Tipping points, normality, Hostmore, DP Eurasia, city centres & other:

A DAY IN THE LIFE:

My app said there was a 4% chance of rain yesterday mid-afternoon in The Smoke and, like a fool, I believed it.

But I then found myself, shirt-sleeved as I was, darting like a thief from one bit of cover to the next in the Barbican to avoid coming undoubtedly last in what would have to be the world’s weirdest and frankly least attractive wet T-shirt contest.

Still, I made it to the shops and back with nary a scratch and my dignity intact. We’ll keep it brief this morning so on to the news:

LANGTON EMAIL:

The Free Email is now written in short form. Extended versions of many stories are in the Premium Email. Reply to this email if you would like to upgrade.

See Twitter for in-day comment. Let us know if you would like an example of the Premium Email or to comment on the new format.

Prices for the Premium are £345 for one subscription, £595 for multiple, both plus VAT. Reply to this email to order & request invoice.

Or sign up for easy in, easy out monthly option HERE

QUESTION OF THE WEEK?

What will win out, premiumisation or the consumer hunt for value? Or will the market polarise between the two?

Answer of the Week comes tomorrow, Friday, so comments please in by close, Thursday.

RETURN TO ‘NORMALITY’ STALLED?

Introduction – straws in the wind. But a lot of them:

• Google’s mobility stats suggest that, although it was a sample of only two dates, increases in mobility in the UK may have stalled.

• Springboard suggested that footfall had fallen in the UK week on week.

• Restaurant Group reports there had been a slowdown between its Q1 and the early weeks of its Q2.

• Topps’ Tiles said it was down currently against ‘strong comps’.

• Bloomberg’s Pret Index lists a number of areas where growth is slowing.

• Certainly, CGA and Wireless Social’s mobility index seems to show more activity in a number of UK cities (in contrast to Google) but S&P / Markit’s Flash PMI numbers for May are consistent with points made above.

• This may be anomalous but, if there is any persistence in such numbers, it could become a matter for concern.

• See premium. Reply to this email to upgrade.

PUBS & RESTAURANTS:

City centres:

Interesting to note that M&S has announced that it will shut 32 more stores as it shifts away from town centres. The company said failed local authority or government policy meant that town centres had ‘lost impetus’ and spark concerns for the future of the high street. M&S also announced a decision to fully exit Russia, after temporarily pausing deliveries in the light of the war in Ukraine, at a cost of £31m. New EU tariffs and border costs relating to Brexit had cost £29.6m in profits and £15m in lost trade.

• See premium. Reply to this email to upgrade.

Levels of business.

ClearSight has updated on the recovery of the UK hospitality market, saying that ‘rail & bus travel is close to pre-pandemic levels in terms of participation but not yet journey volumes.’ It says that ‘outbound holiday and air travel markets see an uplift in demand – but significant challenges remain.’ ClearSight adds ‘UK holidays and paid-for accommodation are recording a strong recovery in 2022 with growth in booking activity during April boding well for the summer.’

• See premium. Reply to this email to upgrade.

Pub accommodation:

Stay in a Pub has reported ‘that 44% of all bookings made in April and May have been from overseas. European visitors are coming from Germany, Belgium Switzerland, and the Netherlands, and significant numbers are traveling long haul from the US, Canada, and Australia.’

• See premium. Reply to this email to upgrade.

Potential travel problems:

Commenting on the RMT vote for a national strike this summer, UKHospitality CEO Kate Nicholls says ‘a national rail strike would further jeopardise hospitality businesses working hard to rebuild following the pandemic, in the face of rising costs and a fall in consumer confidence.’

• See premium. Reply to this email to upgrade.

Food & farming:

Supply issues – a lack of labour, transport or other difficulties, for example those faced in getting grain out of Ukraine – have been responsible for inflation rather than an excess of demand. Demand, rather than supply, will be clobbered by rising interest rates.

In the meantime, a House of Commons committee has reported on Labour Shortages in the Food and Farming Sector, has concluded that labour shortages ‘caused by Brexit and accentuated by the pandemic’ have been impacting food supplies.

Inflation:

Petrol prices have hit a new high of 170.4p a litre with diesel hitting 181.4p a litre.

Menu evolution:

The Caterer reports that restaurants are cutting back on fried dishes and taking premium products such as scallops off the menu due to increasing costs. General manager of The Terrace restaurant in Yarmouth, Tom Fahey, said ‘ People love crispy deep-fried things, [but] it means you use a huge amount of oil.’

COMPANY NEWS:

DPEU says trading is in line:

DP Eurasia has updated on trading for the four months to end-April, saying that the number of stores is up by 41 on the same period last year (to 816) with total sales of 1.035bn TRY. The company says that ‘group system sales increased 56.5%, with a like-for-like growth of 36.1%, driven by excellent demand in Turkey.’ DPEU adds that ‘growth [has been] achieved despite the challenging comparatives in both Turkey and Russia.’

DPEU says that Russian online system sales rose and the company had a ‘good liquidity position at Period-end with TRY 67.8 million cash and an undrawn bank facility of TRY 172.6 million.’ The company adds that it ‘is still unable to provide meaningful guidance for the full year ending 31 December 2022.’

