Langton Capital – 2022-08-05 – Tipping points, costs, bank rates, inflation, Shake Shack, Papa John’s etc.:
Tipping points, costs, bank rates, inflation, Shake Shack, Papa John’s etc.:A DAY IN THE LIFE: We were talking yesterday about heavily embossed, 120gm a metre, paper offers of loans that still periodically come through the post. They seem to promise almost instantaneous unsecured loans and, though there will doubtless be small print (‘offered until bid’, do you remember that phrase), it does feel as though there are some companies willing to pander to people’s inclination to spend today and pay tomorrow. It’s almost as if the desire to spend is what matters. The ability to find the money to do so appears to be of secondary importance and, unless my early accountancy training is even more pitifully out of date than I think it is, that way, misery assuredly lies. Let alone bad debts in the hands of the banks but anyway, affordable treats are still, well, affordable. We spent £27.45 on two meals and two drinks in the local pub on Wednesday and very nice it was too. Have a great weekend and let’s move 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. Prices for the Premium at time of writing are £345 for one subscription, £595 for multiple, both plus VAT. Or sign up for easy in, easy out monthly option HERE CONSUMER BEHAVIOUR: THE DANGER OF A TIPPING POINT… There have been a slew of surveys recently, all of which seem to suggest that the consumer remains under substantial pressure. Hence the forces are in one direction. But forecasting the outcome, let alone the timing of that outcome, can be a challenge. Because pushing on a piece of string will have unpredictable results. Pressure will build up but the string, at the very end, may not budge. But then, all of a sudden, perhaps it does. This, in the real world, could represent a tipping point: • See premium. Reply for sample or to upgrade. Single £324, multiple £595. PUBS & RESTAURANTS: Cost of living crisis – See also comments from the Bank of England under Finance & Markets below: Consumer group Which? reports that an estimated 5.7 million households have experienced at least one “affordability issue” in April… • See premium. Reply for sample or to upgrade. Single £324, multiple £595. Business confidence: CGA and Fourth’s second-quarter Business Confidence Survey reveals that only 23% of leaders are now confident about the next 12 months for the general market. In March, the percentage was almost 3x higher at 65%…’ A considerably higher 53% (still down 15pps) of leaders are confident about their own businesses… • See premium. Reply for sample or to upgrade. Single £324, multiple £595. Other news: The Finance & Markets section below is more important than usual. Hampton’s has suggested that rising property costs could be driving younger people out of London… COMPANY NEWS: Shake Shack reports Q2 revenue up 23.1% YoY to $230.8m, with system-wide sales up 24.8% YoY to $351.7m… • See premium. Reply for sample or to upgrade. Single £324, multiple £595. Global property adviser Knight Frank has completed the sale The Jamaica Inn in Cornwall to The Coaching Inn Group. Papa John’s in the US has reported Q2 numbers saying that revenues grew 1.5% to $522.7 million with net income falling from $35.3 million last year to $25.4 million… Bubble waffle brand Bubblewrap is opening a fourth London site this summer in Westfield Stratford. Big Hospitality reports that Gordon Ramsay Restaurants posts a pre-tax loss of £6.8m for the year ended 31 August 2021…. The MCA reports that Baton Berisha will join Wolseley Hospitality Group as CEO, leaving D&D London after being MD for just three months. Tomahawk Steakhouse has secured a new venue in a “prominent” Morpeth location via Bradley Hall. The 14-strong group which operates Tomahawk-branded steakhouses is known for its Himalayan salt dry-aged beef and Yorkshire Wagyu. HOLIDAYS & LEISURE TRAVEL: Research for Amadeus has found that three out of four consumers planning international travel in the next 12 months could opt to pay by instalments. This could have implications for the timing of any downturn and, further down the line, for bad debts across credit providers… Booking.com reports a 57% increase in gross travel bookings, as consumers travelled to their favourite tourist spots in Europe and North America… Willie Walsh, Director General of IATA, has said that Heathrow has been “failing miserably to provide basic services.” He says the airport “has tried to blame airlines for the disruption” but he says this is unfair and Heathrow itself is to blame. London City Airport has said that its passenger volumes are back to around 70% of their pre-Covid levels… Travel Perk reports that hotel prices have been rising sharply in Europe. It says Barcelona, Berlin and Paris have seen the biggest rises. It says the cost of rail travel has also risen sharply. OTHER LEISURE: Flutter has announced that it has received regulatory approval to proceed with its acquisition of Sisal. It reports that Sisal is ‘Italy’s leading online gaming operator, in an attractive and fast-growing online market, is aligned to the Group’s strategy of investing to build leadership positions in regulated markets…’ FINANCE & MARKETS: Triple whammy. Interest rates up 50bps, inflation to hit 13%, recession to last over a year. As expected, the Bank of England raised interest rates by 0.50% yesterday (to 1.75%). This was the largest rise in interest rates for over 25yrs. The Bank says inflation will hit 13% this year and remain elevated next. It says the UK will enter recession in Q4 and shrink for all of next year. • See premium. Reply for sample or to upgrade. Single £324, multiple £595. Reaction: The BCC says ‘given the extremely precarious state of the economy, this decision is not without risk for businesses and consumers that are exposed to banking or overdraft facilities…’ UKH CEO Kate Nicholls says ‚today’s double whammy of forecasts – for recession and higher energy prices – is further evidence, if any was needed, that the Government must act decisively and swiftly to bolster the plummeting confidence of hospitality businesses…’ • See premium. Reply for sample or to upgrade. Single £324, multiple £595. Halifax has updated on UK house prices saying that average house prices fell by 0.1% in July, the first decrease since June 2021. It says that ‘annual rate of growth eased to 11.8% (from 12.5%)’ and says ‘a typical UK property now costs £293,221…’ • See premium. Reply for sample or to upgrade. Single £324, multiple £595. Markit has reported on UK construction saying that the sector was in decline in July. The PMI fell to 48.9 from 52.6 in June. Any number below 50.0 implies contraction… Accountant KPMG has reported that employment is slowing in the UK. It says that July saw the slowest increase in the job numbers in 17 months. Sky reports that ‘both Boris Johnson and his chancellor Nadhim Zahawi are away on holiday as the Bank of England hiked interest rates for 27 years and warned of the longest recession since the financial crisis.’ Sterling lower at $1.2139 and €1.1857. Oil down at $94.41. UK10yr gilt yield up 5bps at 1.88%. World markets mixed yesterday. London set to open up around 5pts as at 6.30am. FORTHCOMING NEWS: The week’s pretty much ran out. We hear the Halifax brief on house prices this morning. Next week, though quiet, will see Intercontinental Hotels and 888 Holdings report H1 numbers. RETAIL WITH NICK BUBB: • See premium. Reply for sample or to upgrade. 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