Trading, confidence, fuel bills, Carlsberg, JET, CINE, Nightcap etc.:

PREMIUM EMAIL – PLEASE DO NOT FORWARD:

A DAY IN THE LIFE:

Judging by the out-of-office replies, we’re not alone in taking holidays this time of year. We’re back from a week in the North East just now and very pleasant it was to have a break too.

We’re now a week in London before having it away on our toes to Shropshire or thereabouts for the stump of the week after Bank Holiday Monday and after that, sadly but inevitably, it’ll be back to work for real and, before you know it, we’ll be on the run in to Christmas.

We’ll remain silent on the football other than to say that the Mighty Hull City managed to concede its unbeaten record and its positive goal difference all in the space of ninety minutes on Saturday when what must have been an attempt to give our goalkeeper some work experience went spectacularly wrong and we accidentally let in five goals. And that’s enough of that.

Still, whilst Hull City might be teeing up the inevitable relegation struggle earlier than is often the case, the news from politics, the economy and the sector must be positive, mustn’t it?

VERY BRIEF CATCH UP…

Consumer confidence:

Friday saw GfK confirm that consumer confidence had fallen to its lowest level in the almost 50yrs that it has been tracking the measure. The measure for August slipped to minus 44 with all five measures of GfK’s indicators down versus July.

• GfK’s Joe Staton says ‘all measures fell, reflecting acute concerns as the cost-of-living soars. A sense of exasperation about the UK’s economy is the biggest driver of these findings.’

• GfK says ‘a similar consistent sharp decline since December 2021 is evident in how consumers see the economy a year ahead and this month’s score of minus 60 sets a new record.’

• Such measures must impact consumer behaviour. And not in a good way. GfK says ‘with headline after headline revealing record inflation eroding household buying power, the strain on the personal finances of many in the UK is alarming. Just making ends meet has become a nightmare and the crisis of confidence will only worsen with the darkening days of autumn and the colder months of winter.’

Inflation:

Numbers last Wednesday saw the headline inflation number for CPI rise to 0.1%, the first time it has been in double figures since the early 80s.

• Analysts are looking for perhaps 13-14% in the Autumn. The RPI, which is used to price the yield on around a quarter of government debt, hit 12.3%. Some observers have suggested that this could impact PM in waiting Liz Truss’s plans for tax cuts. Alternatively, Sterling could have a wobble.

• The BCC says ‘this higher than expected inflation increase, alongside eye-watering energy prices, this confirms the severity of the cost of doing business crisis. it says ‘two out of three firms expect to raise their own prices in the coming months, with utilities, labour costs, and raw materials all cited as the main drivers of costs. Firms have been telling us about this inflation shock for 18 months now.’ This may undermine Governor Andrew Bailey’s suggestion that inflation is transient.

Wage inflation numbers. Out on Tuesday last week, these confirmed that the labour market remained tight and that real wages were falling at the ‘fastest rate on record’.

• This comment, which we may hear back to back over the coming months, is disputed by Fact Check which suggests that bonuses should maybe be included.

• The BCC comments on the tight labour market post Brexit and Covid saying that ‘the number of job vacancies in the economy remains around the highest on record. Competition for skills and labour continues to drive up wage costs.’

Company trading:

The latest Coffer CGA Business Tracker (for July) came out last week. It concludes that ‘July’s like-for-like sales at Britain’s top managed pub, bar and restaurant groups held steady against pre-COVID-19 levels of July 2019.’

• This does not account for inflation and nor does it a) comment on the split between price increases and volume drops or b) comment on sales taken by delivery, which may be lower margin.

• The overall figure suggests ‘like-for-likes are flat compared to 4.7% growth in June (which benefited from bank holidays and the Jubilee).’

• The Tracker concedes that sales are in decline by 3.3% when delivery and takeaway sales are removed. It also says ‘given high levels of inflation since 2019, sales are significantly behind pre-pandemic levels in real terms’.

Company news:

Carlsberg reported strong Q2 numbers on Wednesday.

• CEO Cees ’t Hart commented ‘we’re very satisfied with the strong set of results for the first half year in light of the severe challenges stemming from the war in Ukraine, rising commodity prices and energy costs, and the pandemic. Despite these challenges, the Carlsberg Group’s half-year results are now well ahead of pre-pandemic levels.’

• The CEO adds ‘global uncertainty remains high, with the increasing input cost pressure a particular challenge for us in the coming quarters.’

Just Eat shares rose sharply on iFoods disposal news.

DPP announced a fundraise. Wynnstay Group likewise.

The MCA reported Brakspear as saying ‘we are back in survival mode’.

The Hush Collection reported full year numbers to end-Dec with turnover 8.7% up from 2019.

Cineworld shares collapsed (see below).

