Capacity, closures, buybacks or expansion, cash & other:

A DAY IN THE LIFE:

When undertaking an action, there are often unforeseen consequences.

I mean the Brexit protest vote last year hit the spot in that it rattled the Liberal Establishment but, on the other hand, it seems to be opening the door to a Hard Left government, Britain’s first in, well, ever. And, whilst there are other, serious examples of chronic miscalculations, the one that’s exercising us chez Brumby at the moment is that the ‘sponsor a sparrow-hawk’ programme has led to the feisty blighters eating all of our blue tits.

In fact, the bird feeders have become killing zones as, more than once, we’ve seen a blur of brown feathers, claws and beak swoop down and shred a blue tit that was harmlessly nibbling on a bit of suet and now they’ve all gone, the suet is gradually being worn away by the rain and the sparrow hawks themselves are going hungry.

So much for planning. If the sparrow hawks ate squirrels, rats and rabbits (and if Brexit got us back on the path to being a swashbuckling, no-rules, go-getting economy) then I could understand the principles.

Anyway, on to the news but, by the way, the Mighty Hull City’s plod back towards the Premiership seems broadly on track as we managed to beat Burton (who, they?) 4-1 on Saturday at the KC.

60 SECONDS. ACTIONS SPEAK LOUDER THAN WORDS…:

Demand softer & economy is slowing; why so little comment?

• Data shows construction, industrial output & manufacturing output fell in Q2

• Car production is lower year to date & GDP targets may be undershot

• Big ticket spending (see e/ms) may bear the brunt

• House transactions, furniture sales & car sales are slowing but holidays look OK

• In light of the above, what comment should we expect from leisure retailers?

No reward likely for bearer of cautionary news:

• Unsurprising, perhaps, that there is no rush to be the first to speak.

• Some operators, Richoux, Tasty (twice) & others have had no choice

• But elsewhere, there are no prizes for caution. But actions speak louder than words

Unit closures, unit sales, share buybacks rather than expansion seem the order of the day:

• Tasty, Richoux, Comptoir, Restaurant Group & others have warned on trading

• Many operators are selling (or simply shutting) units. JDW has cut c10% of its estate

• The Diner, Byron, Restaurant Group, Wildwood, Prezzo, ASK, Strada & others have units for sale. Good luck with that.

• JDW has spent c£42m buying back shares since 4 July. It has cut around 10% of its units

• To succeed one must be relevant, authentic, well-financed & not overrented.

• And it helps to be lucky. Give it a try someday.

PUB, RESTAURANT & DRINK PRODUCERS:

• US LfL restaurant sales fell by 2.8% in July per TDn2K. Traffic (footfall) was down by 4.7% in the month with higher prices taking up some of the slack. TDn2K reports ‘July proved to be a tough month for chain restaurants.’ It continues ‘based on recent trends, we were cautiously optimistic that the tide was turning a bit, especially since brands were comparing against weaker comps in 2016.’ On a 2yr basis, LfL sales in July were some 4.2% below levels seen in July 2015.

• Overbuilding issues. Casual dining in the US & UK. In US, TDn2K reports ‘while much of fast casual’s headwinds are a result of rapid segment growth, the steady performance decline in lower PPA segments will be important to follow. Both segments outperformed the industry in 2015 and 2016, but trail through July of this year.’

• Gaucho is to return to Scotland with a new site at the St Andrew’s Square development in Edinburgh, 15 years after it closed its site in Glasgow, writes MCA. Gaucho, which is backed by Equistone and chaired by Luke Johnson, will be competing with nearby competitors including Drake & Morgan, Dishoom, Vapiano, and The Ivy Collection.

• The Unite union has urged the government to stop dragging its feet over the tipping consultation, which has been pushed back a number of times. Dave Turnbull, Unite regional officer, commented: ‘The Government needs to stop dragging its feet and publish its report, kicking this consultation into the long grass now is simply inexcusable. Because while it sits on its hands, workers and diners are no closer to getting the clarity they deserve and unscrupulous bosses continue to cream off staff tips.’

• Hotel Chocolat has secured its first store in Ireland — a 1,100 sq ft site in Dundrum, Dublin — and is also planning to take its store concept into retail parks across the UK.

• More than a tenth of 25-35 year olds avoid cash and instead rely solely on cards and digital payments for their day-to-day spending, according to figures from UK Finance. Nearly three million people rarely use cash anymore.

• Violent unrest led by Gorgha separatists has brought the picking of tea in Darjeeling to a virtual standstill (The Times).

• TGI Friday’s has suffered a sales dip as a result of new entrants flooding the casual dining market and taking share. Like-for-likes fell 2.7% in 2016 compared to 1.1% of growth in 2015, while the the number of food-led venues has increased by 13.5% over the past three years. New openings continue to fuel much of the market’s sales growth.

