sales up by 2.6%, despite a tough comp, thanks to discounting. Total Store LFL sales were up by 4.0% and overall Online sales were up by 20%, on top of strong 26% growth last year… • News Flow This Week: Everything pales into insignificance after “Super Thursday” last week, but there’s still plenty going on this week and today has brought an upbeat trading statement from the privately-owned Shop Direct group. Tomorrow brings the Greggs Q4 update and the Hotel Chocolat trading update. Wednesday brings the Burberry Q3 and the Game Digital AGM. On Thursday we get the Halfords Q3, the N Brown Q3, the Pets At Home Q3 and, in the Retail Property world, the British Land Q3. Then Friday brings the Bonmarche update and the ONS Retail Sales for December…and, over in the US, the inauguration of President Trump (shudder…). |
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