Revolution, Hollywood Bowl, Monarch, big-ticket & other:

A DAY IN THE LIFE:

Bit busy today – and the England match put me into a deep sleep so hard to wake up. Managed to see the goal, though. On to the news:

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DELTIC – REVOLUTION – STONEGATE:

o The board of Revolution Bars has responded to Deltic’s merger proposal yesterday saying that it will respond more fully in due course. Yesterday it said ‘shareholders are advised that there is no certainty that the merger proposal would be likely to lead to a transaction that could be announced and completed or that Deltic will make an offer for the Company.’

o Agreed bidder Stonegate comments that it ‘has made a fully financed offer for the issued and to be issued share capital of Revolution at a price of 203 pence per share in cash.’ It reminds investors that ‘the Court Meeting and General Meeting in relation to the Cash Offer will take place on 17 October 2017 and the Board of Stonegate looks forward to completion of the transaction and to welcoming new colleagues at Revolution to the enlarged Stonegate group.’ If the process in undisturbed ‘Stonegate expects the Scheme to become effective on 23 October 2017 and notes that the Cash Offer has no conditionality aside from the Revolution shareholder vote and the sanction of the Court.’

o Deltic maintains that Revolution is worth materially more than the Stonegate bid suggests & it is willing, unlike Stonegate, to share that upside with shareholders.

o Revolution shareholders perhaps a little unwilling to take paper in a vehicle run by management with whom they are unfamiliar. Cash offer from Stonegate does allow a clean exit.

o Deltic yesterday evening clarified its statement saying that a prospectus would now be necessary should it merge with Revolution. It says ‘the Merger Proposal would require Revolution to issue ordinary shares equivalent to more than 20% of the number of its ordinary shares already admitted to trading on the main market for listed securities of the London Stock Exchange.’ It says ‘consequently, the anticipated timetable to complete a merger would be approximately a month longer than the two to three months stated in the Merger Proposal Announcement’. It adds ‘there would be some incremental cost associated with producing a prospectus, over and above that which would typically be required to produce a class 1 circular.’

o Stonegate chairman Ian Payne comments ‘the Deltic Proposal does not offer any cash to Revolution shareholders and is highly conditional and uncertain as to deliverability and timing. Furthermore, the Deltic Proposal also appears to include the repayment of a £22.3m loan to Deltic shareholders to be funded by leveraging the Revolution balance sheet. At a time when the sector is facing headwinds from cost inflation, labour costs, rate rises and consumer uncertainty, we believe that Revolution shareholders will prefer the certainty of Stonegate’s cash offer.’

PUB, RESTAURANT & DRINK PRODUCERS:

o Jamie’s Italian reports that CFO Tara O’Neill ceased to be a director of the company on 1 October

o Constellation Brands has reported Q2 numbers saying EPS has risen by 40% to $2.37 per share. The group has increased full year guidance to between $7.90 and $8.05 per share. The group claims that ‘Constellation’s Beer business drove more than 60% of high-end category growth and claimed 3 of the top 10 share gainer spots in the U.S. beer market’.

o NRN comments that overcapacity in the US casual dining market is one of the main reasons why footfall is falling. The same may apply in the UK, see Langton note referred to above. NRN says ‘at the end of the first quarter, there were 620,208 restaurants in the U.S., according to data from the U.S. Bureau of Labor Statistics. That’s up 13,904 locations over the past year — or 2.3 percent.’

o NRN says the US restaurant industry ‘has exploded since the end of the recession. Between the first quarter of 2010 and the first quarter of 2017, the number of restaurants has grown by 13 percent — another 71,163 locations.’ It adds ‘by comparison, the U.S. population over that time has grown just 4.9 percent.’

o NRN says over-expansion is ‘making the industry vastly more competitive, giving consumers more choices than they’ve ever had. They don’t tolerate restaurants that are too expensive, too tired, too old or just plain out of favor.’ This is the same in the UK. The journal adds ‘the intense expansion has been brought about by growing interest in the industry from investors and entrepreneurs, and a willingness by financiers to lend.’ NRN says ‘the problem is particularly acute for fast-casual restaurants, which have generated much of the unit growth over that time. So-called fast-casual restaurants represented more than 40 percent of all unit growth on the NRN Top 200 restaurants, but just 20 percent of the restaurants on that ranking.’