• Moody’s has reported that Constellation Brands’ purchase of the Funky Buddha Brewery for an undisclosed amount is credit positive. It says this is ‘because it adds to the company’s growing premium craft portfolio without materially increasing leverage.’ This presumably without knowing the purchase price? Moody’s says ‘the addition of another premium craft brand will strengthen Constellation’s presence in the high-end beer segment and is consistent with the company’s strategy of making bolt-on acquisitions in the premium alcohol space.’

• The Chartered Institute of Personnel and Development has suggested that pay will rise by only 1% over the next 12mths.

• British retailers were deterred from the high street by heavy storms and rain in July as figures from the BRC show a 1.1% fall in shopper footfall. The high street was hit the hardest, with a 2.1% drop in footfall, while shopping centres suffered a 1.3% slip in footfall, the fourth consecutive month of declines. Helen Dickinson, chief executive of the BRC, commented that the declining footfall ‘translated into weak sales performance for stores in non-food particularly, which fell further into negative territory as consumers reined back spending on non-essential items.’

• Wilko will be the next retailer to axe jobs amid rising costs and a tough trading environment in order to ensure ‘all retail operations are fit for the future’.

HOLIDAYS, LEISURE TRAVEL & HOTEL:

• Civil Aviation Authority (CAA) data show that passengers at Gatwick have suffered the longest average delays during summer getaways, while easyJet passengers faced the longest wait times among the 10 busiest airlines. The CAA collected the figures over the last two summers.

• Spanish travel agents have warned British tourists could be attacked if the anti-tourism protests sweeping the country continue. Anti-capitalist activists have staged a number of protests and a group known as Arran recently carried out an attack on a tourist coach full of Brits visiting Barcelona’s Camp Nou football stadium.

• Rafael Gallego, chair of the Spanish Association of Travel Agents, called the protesters ‘fascists’ and warned their actions could get worse. ‘This tourismphobia has been worrying us since last summer,’ he said. ‘In 2016 we noted graffiti and there was an aggression with a glass against tourists who were on an excursion, so we alerted that the situation could radicalise, which is what we have seen. Now there are protests in the entrances of hotels, restaurants and in ports. The danger is that tomorrow there could be an incident of real violence. They call themselves Left-wing but they are more fascist than the far-Right. We are very worried that they might cause a serious incident with our visitors at any day.’

• Heathrow has recorded its busiest ever month in history in July, welcoming an average of 243,000 people every day throughout the month for a total of 7.53 million passengers. Middle Eastern destinations were particularly popular for travellers as fuller aircraft led to a 7% increase in passengers to the region, while more flights to Brazil pushed up passenger numbers to Latin America by 3%.

• European airports saw passenger numbers jump by 9% year-on-year in the first half of 2017, although associations have warned of a ‘looming capacity crunch’, while ‘Brexit remains the number one worry’. Cyprus, Malta, Portugal, Croatia, Slovenia, Poland, the Czech Republic and Hungary all saw double-digit growth. Airports group ACI-Europe suggested: ‘If no progress is achieved in coming months, we are likely to see negative impacts on aviation next year.’

• Hilton is planning on expanding the size of its UK estate by almost 25% and aims to open 30 hotels over the next two years in a bid to cement the UK division’s standing as Hilton’s second largest market (behind the US). Simon Vincent, the president of the Europe, Middle East and Africa division at Hilton, confirmed its 138-strong estate in the UK had performed exceptionally well after being ‘buoyed by the devaluation of sterling’. The new openings will include sites in London, as well as regional cities like York and Leeds, with a particular focus on its Hampton and Hilton Garden Inn brands.

• STR monthly data for the US hotel industry show flat to negative occupancy growth in July 2017, while ADR growth ranged from flat to 2% and revenue per available room growth was between negative 1% and 1%.

• A BBC Panorama investigation has found that arrests of passengers suspected of being drunk at UK airports and on flights have increased by 50% in a year. A total of 387 people were arrested between February 2016 and February 2017 – up from 255 the previous year.

FINANCE & MARKETS:

• Nationwide reports a sharp fall in mortgage lending, mainly on the back of fewer buy-to-let loans. It says higher lending hurdles ‘together with a softening of lending due to Stamp Duty and tax changes, led to a decline in buy-to-let.’

• US inflation in July rose to 0.1% from 0.0% in June

• Oil up to $52.01

• Sterling up a shade vs dollar at $1.3009

• Pound down vs Euro at €1.1005

• UK 10yr gilt down 1bp at 1.07%

• World markets: UK & Europe down on Friday but US markets higher. Far East mostly up in Monday trade

YESTERDAY’S LATER TWEETS:

• Later tweets: Domino’s Pizza takes 75% stake in JV to buy franchisee businesses. Too good to miss or does this imply saturation in terms of unit numbers?

• JDW has announced that it yesterday bought back another 200k shares for cancellation at 1027p per share. Spent c£42m in 5wks.

