Entain, TUI, McDonald’s, DGE, Pernod, Barclaycard data, trading & other:

PREMIUM EMAIL – PLEASE DO NOT FORWARD:

A DAY IN THE LIFE:

Bit rushed today.

Just time to make the point that you know your life has become a little boring when you get excited that the local supermarket has restocked its Tuna in Olive Oil.

No more of that brine or sunflower muck but, on reflection, it’s a bit sad, isn’t it?

And, if you need to be in bed by 10pm, the hole where your earring used to go has healed up and you have to wear odd socks to show how alternative, wacky and trendy you are, it’s even worse.

Checks socks.

On to the news:

PUBS & RESTAURANTS:

Consumer spending, Jan 2025, Barclaycard data:

Barclaycard has produced spending data for January saying that ‘consumer card spending rose by 1.9% in the month compared with the same month last year. This follows a 0.0% month in December and a decline of 0.5% in November. The 1.9% in January is therefore the best number in three months but it still lags general inflation….

• There may be a slight drift back towards cash but the last six months now have all been either negative or below inflation. Barclaycard reports that ‘spending on essential items returned to growth in January, up 0.1%, after four consecutive months of decline.’ This is not much of a rise. Spending on non-essentials was up by 2.7%. January storms impacted spending, entertainment, driven by film releases, remained strong and demand for holidays was likewise prioritised by consumers.

• Consumer trends: Barclaycard reports the rise in spending, at a sub-inflation 1.9%, was nonetheless ‘the highest uplift since March 2024.’ It says that ‘despite falling consumer confidence in the UK economy, down five percentage points to 21%, non-essential spending grew 2.7%.’

• Barclaycard adds that ‘for the third month running, 86% of consumers are concerned about rising food prices, while 64% are looking for ways to get more value from their weekly shop.’ Barclaycard reports that January’s storms boosted takeaway and delivery sales – pity the poor delivery rider – and helped the share of online retail spending to hit a three-year high.

• Entertainment: Barclaycard reports that ‘entertainment continued its stellar performance into the New Year, with spending rising  8.1 per cent.’ It says that ‘cinema spend was up 15.1 per cent, as family-friendly films Mufasa: The Lion King and Sonic the Hedgehog 3 lured in viewers.’ Elsewhere, spending on digital content & subscriptions increased 8.3 per cent with 19 per cent of respondents saying they ‘used their entertainment subscriptions more than usual due to the weather.’

• Pubs, Bars & Restaurants: Barclaycard reports that ‘both pubs, bars & clubs, and restaurants enjoyed growth of 2.6 per cent, showing not everyone spent the month sheltering from the cold’. it says this is ‘despite a third (34 per cent) of consumers saying they significantly reduced their alcohol consumption in January.’ Barclaycard says ‘this suggests the hospitality industry had prepared to cater for the growing popularity of Dry January, having witnessed a rise in punters shifting to low and no alcohol alternatives.’ Takeaway and fast food spend was up 5.1% on 7.3% more transactions.

• Leisure travel & other spend: Leisure travel continued to beat the market. Hotel & resort spend was up 5.5% whilst spend with travel agents was up 5.85 and airlines were up 5.5%. Losers remain dominated by commodity-influenced prices. Down sectors included fuel spend, down 5.8% and motoring spend, down 7.1%.

Q4 trading:

Lumina Intelligence has commented on the eating out market in Q4 last year saying that stronger spending power and less industrial action boosted participation in the quarter. Its Eating and Drinking Out Panel found almost six in 10 UK adults – up 3.4ppts year-on-year – enjoyed eating or drinking out of home each week in the 13 weeks to 31 December….

• These numbers, although they are not directly comparable, contrast with lower numbers produced by Barclaycard and CGA. There will be apples compared to oranges, of course and, if coffees and the odd sausage roll are counted in ‘eating out occasions’, then numbers could be larger.

• Nonetheless, Lumina says that participation among 25-34 year olds was particularly strong, up 1.6ppts compared to Q3 2023. The report, as MCA precis, found quality and value for money remain crucial, as consumers seek elevated moments to justify spending.

Jobs market

Demand for staff. The state of the jobs market influences consumer confidence. With that in mind, noteworthy that the latest jobs report from KPMG and the Recruitment and Employment Confederation has found that demand for staff last month fell at its fastest rate since August 2020. This is likely impacted by the upcoming NIC changes, which will make labour, particularly part time labour, considerably more expensive…

• The report notes ‘there were again reports of a reluctance to hire staff given upcoming changes to the cost of employing staff’ partly because of there being ‘a general air of business uncertainty.’ The REC says ‘an autumn of fiscal gloom, difficulty navigating significant upcoming tax rises and little progress on the practicalities of a costly new approach to employment rights are all acting as brakes on progress.’