PUBS & RESTAURANTS:

Current & upcoming trading:

CGA’s Drinks Recovery Tracker shows that average sales by value in managed venues across the week to 13 August were up 9% on 2019 levels. Six of the seven days were in 2022-on-2019 growth, driven by higher temperatures.

Research from KAM shows that 29% of consumers expect to visit restaurants less in the next 12 months due to the ongoing squeeze on discretionary incomes.

• The research states that the average family spends £39.56 on a meal and drinks out. When asked about their visit frequency to pubs and bars specifically, 19% said that they expect to visit less in the next 12 months.

Labour issues:

The ONS reports that the average monthly wage of a hospitality worker has increased by 6.4% since the beginning of 2022.

Cost of living crisis:

Commenting on the current energy crisis, Alex Reilley, chair of Loungers, tweets ‘we hedged our energy contract in May ‘21 (pure luck as that’s when our contract ended) until 2024. If we had to enter into a hedge today it would cost an EXTRA £17m!’…

• Mr Reilley says ‘hospitality has already been absolutely battered by the pandemic, chronic labour shortages, & spiralling food & drink costs but, the obscene,… uncapped utility price increases that our sector (& any business on a commercial supply) is having to face is nothing short of an extinction event. Independent cafes/restaurants/shops, tenanted pubs, small groups & even some big businesses don’t stand a chance.’

• He says ‘so instead of bleating on about pointless, irrelevant crap that only the Tory membership cares about the next PM needs to realise that without immediate, surgical intervention the soul & heartbeat of our high streets & communities is dead & that all of the money that was invested helping businesses to survive the pandemic will be for nothing.’

• Mr Reilley continues ‘so @RishiSunak & @trussliz, you need to step outside your hustings bubble, stop trying to sell yourself to a tiny minority of the country you want to govern & realise that all of this talk about ‘growth’ is absolute soundbite nonsense. For most businesses this is about survival & without major govt intervention & ‘real’ leadership with crisis management policies most, very sadly, won’t.’

• Langton. The tweet has been commented on several dozen times including by single-site operators seeing their bills rise from £1,400 a month to £10.000 a month. Many will not be able to survive such a hike. They will be faced wit the choice of either passing the cost on (to a reluctant and hard up customer) or of swallowing it themselves (which may not be possible whilst remaining solvent).

Uswitch has commissioned research that suggests consumers have been underestimating and continue to underestimate just how much fuel bills will shortly rise.

The BBC reports that people under 30 are facing a growing cost-of-renting crisis with four in ten of this age group now spending more than 30% of their pay on rent. It comes as younger people’s finances are being squeezed, amid rapidly rising living and rental costs, and a fall in real incomes.

• Demographics matter. Whilst younger consumers may have the inclination to go out (and return to ‘normal’) more rapidly than their older peers, they may lack the financial ability to do so.

Supply issues.

Dock workers at Felixstowe have started an 8dy strike over pay. This will not help with deliveries that have already been impacted by Covid and, latterly, by lockdowns in China.

Travel disruption.

Train strikes continue this week. City centre footfall is likely to be reduced as a result. Commenting on the ongoing rail strikes, Michael Kill CEO of the NTIA has said that they risk doing ‘irreparable damage’ to his industry.

• Mr Hill says ‘our industry is suffering heavily from rising costs, as inflation reaches a high, with most reporting an estimated loss of up to 40% in trade from the previous strike action, and unions announcing this morning that strikes could go on indefinitely is hugely concerning for the hospitality and late night sector.’

• He adds ‘long term strike action would be catastrophic, sporadic weekly or daily planned strike action is eating into consumer confidence, hospitality and late night sector workforce who aren’t able to work from home are struggling to find safe alternative transport at night at additional cost, as well as having a direct impact on the transient mobility of tourists across the country.’ Mr Kill says ‘the current operating climate will lead to irreparable damage without Government intervention, leading to loss of businesses and jobs, slowing recovery.’

Market size:

The latest Market Recovery Monitor from CGA by NielsenIQ and AlixPartners reveals that, in terms of outlets at least. ‘Britain’s licensed sector has stabilised in Q2’. The Monitor suggests that ‘there were just under 106,000 licensed premises at the end of June 2022—almost exactly the same number as in both June 2021 and March 2022.’

• The Monitor suggests that ‘more net closures are possible in the second half of 2022 as cost pressures mount for both businesses and consumers. Sharp rises in food and energy prices, labour shortages, supply chain issues and high consumer inflation are all likely to threaten many venues that have been left fragile by two years of COVID-related challenges.’

• Managed site numbers ‘have increased by 1.8% in the last 12 months’ whilst the number of independent outlets has fallen by 0.4%.

• CGA says ‘these numbers are a welcome indicator of stability in hospitality, and proof that operators have built back well from the turmoil of COVID. But this solid recovery is now under severe threat from a powerful combination of inflationary pressures and other challenges, and we are likely to see a lot more churn of openings and closures over the second half of 2022. Hospitality’s long-term outlook remains very positive, but it is clear that many businesses have a bumpy road ahead.’

