Langton Capital – 2021-09-06 – Staff, beer & food shortages, working from home, inflation, JDW etc.:
Staff, beer & food shortages, working from home, inflation, JDW etc.:A DAY IN THE LIFE: Driving over to and around Hull at the weekend, we happened to be passing Skirlaugh and then the village of Swine, where I’d always thought it would be nice to have a cottage and call it ‘You Filthy’ just for the pleasure it would give me when filling in my address. Specifically, You Filthy Swine, Yorkshire or some such and, having holidayed near Hope in Derbyshire recently (cottage names copyrighted as ‘No Remaining’ or ‘Precious Little’ etc), I thought this could be something of a hobby. However, it only captured my attention for the time that it took me to drive past or through the villages in question and now it’s the start of a full week. And, to add insult to injury, it’s September. We’re meant to be thinking about work again but, with 27 degrees and sun promised for mid-week, the autumn may have to wait for us to cut the grass, stock up on beer and spark up the BBQ. On to the news: ADVERTISE WITH US: Langton’s free email now carries adverts. See front page of website for today’s copy & contact us for further details. CHANGED EMAIL FORMAT: The Premium Email is unchanged. The Free Email is now largely written the evening before. It may not include breaking stories nor Langton comment. See Twitter for in-day comment. Let us know if you would like an example of the Premium Email. Prices: £295 for one subscription, £495 for multiple, both plus VAT. Or sign up for easy in, easy out monthly option: PUBS & RESTAURANTS: Labour shortages: • The Telegraph warns that staff shortages could last for several years as vacancies have now topped 1.7m. It quotes a report by the Recruitment and Employment Confederation as saying there will not be enough workers in some industries for an extended period. It spells it out, saying ‘the economy will be plagued by labour shortages and potential supply chain disruption for years to come as businesses struggle to recover from the Covid shock.’ The REC says ‘large numbers of people are finding new work post-pandemic as the economy reshapes. But that realignment will take time, and there is good evidence to suggest that the market will remain tight for some years to come, even if the current crisis passes.’ • Further comment: See premium email • The Independent points out that some checks on incoming products will begin from 1 October. It says this could make UK food supply problems worse and it blames Brexit red tape. Paperwork checks begin next month and physical checks on inbound products begin on 1 January. Indeed, M&S has this morning warned (per The Times) that there could be “significant disruption” to food imports from Europe because officials in some EU countries do not work at weekends. Marks & Spencer, which sold more than £9 billion worth of food and clothes last year, held an emergency meeting with its European food suppliers on Friday, reports the paper. • The Guardian quotes Aodhán Connolly, who chaired a session of the UK Trade &% Business Commission, as saying that ‘red tape and labour shortages from Brexit have exacerbated problems that are being acutely felt across production, processing, manufacturing, retail and of course logistics.’ Connolly says ‘the government needs to get a handle on this both in the short and long term and we will be making recommendations based on the evidence we heard today.’ Various companies including Coca Cola, Nando’s, KFC and others have warned of delivery problems. Working from home: • There may be a gradual drift back to the office going on but we remain a long way from ‘normal’. Bloomberg calculates that demand for products such as coffee in the City are still about 43pc below pre-pandemic levels. The Sunday Times has a similar view when it says that ‘squares that would normally bustle with office workers dashing to and fro, remain eerily quiet ahead of what is expected to be the busiest month yet for workers returning to the office. • Further comment: See premium email Inflation, employment levels & their impact on demand: • The BBC quotes logistics companies as saying that the national shortage of lorry drivers could lead to a rise in food prices. Any rise in food prices may reduce the spending power of households when it comes to non-essential products and services. • Further comment: See premium email • The Joseph Rowntree Foundation has said that rising food prices and energy bills could raise the cost of living for millions of consumers this autumn. The ending of the £20 per week universal credit bump next month and the purported 1-2% rise in National Insurance will make a further demand on the consumers’ resources. • Further comment: See premium email • On a positive note, the Resolution Foundation says that job creation should remain strong after the furlough scheme ends. It says as many as 900,000 people could still be on the scheme when it ends – and cautions that it will take some time for these workers to be reabsorbed into the workplace. It says ‘firms are unlikely to have the capacity to immediately take on all previously furloughed staff who do lose their job.’ • Wages & inflation. Markit on Friday said ‘tight labour market conditions pushed up wages as service sector companies sought to attract and retain employees. The overall rate of input cost inflation remained steep, but eased from the record high seen in July.’ Tight labour markets would normally be associated with rising wage levels and inflation. Service sector stats: • Markit has reported August PMI numbers for the service sector saying that ‘UK service providers signalled that August was the worst month for business activity growth since the current phase of recovery began in March.’ It says ‘the slowdown partly reflected a normalisation of customer demand after the initial loosening of pandemic restrictions during the second quarter of 2021.’ • Markit adds ‘there were also widespread reports that shortages of staff and disrupted supply chains had constrained growth in August.’ The index came in at 55.0 for August vs 59.6 in July. It says the index has registered above the 50.0 no-change value in each of the past six months, but the rate of expansion was the slowest since the service sector returned to growth after lockdown.’ • Further comment: See premium email Exports: • The Food and Drink Federation has said that UK exports of food & drink to the EU have seen a “disastrous” decline in H1 this year. It says that there has been some growth in exports to non-EU countries, but says this does not make up the shortfall. The FDF says ‘the return to growth in exports to non-EU markets is welcome news, but it doesn’t make up for the disastrous loss of £2bn in sales to the EU. It clearly demonstrates the serious difficulties manufacturers in our industry continue to face and the urgent need for additional specialist support.’ Some observers have pointed out that we did not need to leave the EU to increase exports to non-EU markets. • Further comment: See premium email Company & other news: • JDW chairman Tim Martin has reiterated that ‘Wetherspoon beer stocks in pubs…are approximately the same as for the same period in 2019, although there have been supply issues for a minority of products in the last fortnight, following industrial action, including an overtime ban, which affected a major brewer.’ It says a number of newspapers have misrepresented the facts. Tim Martin says ‘there is clearly a shortage of HGV drivers’ and adds ‘there are supply chain issues in many other parts of the world also.’ • Despite the above, the hot weather this week has sparked further fears that some pubs could run out of beer. The press quotes Heineken-owned Star Pubs and Bars as admitting that deliveries have been hit due to the lorry driver shortage. It quotes Mitchells and Butlers as reporting “sporadic shortages”. • The Guardian quotes Restaurant Group-owned Wagamama as saying that it is struggling to hire chefs at a fifth of its sites. CEO Thomas Heier told the PA ‘we’ve seen a reduction in our EU workforce in particular.’ He adds ‘but the other thing we’re seeing is increased competition from logistics and delivery firms who are struggling with an increased number of vacancies.’ Fitch last week said the movement of workers out of the UK back to the EU had been “intensified by Brexit”. Wagamama adds ‘it’s a perfect storm of higher than normal demand, with supply chain challenges in the mix and a shortage of staff on the logistics side.’ • Nightcap reports it has entered into a lease for a new London Cocktail Club bar at 78 Queen Victoria Street in Central London. It says it ‘continues to ramp up its new site roll-out and currently has a further five sites in legal negotiations across several of its brands.’ CEO Sarah Willingham says ‘since the lifting of the Covid restrictions we have been impressed with the strong trading at all of our City sites in London.’ • The government has announced that it is pressing ahead with vaccine passports for nightclubs. See our comments last week on the threat to spontaneity. CEO of UKHospitality, Kate Nicholls, has said ‘Covid passports for certain venues and events will be unworkable, cause conflict between staff and customers and will force business to deal with complex equality rules.’ • Research conducted by the Local Data Company reports that almost 50 stores per day closed down across the UK during the first half of the year. Some 8,739 outlets went out of business across high streets, retail parks and shopping centres in H1, with 3,488 opening during the same period. • Starbucks workers from three Buffalo, New York-area stores have filed to have the official union elections for its Starbucks Workers United union. Jory Mendes, Starbucks’ senior manager of corporate communications, said ‘we firmly believe that our work environment, coupled with our competitive compensation and benefits, makes unions unnecessary at Starbucks’. • Further comment: See premium email • Pernod Ricard has acquired a minority stake in wine and spirits company Sovereign Brands. The investment is said to be the beginning of a long-term partnership aimed at creating business opportunities between Sovereign Brands and Pernod Ricard in the future. • Brown-Forman reports net sales up 20% in its first quarter to $906m with CEO Lawson Whiting saying the firm ‘ benefited from the re-opening of the on-premise, sustained at-home consumption, and continued premiumisation trends’. Operating profits for the period were up 25% to $289 million. • Walmart opened its first Ghost Kitchen Brands ‘virtual food court’ location in its Rochester, New York. The Ghost Kitchens service enables Walmart shoppers to select food and beverages from the menus of up to 25 national and regional restaurant and CPG food concepts and combine them into a single order. • Junkyard Golf Club will open a Newcastle venue this winter, bringing its estate to 6. The new site, on Newgate Street, will feature three bars as well as its golf courses. • The owners of the Gunpowder Indian restaurant in Spitalfields are set to open a new 54-cover Indian restaurant in Soho in October. • Booking Office 1869 is set to open in October in King’s Cross, offering an all-day drinking and dining destination. • Scream For Pizza, based in Newcastle, has announced that it is creating a dozen jobs as it launches a new Quayside venue. The new site has created 12 jobs, more than doubling Scream For Pizza’s workforce to 27 people. • Ikea says that at least 1,000 of its product lines have been disrupted by the shortage of lorry drivers, with transport, raw materials and sourcing at all of its 22 stores around the UK and Ireland been affected by labour shortages and COVID-19. HOTELS & LEISURE TRAVEL NEWS: • The Air Travel Insolvency Protection Advisory Committee has issued a series of warnings to the government on the impact of changing travel restrictions, imminent withdrawal of financial support and proposed Atol reform. The committee warns that last-minute changes to travel restrictions risk ‘a higher level of travel organiser insolvency’ and that if the furlough scheme and Coronavirus Business Interruption Loans (CBILS) cease from the end of September ‘many businesses could fold’. • The ONS reports that 23% of arrivals from amber list countries broke the Covid-19 quarantine rules, failing to comply either with the requirement to isolate at home for 10 days or to complete the necessary PCR tests. • The Home Office has criticised UK Border Force after reports of passengers fainting in queues of up to three hours emerged. A spokesperson said ‘We are working very closely with Heathrow Airport and its airlines and we are all committed to making sure all passengers can have a safe and hassle-free journey.’ • In the US, STR reports hotel occupancy of 61% in the week ending August 28, down by more than 2 percentage points. FINANCE & MARKETS: • Markit’s composite PMI for the UK in august was 54.8, down from 59.2 in July. It says this ‘signalled a much slower speed of recovery across the private sector economy.’ It says the reading ‘was the weakest over this period.’ It says ‘private sector employment numbers increased at the fastest pace since this index began in January 1998, largely fuelled by a rapid rise in recruitment across the service economy.’ It cautions ‘shortages of staff and raw materials acted as a constraint on the recovery in August, with supply chain disruption leading to an especially sharp rise in backlogs of work at manufacturing companies.’ • Markit comments that ‘strong inflationary pressures continued in August, but the latest rise in overall cost burdens was the slowest for three months. Meanwhile, prices charged inflation eased since July in both the manufacturing and service sectors.’ • US jobs creation in August was weaker than expected as employment rose by 235,000. Some 1.05 million jobs had been created in July. The unemployment rate fell to 5.2% in August from 5.4% in July. • Sterling up at $1.3844 and ®1.1662. Oil price lower at $71.74. UK 10yr gilt yield up 3bps at 0.71%. World markets lower on Friday but Far East up in Monday trade & London set to open up around 11pts as at 7am. RETAIL WITH NICK BUBB: • Saturday’s Press and News (1): The front-page headlines on Saturday were dominated by the debate over Covid jabs for kids: the Daily Mail highlighted “Chaos over jabs for kids” and the Guardian noted “Ministers expected to defy advice on jabs for children”, whilst the Times went with “Children set to be jabbed from early next week” and the Telegraph flagged “Child jabs rollout to be pushed through”. The FT had a couple of interesting headlines, by way of contrast: the main headline was “Apple delays child sex abuse detection code”, but it also had a story about the news that “Yoga, DJ’s and cash on offer as groups try to tempt staff back into the office”.