Cost of labour. Lidl has announced a pay rise for thousands of workers that will take their entry-level hourly wage from £12.40 to £12.75. Lidl will leapfrog Sainsbury’s and Aldi, all this ahead of the NIC rises in April….

• Whilst the above will put money in would-be consumers’ pockets, wages paid in sectors deemed to be similar to hospitality, such as retail, will have an impact on expectations and, ultimately, they may influence the cost of labour for pubs & restaurants.

Other news:

The Daily Mirror reports that PM Sir Keir Starmer is ‘backing’ its campaign to save Britain’s pubs. The PM says pubs are hugely important to communities. He says the pub is ‘s a place of warmth, of opportunity, to have a nice time with friends, family and for many people to have the friendship and engagement that is so important to their wellbeing….’

• That’s all well and good, of course, but action needs to be taken. The Mirror ‘is calling for the Government to back pubs with a fighting fund for hard-hit boozers and proper recognition for pubs that are the heart of our communities. The campaign also demands more support for community groups who want to buy their local pub to stop it from closing.’

Consumer spending. Rising retail sales (see Nick Bubb) have spurred hopes that the UK economy is emerging from stagnation.

Consumer spending. With regard to disposable income, worth keeping an eye on the wholesale gas price which is now at a two year high. The direction of travel for energy costs could be upwards.

COMPANY NEWS:

McDonald’s yesterday reported Q4 numbers below estimates. Revenue fell by 0.3% to $6.39 billion in the quarter, below expectations for $6.45 billion. Adjusted earnings per share of $2.80 missed the estimate of $2.84. Global LFL sales were up 0.4%, below inflation in most territories. US LFL sales were down by 1.4%, impacted by an E. coli outbreak in the quarter…

• CEO Chris Kempczinski announced full year revenue of $25.92 billion versus $25.99 billion in the prior year. Adjusted earnings per share was $11.39 versus $11.74. The FT points out that the rise in global LFL sales came despite boycotts against US brands in several Middle Eastern countries. Net profit fell 1 per cent to $2bn, below estimates for $2.1bn. Shares in the company rose by around 5% on the news.

Diageo. Moody’s comments on Diageo’s results saying that these were ‘below our expectations’. It concedes that ‘most of the miss was the consequence of adverse exchange-rate movements’ and it says that ‘despite slower growth prospects than before, the company’s high margins, strong cash generation and ongoing commitment to return to a net leverage ratio of between 2.5x and 3.0x, are credit positive…’

• Moody’s adds that ‘we see scope for a gradual recovery in overall volumes now that inflation has fallen from the highs that curbed disposable incomes and dented consumer confidence in 2023 and 2024, which should support earnings growth.’

• However, there are a lot of moving parts. With Tequila in mind, Moody’s says that ‘the prospects of tariffs affecting imports into the US, the company’s largest market, is credit negative, even though, on 3 February, President Trump announced an immediate one-month pause on the anticipated Mexican and Canadian tariffs.’

Pernod Ricard. Reuters reports that Pernod Ricard is considering a sale of its Mumm champagne brand. Pernod says it ‘regularly assesses and evaluates its strategic opportunities and is continuously exploring options, including divestments or the streamlining” of businesses….’

• It says no decisions have been made and adds the above ‘is a usual process in line with management’s mission of delivering value to shareholders, employees, clients and stakeholders.’

The Cornish Bakery has reported numbers to end-May to Companies’ House saying that revenue rose to £29.4m from £23.7m in the prior year. EBITDA rose to £3.4m from £3.2m but PBT slipped from £1.4m to £1.1m. The company says its ‘directors believe that the business is well capitalised, with a cash rich balance sheet and a platform that is set up for continued expansion.’

Liverpool-based brewery Carnival Brewing Company, which was established in 2017, entered administration on 29 January.

Pizza chain Santa Maria ‘is celebrating its 15th anniversary with the opening of its sixth location in Paddington on Monday, 24th February 2025’.

TUI AG – Q1 NUMBERS:

TUI AG, which is no longer listed primarily in London, has updated on q1 trading (to end-December) and our comments are set out below:

Headline numbers:

• TUI reports that its Q1 (to Dec 2024) was its ‘10th consecutive quarter of Underlying EBIT growth’

• It says Hotels, Cruises and TUI Musement all helped to drive the improvement

• Q1 revenue ‘was ahead across all segments, up +13% to €4.9bn overall, supported by higher demand at improved prices as well as rates, and underlining the popularity of our product portfolio.’

• The company reports that ‘in particular our Holiday Experiences businesses, contributed to a tenth consecutive quarter improvement in underlying EBIT of +€44.9m to €50.9m.’

By business segment:

• TUI reports that Hotels & Resorts ‘posted a further record performance with underlying EBIT up +65.8%, driven by a higher number of bed nights, improved occupancies and increased rates across our key brands.’