• BrewDog raises $7m of intended $50m in punk offer in US. Spinning it a success. Says they’ve torn up the financial rule book (again)

• Looking for the good news in lower industrial production, reduced manufacturing output & bigger trade deficit. Help me out someone??

• ONS reports car production down 6.7% from May to June, biggest fall in 4yrs. Construction output down in Q2 by 1.3%

• GDP targets under threat. ONS used 1.8% increase in construction output to build its case. June figure was minus 0.1%

• BDO sales tracker has online +31.5% in week to 6 Aug after +32% last year. Plenty of warehouse jobs out there guys

• Big ticket being squeezed. Furniture on a downer, car sales also. Updates from Marshalls & Lookers next week

RETAIL NEWS WITH NICK BUBB:

• Saturday Press: The main story in the stockmarket reports in the Saturday papers was the savage downgrade of Dixons Carphone on Friday by Exane and, given the 7% hit to the share price, this was the lead item in the FT, the Daily Mail, the Telegraph and the Times market reports, with the FT highlighting Exane’s concerns about the unhelpful trends in the UK mobile phone market and the boost to last year’s profits from undisclosed one-off items. The other key Retail news was that the struggling discount store Wilko has said that up to 4,000 jobs could be at risk from its decision to cull store supervisory roles: this was a big story for the Guardian and was also picked up by the FT, the Telegraph and the Times. The main Business story in the Daily Mail was that Amazon paid just £15m in profit taxes in Europe last year, despite racking up sales of nearly £20bn. The FT noted that the
struggling US department store JC Penney reported that heavy discounting had pushed it into a bigger than expected loss in Q2, prompting Lex column to thunder “expect stock prices to keep falling as fast as prices on the clothes racks”. Finally, the FT had a News feature on the difficulties of filling empty BHS stores (“High Street turns creative to plug gap left by BHS”), highlighting that the former BHS site on Princes Street in Edinburgh briefly became a discount outlet, Scottish Home Stores, and is now being turned into a hotel.

• Sunday Press: Asda was in focus in the Sunday papers, with the Sunday Telegraph flagging on the front page of its Business section that it would report its first LFL sales growth for 3 years in Thursday’s Q2 results, albeit the Observer highlighted that the Asda business is still concentrating on cost-cutting after last year’s dismal trading. The Sunday Telegraph had a big feature on the troubled New Look fashion chain, noting that, after posting poor LFL sales for five quarters in a row, the business “is in urgent need of a makeover”. Perhaps the most intriguing story in the Sunday papers, however, was the Sunday Times snippet that the Online group The Hut has been valued at as much as £2.5bn, after the latest investment of £125m by the Old Mutual investment group (who were a famously early backer of Boohoo.com). Talking of Boohoo, the Observer had a double-page spread on the
uncertain state of the UK housing market, contrasting “booming Burnley” (the home of Boohoo’s distribution warehouse) with “stagnant Kensington”. The Observer also had a preview of the upcoming Kingfisher interims and the update on its turnaround strategy (noting that “repairs often end up taking longer than you expect”) and its Business Leader column looked at the problems of the Wilko discount chain, thundering “Why is Wilko pinning its woe on the national living wage?”. The Sunday Telegraph also highlighted that profits fell at the Crew Clothing chain last year, because of the cost of its new HQ in Wandsworth, whilst the main Business story in the Mail on Sunday was that Philip Green’s struggling fashion empire Arcadia is being sued by the liquidator of the BHS business, for unexplained reasons. Finally, the Sunday Times Business section ran a front-page photo of the portly-looking
Philip Green on his super-yacht on his summer tour of the Med, to illustrate a story in the Prufrock gossip column about the childish antics of his family and friends in an upmarket bar in Mykonos…

• Today’s Press and News: The Times, the Telegraph and the Daily Mail follow up on the Mail on Sunday that Philip Green’s struggling Arcadia group is being sued by the liquidator of the BHS business, eg “BHS scandal returns to haunt Philip Green after liquidator lodges Arcadia lawsuit” (the Times). The other main focus in today’s papers is on the latest weak BRC-Springboard footfall survey, eg “Shoppers shun high street amid wet and stormy weather” (shopper footfall dipped by 1.1% in July and the High Street was hit the hardest, with a 2.1% drop in footfall), whilst City AM goes with “London shoppers rein in spending as footfall lags national average”.

• News Flow This Week: The main focus in Food Retailing this week will be on what the beleaguered Asda has to say for itself on Thursday afternoon, on the back of the Q2 update from Wal-Mart. In General Retailing, the recent focus on “big ticket” retailers will continue, via the interims from two of the Motor retailers, Marshalls and Lookers, tomorrow and Wednesday respectively, followed by the Kingfisher Q2 on Thursday. And the embattled ONS will put its spin on the Retail Sales figures for July on Thursday morning.