o NRN says rents are rising in the US. It says that landlords are unlikely to reduce rents when so many restaurants are in expansion mode.

o Eater.com, also in the US, comments ‘TGI Fridays and Applebee’s and their ilk are struggling as the American middle class and its enormous purchasing power withers away in real time, with the country’s population dividing into a vast class of low-wage earners who cannot afford the indulgence of sitdown meal of Chili’s Mix & Match Fajitas and a Coke, and a smaller cluster of high-income households for whom a Jack Daniel’s sampler platter at Fridays is no longer good enough.’ It adds ‘at the same time, the rise of the internet, smartphones, and streaming media have changed the ways that consumers across the income spectrum choose to allocate our leisure time — and, by association, our mealtimes. In-home (and in-hand) entertainment has altered how we consume casual meals, making the Applebee’s and Red Lobsters of the world less and less relevant to the way America eats.’

o New World Trading Company saw a 33% rise in sales to £40.1m and a 41% jump in adjusted operating profit to £5.1m in the year to 31 March, per MCA. The group completed a management buyout backed by Graphite Capital and opened three Botanist sites in Sheffield, York, and Didsbury during the period. CEO Chris Hill said NWTC is aiming to have 22 sites by April, with its 20th opening this week in West Bridgford.

o Black Cow vodka, ‘a deliciously creamy and smooth vodka [made] from… the whey left over from delicious Black Cow Deluxe Cheddar’ has been added to Bibendum’s vodka lists.

o The Guardian reports that a scheme to avoid a labour crisis in the hospitality industry due to Brexit will come too late. Earlier this year a Pret a Manger manager revealed that only one in 50 job applicants were British. Currently, 75% of all waiting staff in the UK are from the EU, with the UK population near full employment.

o Better than expected Q2 results raised Constellation Brands’ shares on Thursday, with the beer group reporting a 39% increase in net income to $499.5m in the three months to August. Reported EPS reached $2.48 and the group now expects full year EPS of $8.25-8.40.

o Britain’s high street retailers have had their best September sales figures for five years, according to the Telegraph and BDO. LfL sales increased 2.9% on the highstreet whereas online sales grew by 30.4%.

o Diageo is to grow its Guinness brewery site in Dublin into a ‘dynamic urban quarter’ that will include offices, shops, hotels, and housing.

o Extreme weather, including heavy hailstorms, hard frosts and drought, has pushed the EU wine grape harvest to an historical low in 2017, according to the EU department for Agriculture and Rural Development. The EU Commission notes that ‘most of the wine-growing regions in Europe are expecting a very low harvest in 2017,’ with Spain predicting volumes to be 16% lower compared to 2016 and France and Italy anticipating 17% and 21% reductions respectively.

o Gruppo Campari has sold its fruit-flavoured carbonated drinks brand Freedea to the Danish based beverage company Royal Unibrew A/S for €80m.

o Golden rum will be the next big thing in the spirits category and will outpace fin in the next three years, according to CGA commercial director Graeme Loudon. Speaking at the MA’s Future Trends: Spirits conference, Loudon also outlined how important the spirits category is to the sector: ‘Spirits is the fastest growing drinks category in the on-trade and, by 2020, the categories yearly value is forecasted to grow by nearly £800m,’ he said: ‘However, while current spirits volume is flat, premium spirits volume has grown by 5%. Currently 22% of spirits volume in GB is premium but in the US this is 47% so there is room for further growth.’

o Asahi will increase the price of its bottled beers and kegs for the first time in 10 years in 2018 in response to a rise in distribution costs and new regulations.

o A report from Australia’s National Transport Commission suggests drivers under the influence of alcohol or drugs should be exempt from drink-drive laws if they are using autonomous cars.

o Walmart will use its recent acquisition of logistics company Parcel to take the fight to Amazon and introduce same-day food delivery in New York.