• The company adds that ‘cruises also achieved a record underlying EBIT rising +39.6%, benefiting from strong demand and improved rates, coupled with the expansion of the fleet.’

• TUI reports that ‘TUI Musement recorded an underlying EBIT improvement of +78.5%, supported by strong growth in both experiences sold and tour operator guest transfers in the destination.’

• Meanwhile, ‘Markets + Airline benefited from continued higher demand especially for our dynamic packages in a competitive environment. As expected, overall underlying EBIT was 31% lower, due to higher investments ahead of the key summer season.’

• Some 3.7m customers ‘chose to holiday with us’ in the quarter, an increase of +6%. This ‘included a notable increase in dynamic package guests, up +18% to 0.7m.

• Average load factor at 85% maintained the level of the previous year.

Balance sheet, cash flow, debt:

• TUI reports its ‘net debt position was broadly in line with prior year and expectations, increasing by €0.1bn to €4.1bn at 31 December 2024 (31 December 2023: €4.0bn).’

• It says the rating by ‘Fitch of BB with a stable outlook is the first in the pre-pandemic territory and marks a further milestone in achieving our financial targets.’

Outlook:

• TUI reports that its FY25 guidance is reaffirmed.

• The company says ‘we remain focused on operational excellence, execution, and transformation, and are committed to delivering profitable growth.

• It says ‘our guidance is based on delivering further sustainable growth in Holiday Experiences and transforming the Markets + Airline business and is supported by the encouraging performance in Q1.

• The company sees revenue up by 5%-10% y-o-y (FY 2024: €23,167m) and adds ‘we expect underlying EBIT to increase by 7%-10% y-o-y (FY 2024: €1,296m), driven in particular by expectations for Summer 2025.’

• There should be a c. €30m phasing effect from Easter holidays shifting to Q3

Langton comment:

• TUI has benefited both from the rebound in consumer travel and from self-help.

• The consumer, both in the UK and overseas in TUI’s other markets, would appear to have ring-fenced travel when it comes to spending and demand post-Covid has been strong.

• This has not escaped the financial markets and TUI’s share price has been responsive.

• Trading so far in FY25 has been strong and current year expectations are unchanged.

• Re the near-term future, Barclaycard (in the UK at least) and other observers continue to suggest that consumers are still prioritising holiday spend when it comes to financial decisions.

• Supply issues, as always, remain a potential problem. Capacity is easy to put on and TUI, no matter its size, does not have the market to itself. In the immediate term, this does not seem to be a major issue.

• The group’s shares have recovered strongly since late summer and they may be up with events for the time being.

• However, as the company continues to reassure, supporters of the company have no reason to question their decisions to hold the shares in the immediate future.

HOLIDAYS & LEISURE TRAVEL:

TTG reports a conversation with Dover CEO Doug Bannister as suggesting that the EU’s Entry-Exit Scheme is to be delayed until November.

Hilton Worldwide has reported Q4 numbers saying that the group achieved occupancy of 74.4 per cent in Q4, up 1.9 percentage points on the same period in the prior year. The company says ‘as we look to the year ahead, we feel incrementally a bit better than we did a quarter ago.’

Eurostar yesterday resumed direct train services from Amsterdam to London.

OTHER LEISURE:

Entain plc has this morning announced that ‘by mutual agreement Gavin Isaacs, Chief Executive Officer, is stepping down with immediate effect.’ The company does not give details but adds that ‘Stella David, currently Entain’s non-executive Chair, will again assume the role of Chief Executive Officer on an interim basis until a permanent replacement has been found. Stella was previously Interim CEO from December 2023 until September 2024.’

• Stella David says ‘Entain is making strong progress in delivering our strategic priorities. We would like to thank Gavin for his contribution. The Board is pleased with the Group’s performance in 2024 and trading so far this year. As announced on 13 January 2025, FY2024 Group EBITDA is expected to be at the top of the £1,040m-£1,090m guidance range.’

• Entain adds that it ‘confirms that it is comfortable with market expectations for FY2025. Further details on Entain’s FY2024 results and current trading will be provided on 6 March 2025.’

A consortium of investors led by Elon Musk is reported to have offered $97.4bn to take over ChatGPT owner, Open AI.

FINANCE & MARKETS:

President Donald Trump has signed into law a 25% import tax on all steel and aluminium imports into the US. The levy will come into force on 4 March.

MPC member Catherine Mann has told the FT that companies will struggle to raise prices this year as consumers are hit by job losses and spending softens’ She says ‘demand conditions are quite a bit weaker than has been the case — and I have changed my mind on that.’

Sterling down at $1.2356 and €1.1999. Oil price higher at $76.25. UK 10 year gilt yield down 3 basis points at 4.46%. World markets mostly better yesterday but Far East mixed & London set to open around 7 points lower as at 6.30am.