• Saturday’s Press and News (2): In terms of Retailing stories, the main focus was on Asda, after it reported weak Q2 sales (down 0.7% LFL) on the day that 2 more senior executives quit the business (Anthony Hemmerdinger and Preyash Thakrar): as noted in the gloomy FT headline: “Clouds hang over Asda as sales slip and more senior figures quit”. There were also snippets in the Times and the Telegraph about the Asda news and a longer article in the Guardian, which highlighted the more cheerful news that Asda plans to open 200 petrol station convenience station stores by the end of next year. The main Business story in the Daily Mail, however, was headlined “Is Tesco the next private equity takeover target?”, flagging the view of the fund manager Alliance Bernstein that Tesco is the most attractive of the supermarket chains. And Morrisons was the “Share of the Week” in the Daily Mail, ahead • Sunday’s Press and News (1): The front-page headlines of the Sunday papers were mixed: the Sunday Times and the Mail on Sunday ran with a new Royal scandal (“Charles aides fixed CBE for Saudi tycoon who gave £1.5m”), whilst the Observer and the Sunday Telegraph went with the row about how to pay for increased social care spending (the former flagged “Pressure grows on Starmer to back tax on rich to pay for care”, whilst the latter said that “Tories at war over “idiotic” tax increase”).
• Sunday’s Press and News (2): In terms of Retail stories, there was plenty of focus in the Sunday papers on Morrisons: the Observer led its Business coverage with a preview of the upcoming Morrisons interim results (“Bidders’ enthusiasm for Morrisons looks unlikely to be dampened by latest results”), whilst the Mail on Sunday flagged that the improved interim profits are set to ignite the takeover battle, with a counter-offer still expected soon from the Fortress consortium. The main Business story in the Mail on Sunday, however, was that M&S has warned its European food suppliers about the likely chaos next month when EU border controls are tightened on Oct 1st. The Sunday Telegraph had a photo of the boss of Boohoo’s Pretty Little Thing fashion website, Umar Kamani, and his fiancée, to flag his launch of a private club in Dubai. The Questor investment column in the Sunday • Sunday’s Press and News (3): In terms of all the Economics comment columns in the Sunday papers, we give our usual shout-out to the column by the Sunday Times Economics correspondent David Smith (“Sunak knows he has to turn off the public spending taps”) and the column in the Sunday Telegraph by the veteran City commentator Jeremy Warner (“Many firms will need to offer big, inflationary wage rises to fill jobs”). We also enjoyed the column by the veteran Economics commentator, William Keegan, in the Observer, headlined “Leavers’ pride may not endure as Britain’s poverty rises”. For today’s comment, see premium email. TRADING STATEMENTS & EVENTS: Upcoming results are set out below: • 1 Sept 21 PPHE H1 numbers • 1 Sept 21 888 Holdings H1 numbers • 2 Sept 21 Jet2 AGM • 2 Sept 21 Gym Group H1 numbers • 7 Sept 21 DP Eurasia H1 numbers • 9 Sept 21 Gear4Music AGM • 9 Sept 21 Morrison’s H1 numbers • 15 Sept 21 Restaurant Group H1 numbers • 16 Sept 21 C&C H1 trading update • 21 Sept 21 Compass Group full year update • 22 Sept 21 Ten Entertainment H1 numbers • 23 Sept 21 Playtech H1 numbers • 25 Sept 21 (est) GfK UK Consumer Confidence numbers • 29 Sept 21 Fulham Shore AGM • 30 Sept 21 New River investor day • 1 Oct 21 JW Wetherspoon • 5 Oct 21 Gregg’s Q3 update • 6 Oct 21 Constellation Brands Q2 numbers • 13 Oct 21 Marston’s FY trading update • 22 Oct 21 Intercontinental Hotels Q3 numbers • 25 Oct 21 DP Poland H1 numbers • 26 Oct 21 Campari Q3 numbers • 28 Oct 21 YUM Brands Q3 numbers • 18 Nov 21 Jet2 H1 numbers • 23 Nov 21 Compass Group FY numbers • 24 Nov 21 Britvic FY numbers • 30 Nov 21 Marston’s FY numbers • 8 Dec 21 TUI FY numbers LANGTON CAPITAL: Made in Hull. Like all the best things. Langton Capital is a financial advisory company providing insightful views on the UK and global leisure industry and the wider consumer sector in general. Subscription to the daily email is free. Unsubscribing is painless. We provide daily off the shelf and bespoke research. We have helped with transactions, fund-raisings, disposals and other corporate issues. We have a good ear, we are impartial, independent and not half bad at what we do. If you think that we could help you or your business, drop us a line. |
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