HOLIDAYS, LEISURE TRAVEL & HOTEL:

o Monarch collapse impacts public. And, Langton. There are now virtually no flights available to anywhere for half term in three weeks. Holiday not going to happen. Also villa owners will have empty stock as punters can’t get to them.

o Monarch jets likely to sit on the tarmac for a few weeks before they get re-badged & get back into circulation. If you want to fly at Half Term, forget it. If you have plans for Xmas, then get your skates on.

o STR reports that in the week ending 30 September, the US hotel industry saw occupancy increase 0.4% to 70.3%, ADR up 0.8% to $128.19 and RevPAR rise 1.2% to $90.13.

o A parliamentary group has warned that more UK airlines could be at risk of collapse if a travel ban over the Egyptian resort of Sharm el-Sheikh is not lifted. Monarch chief executive Andrew Swaffield told staff as he announced that Monarch had ceased operations in the early hours of Monday morning, that the ‘root cause’ was the closure was due to terrorism, of Sharm el-Sheikh and Tunisia and the decimation of Turkey.

o Accorhotels and SNCF Group have agreed to continue the development of Orient Express, with Accor taking a 50% stake in luxury hotel brand.

o A spokesman for Uber said the discussions between CEO Dara Khosrowshahi and TfL boss Mike Brown on Tuesday were ‘constructive’. The firm has a deadline of October 13 to appeal TfL’s decision not to renew its license.

o Thomas Cook pilots have called off eight days worth of strikes after both parties agreed to enter binding arbitration over the issue of pilots’ pay.

OTHER LEISURE:

o Hollywood Bowl updates on trading, says strategy ‘has delivered a strong financial and operational performance’

o Hollywood Bowl says it ‘has continued its positive trading performance from the first half of the year with second half Group revenue growth of 10.0% against the comparable period last year. Overall, Group revenue for the full year grew 8.9%, with LFL revenue growth of 3.5%.’

o Hollywood Bowl is ‘considering returning capital to the Group’s shareholders. A further update will be given on the potential return in the Group’s FY17 results announcement, which is expected to be published on 11 December 2017.’ CEO Stephen Burns comments ‘we are very pleased with our full year performance, delivering good results marginally ahead of expectations, through the effective execution of our customer led strategy which is underpinned by our capital expenditure programme. Our centre teams continue to work very hard to ensure our customers have a fun-filled, great value for money leisure experience, whilst managing cost and improving our margins.’

o Merlin’s shares are up almost 2% on reports that the entertainment giant has held talks to take over parts of US-based SeaWorld. At its interim report this August, Merlin said it was only interested in acquiring SeaWorld’s Busch Gardens assets. SeaWorld’s shares have come under heavy pressure since 2013 over how the company treats its Killer Whales, dropping from $40 to $11 over recent years.

o Macau casino stocks fell on Friday after the area’s tourism board said visitor numbers during the first four days of China’s Golden Week holiday fell 2% on last year.

o Netflix has raised prices in the UK and US for the first time in two years, with a standard UK plan increasing by 50p to £7.99 a month. Netflix said in July it has 104m subscribers globally, while revenues rose 32% in the second quarter to $2.8bn.

FINANCE & MARKETS:

o New car sales in the UK fell in Sept for the 6th month in a row. It was the first September fall (down 9.3%) in 6yrs. The SMMT said ‘September is always a barometer of the health of the UK new car market, so this decline will cause considerable concern.’ It adds ‘business and political uncertainty is reducing buyer confidence, with consumers and businesses more likely to delay big-ticket purchases.’

o ECB minutes show that the bank is considering tapering.

o Oil up at $56.95

o Sterling sharply down vs dollar at $1.3087

o Pound down sharply vs Euro at €1.1185

o UK 10yr gilt yield up 1bp at 1.39%

o World markets: UK, Europe & US up again yesterday. Asia mostly up in Friday trade.

o Politics:

o Odds on PM May resigning before end of December cut from 9/1 to 5/2

o Daily Mash says Tories comfortably win no1 & no2 in worst PMs of the century. Beaten, it says, by a dour Scot and an alleged war criminal. With Boris, a hattrick is nailed on

o Tory fears that oblivion beckons. A second change in PM without an election? Would be a tough sell.

o Uncertainty unhelpful for business. See SMMT comments above.

o Brexit:

o Investment management industry says ‘we welcome further clarity from the Prime Minister on a proposed two-year implementation period’

o Clarity remains in short supply.