• See premium. Reply to this email to upgrade.

Hostmore profit warning. Slower sales, lower margins:

Hostmore, which operates the Friday’s chain of restaurants in the UK, has updated on trading update for the 20 weeks ended 22 May 2022 and revised its guidance for FY22. The company says this is ‘a challenging consumer environment’ but it maintains that it is ‘well positioned with a strong and resilient balance sheet.’ The company says that ‘LFL revenue for the 20 weeks ending 22 May 2022 is c.6% lower than 2019, with dine-in sales remaining in line with the market benchmark data.’

Hostmore adds that ‘management actions, including pricing adjustments and hedging of utilities, [are] limiting [the] impact of lower volumes on margins.’ The group has opened two units in the period and expects to open three this financial year. Re Current Trading, the company says that it is inline ‘with the market benchmark data, with LFL revenue for the 20 weeks ending 22 May 2022 c.6% lower than FY19 as a result of a more challenging consumer environment.’

• See premium. Reply to this email to upgrade.

McDonald’s UK and Ireland invests over £250m in restaurant redesign as consumers increasingly look for greater speed, efficiency and choice in how they order their food. In 2022 McDonald’s will introduce Convenience of the Future in 200 restaurants with 800 conversions planned over the next four years.

EG Group reports a £215.7 million net profit for the first three months of the year with the company claiming it is well placed to weather the current inflation and cost of living crisis. CEO Zuber Issa said ‘The strong performance in foodservice was supported by UK acquisitions from 2021 that contributed £32m of gross profit across the quarter…our belief [is] that food service represents the biggest opportunity for EG Group globally.’

SA Brain has put the freehold and leasehold investment of 99 pubs on the market for a price reflecting a NIY of 5.75%. The company has agreed to sell 95 of those assets in one property portfolio to Song Capital and partners.

Duration brewing has launched a £1m crowdfunding campaign to fund an immersive taproom and expansion at historic its priory site.

The Famous Grouse is launching a new premium spirit with a Sherry Cask Finish. The drink is billed as a ‘blend of festive flavours including chocolate, almonds, dried fruits and sweet spices’.

Surrey-based brewer, Big Smoke Brew Co, and Airport Retail Enterprises have announced the opening of two new independent craft beer and food destinations at Heathrow’s Terminals 3 and 5 this summer. The Oceanic in Terminal 3 and The Globe in Terminal 5 will serve Big Smoke’s core range of beers and gins.

Foodsteps has raised $4.1m in seed funding, led by Octopus Ventures, to expand its sustainability platform and attract new talent. Companies can upload recipes onto the platform, which has a database of 3,000+ ingredients containing impact information on each ingredient’s carbon footprint and provides recommendations on improving sustainability.

Majestic Wine has said that it expects to break all records in its sales of sparkling wines over the Jubilee weekend.

Trian, the largest shareholder in burger chain Wendy’s Co., is reported to be exploring options that could include taking over the whole company. Trian is controlled by Wendy’s chairman Nelson Peltz.

HOLIDAYS & LEISURE TRAVEL:

Travel Weekly reports that limited delays at airports are expected over the half-term and Jubilee bank holidays, despite a ‘narrative of disruption’ in the media being forecast. Travel Weekly’s source suggested delays at UK arrival halls next week should be manageable, but warned delays are likely this summer.

• See premium. Reply to this email to upgrade.

The RMT has said that its demands for a pay rise are “not unreasonable.” It is possible that the largest rail strike in more than ten years will be upon us shortly. The union says that some of its members ‘are in the third year of a pay freeze this year.’

Travel Weekly has reported that Travel Counsellors has recorded its second-highest sales week in its history earlier this month.

OTHER LEISURE:

The sale of Chelsea FC has been given approval by the UK government following the proposed takeover by the Todd Boehly / Clearlake Consortium. The Premier League Board approved the proposed takeover on Tuesday.

Elon Musk yesterday tweaked his bid for Twitter. He is now pledging an additional $6.25 billion in equity financing to fund the deal. Mr Musk had suggested he could lower his bid.

FINANCE & MARKETS:

The ONS has reported that monthly number of house sales in the UK fell in April for the first time since the end of the stamp duty holiday. On the Market says that it is ‘clear the frenetic pace of the housing market has subsided.’

David Malpass, head of the World Bank, has warned that the war in Ukraine could cause a global recession. He says ‘the idea of energy prices doubling is enough to trigger a recession by itself.’

UK car production fell again in April by a further 11 per cent.

Fed minutes from its May meeting were in line with forecasts and still seem to suggest that future 50-bp rate hikes are ‘likely’.

Sterling mixed at $1.2569 and €1.1757. Oil price lower at $114.51. UK 10yr gilt yield up 2bps at 1.91%. World markets better yesterday. London set to open around 14pts lower as at 6.30am.

FORTHCOMING NEWS:

DP Eurasia reports today on its first 4mths’ trading. AG Barr’s AGM is Friday. See also Trading Statements on the right.

RETAIL WITH NICK BUBB:

• See premium. Reply to this email to upgrade.