• Alix Partners says ‘the industry is still in recovery mode and adjusting to various challenges, such as clear shifts in demand, brought about by some significant changes to the operating landscape. This is graphically illustrated with the impact evolved working patterns and indeed the work-from-home culture has visibly had on bar and restaurant numbers in business districts, such as the City of London.’

COMPANY NEWS:

Just Eat Takeaway shares jumped by 40% on Friday, driven by its agreement  to sell its stake in Brazil’s iFood to technology investor Prosus for up to €1.8bn. A person familiar with the deal said the valuation of iFood, which is higher than that of publicly traded European meals delivery companies on most measures, reflected its high growth prospects.

Nightcap has announced the opening of a Tequila-focussed bar, the first new site for its Barrio brand following its acquisition, in Covent Garden in November.

• The co says ‘this is the first Barrio to open since 2015 and will be the flagship site as the largest Barrio to date and the largest Nightcap venue in London. It takes the total number of Barrio branded venues to five.  The site – formerly The Tropicana Beach Club – is well known to our current senior management team and once completed it will be one of the largest Tequila-focussed bars in the world.’

• The company ‘now has 35 sites within its estate and a further 21 premises under offer or in legal negotiations for all its brands and continues to see favourable market conditions for site acquisitions across the UK.’

Taco Bell has opened its 100th UK site, located in Spalding in Lincolnshire, following 18 months of rapid growth. Further sites in Torquay and Hornchurch will launch in the coming days.

Tim Hortons has opened its first dark kitchen in London, with Kevin Hydes, Chief Commercial Officer of Tim Hortons franchise in the UK saying ‘This dark kitchen delivery format allows us to trial a new concept, focusing on a fast delivery service throughout the day and we are excited by the potential it offers.’

Stars Coffee, the Russian replacement for existing Starbucks outlets, opened its first Moscow café on Thursday…

• Aside from the human tragedy, Russia’s invasion of Ukraine has had a far reaching economic impact on those global majors that had made the decision many years, indeed decades, ago to invest in the country. Starbucks had almost 2,000 employees in Russia and 130 stores. Staff members remain on full pay through the autumn. Stars co-owner, the restaurateur Anton Pinsky, said the outlets would be reopened gradually.

Amazon is reported to have paused its UK roll-out of its till-free grocery stores. The Times reports it was ‘facing disappointing sales at the 19 check-out free shops it already has in the UK.

HOLIDAYS & LEISURE TRAVEL:

The GMB union has suspended planned strike action by security staff at Leeds Bradford airport ahead of the August bank holiday. GMB negotiator Joe Wheatley said ‘Following a number of commitments put forward by Leeds Bradford bosses to improve pay, we now need to fully consult with our members working in security at the airport.’

OTHER LEISURE:

Cineworld has this morning commented on media speculation and confirms that it is considering bankruptcy protection…

• It says ‘the strategic options through which Cineworld may achieve its restructuring objectives include a possible voluntary Chapter 11 filing in the United States and associated ancillary proceedings in other jurisdictions as part of an orderly implementation process.’ It says ‘Cineworld is in discussions with many of its major stakeholders including its secured lenders and their legal and financial advisers….’

• Cineworld says it ‘would expect to maintain its operations in the ordinary course until and following any filing and ultimately to continue its business over the longer term with no significant impact upon its employees. As previously announced, any deleveraging transaction would, however, result in very significant dilution of existing equity interests in Cineworld.’ It concludes that its ‘evaluation of these strategic options remains ongoing. A further announcement will be made if and when appropriate.’

Cineworld shares fell by around 80% last week as concerns mounted that the world’s second largest cinema chain was about to file…

• The company, which also owns the Picturehouse chain in the UK, is struggling under $5bn worth of debt. The chain has recently warned that ‘Despite a gradual recovery of demand since reopening in April 2021, recent admission levels have been below expectations.’

Former Manchester United director Michael Knighton is backing Sir Jim Ratcliffe to become the new owner of the club. However, the American Glazer family has given no indication it is willing to bow to fan pressure by selling the club after 17 years of controversial ownership.

FINANCE & MARKETS:

Interest payments on UK government debt rose by around 40% in July.

Comparing current prices with our last email on 12 August, Sterling is markedly weaker at $1.1828 and €1.1782. Oil is lower at $95.48 and the UK 10yr gilt yield is sharply higher at 2.42% (up 35bps). Markets were mixed to lower on Friday & London is set to open around 7pts lower (as at 6.30am).

FORTHCOMING NEWS:

Very quiet week in the run up to the August Bank Holiday weekend.

RETAIL WITH NICK BUBB:

Nick is taking a well-earned break & is back after the Bank Holiday.