YESTERDAY’S LATER TWEETS:

o Later tweets: Cool Sept not good for pubs, better for indoor attractions & FMCG companies e.g. Premier Foods. Gravy sales inversely linked to temperature

o Deltic offers merger. Two thirds shareholders from Revs, one third from Deltic. But the latter aims to run the show

o CGA Business Leaders’ survey suggests ‘mounting costs and Brexit dampen market confidence’. Fears of ‘spiralling input costs and Brexit.’

o ALMR calls on HMG to cut employment costs. IoD says confidence is ‘wavering’. Michael Gove says we’re sick of experts

o Topps Tiles warns on profits, DFS says UK furniture outlook is ‘very challenging’ & SMMT says car sales fall for 6th month in row

o Tories labelled shambolic, luckless and pitiful. And that by their friends. PM in waiting Corbyn wisely keeping his gob shut

o Bank of England warns clock is ticking. Tells HMG to get deal by Xmas or see banks pull trigger & leave London

o SMMT: New car sales down 9.3% in Sept v Sept 2016. Diesel sales down 21.7%. First Sept drop in 6yrs (when it fell by only 0.8%)

o Micro analysis it may be but Sept was warmer in north than usual, cooler in south. Will have implications for pub cos

START THE DAY WITH A SONG:

Yesterday’s song was Kasabian ‘Ill Ray’. Today’s song:

Couple man called me a backup dancer,

Onstage at the BRITs, I’m a backup dancer

RETAIL NEWS WITH NICK BUBB:

o Today’s Press and News: The startling front page headline of the FT is “Hammond’s £26bn War chest in peril after growth forecast blow”, whilst there are other headlines questioning the future of the embattled Prime Minister…In terms of Retail news, there is plenty of coverage of the gloomy DFS Furniture results and the poor SMMT new car sales figures for September, but several papers also highlight the upbeat BDO High Street Tracker overview of trading in September and the Sky News story that the founders of JD Sports will cash in from the expected IPO of the Footasylum sports footwear chain. The Times also highlights the top management changes at the preppy fashion chain Jack Wills, the news that the Tesco accounting whistleblower has defended the decision not to alert PWC and the news that Sports Direct has closed almost half its concessions in Debenhams.

o Trade Press: The cover of today’s Retail Week magazine is a mock-up of a new Microsoft store, to flag up a feature article on “Brand new threats” (“Where do retailers fit on a High Street increasingly dominated by brands?”). RW also has a column by Dixons Carphone’s Katie Bickerstaffe on “the benefits of a diverse workforce”, plus features on “Small Packages” (“How Not On The High Street and Amazon harness the power of the little guys”) and “Booming Boohoo” (“Nasty Gal and Pretty Little Thing prove the perfect purchases”). In terms of News stories, RW focuses on the news that Nisa boss Nick Read has quit ahead of the expected formal Co-op offer, Marks & Spencer is pulling out of its Covent Garden store and intends to close it in March and Ikea has bought the odd-jobs firm TaskRabbit (which sends workers to people’s homes to carry out chores such as assembling flat-pack furniture).
And in his column the acting Editor of RW thunders that “Retailers must invest in what Amazon can’t do”.

o News Flow Next Week: A busy week kicks off with the BRC-KPMG Retail Sales for September first thing on Tuesday. Tuesday also brings the Ted Baker interims. On Wednesday we get the Dunelm Q1 and Capital Markets Day, the Vertu Motors interims and the QUIZ pre-close update. Then Thursday brings the Booker interims, the WH Smith finals and the N Brown interims.

o Retail Insider Watch: A couple of weeks ago, we flagged that the influential blog Retail Insider (which is run by the estimable Glynn Davis) had launched its annual “Movers and Shakers Top 100” List of the most influential people in digital retailing. And Retail Insider has just announced its “Transforming Retail Awards 2017”, to showcase the most exciting developments in the Retail sector over the past year. The company that caught our eye was the health foods store Tossed Restaurant (which now has 14 stores in London), as it won both “Overall Technology Innovation of the Year” and “Best In-Store Experience of the Year”.

o Oxford Street Watch Part 2: Having flagged yesterday that the Littlewoods store on Oxford Street, near Marble Arch, became a Next store, over the road from the flagship Primark store (which used to be a C&A back in the day)…our Romney Marsh correspondent has pointed out that in between C&A and Primark it was the site of an Allders department store (and back in 1931 it was briefly a Gamages department store).