RETAIL WITH NICK BUBB:

• BRC-KPMG Retail Sales survey for December: We thought that the overnight BRC-KPMG Retail Sales survey for January (the 5 weeks to Feb 1st) would look brighter, given the strong Food sales growth reported by Kantar/NielsenIQ (helped by the calendar shift in the first week of the period) and the encouraging weekly BDO High Street Sales Tracker figures, with total sales perhaps 2%-3% up on last year (after +1.2% in January a year ago, +1.1% in February, +3.5% in March, -4.0% in April, +0.7% in May, -0.2% in June, +0.5% in July and +1.0% in August, +2.0% in September, +0.6% in October, -3.3% in November and only +3.2% in December, despite the Black Friday week shift). And we were bang on target, pleasingly, as total sales were up by 2.6% on last year! In the press release (which was headlined “Retail sales weather a stormy January”), Linda Ellett of KPMG highlighted, however, that “The
trading environment remains tough for retailers, with consumer demand still subdued and household essential bills still high. Business costs are also coming under pressure, with rising employment costs only increasing that in the coming months. Boardroom focus on costs and competitiveness is sharpening”. The key Food/Non-Food sales split for January wasn’t buried, as usual, in the 3-month moving averages, with Food sales growth improving to 2.8%, whilst overall Non-Food sales were 2.5% up…Online Non-Food sales increased by 2.2% year on year in January and the Online penetration rate (the proportion of Non-Food items bought Online) edged down a tad, to 35.7%, from 35.8% in January 2024.

• Barclaycard Watch: Every month (at the same time as the BRC-KPMG Retail Sales survey), Barclays issues a very detailed report on UK consumer spending, based on the fact that it sees c40% of all the nation’s credit and debit card transactions, although it does not cover the full calendar month (the period covered by Barclaycard was from Christmas Day to Jan 24th). The overnight survey was more encouraging, flagging that consumer card spending was up by 1.9% in January (after +1.9% growth in both February and March last year, +1.6% in April, +1.0% in May, -0.6% in June, -0.3% in July, +1.0% in August, +1.2% in September, +0.7% in October, -0.5% in November and +0.0% in December). The survey headline was “Essential spending returns to growth in January, while entertainment, wellness and social media trends drive discretionary purchases” and Barclaycard noted another strong performance
from Entertainment (up 8.1%, helped by a continuing boom in cinema visits). Retail spending was up by 1.2%, with supermarket spend said to be up by 1.0% (although even that improved growth estimate still looks too low, given the strong Kantar/NielsenIQ monthly data and the reported BRC-KPMG Food sales growth of 2.8%).

• Heathrow Watch: This morning Heathrow has announced its latest monthly passenger number figures, flagging that over 6.3m passengers travelled through the airport in January (“Successful start to 2025 with record-breaking January”), up 5.4% on Jan 2024 and up 5.2% on Jan 2020.

• Today’s News: Along with the Dunelm interims (for the 26 weeks to Dec 28th) has come the surprise news that the CEO, Nick Wilkinson, “has informed the Board of his intention to retire from Dunelm and full-time executive life, following seven years in the role…Nick will remain in role until a successor is appointed, continuing to drive business performance and ensuring a smooth and orderly transition”. The interims themselves are headlined “Good performance and strategic progress in a challenging environment”, although PBT was only flat at c£123m, on sales up just 2.4% to c£894m. However, Dunelm goes on to say that “We are encouraged by early trading in the second half. Our PBT expectations for the full year are unchanged and in line with consensus” (of £209m). Over in France, the luxury giant Kering has announced its Q4 results and finals, with Gucci still causing problems…total Q4
sales were down by 12%, with Gucci itself down by 24%. Total recurring operating income of €2.6bn in 2024 was down by 46% from the 2023 level, but François-Henri Pinault, the Chairman and CEO, says that “we are confident that we have driven Kering to a point of stabilization, from which we will gradually resume our growth trajectory”. Back in the UK, today is also the last day of dealings in shares in N Brown, ahead of the ‘take private’ move by the Alliance family (which values the home shopping business at £185m). 

• Today’s Press: The excellent press summary email from the Guardian about today’s front-page headlines notes that the Guardian itself leads with “Court signoff in assisted dying bill to be scrapped”. “Farage deal is for the birds, says Badenoch” as the latter rules out a pact with Reform, the Telegraph reports. Rural inheritance is back on the front of the Daily Express: “‘Stop the tax so I can be a farmer like my mummy and daddy!’”. “UK fears steel industry faces a fatal blow” is the i’s lead responding to Trump’s tariffs. Top story in the Times is “Starmer set to sidestep EU’s tariff war with US”, while the Daily Mail claims a Royal exclusive: “Andrew, the ‘security risk’ financier and an £8bn venture”. “Job losses will restrain price pressures, says BoE rate-setter” is the main story in the Financial Times.