A Day in the Life:

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Find previous emails at https://www.langtoncapital.co.uk/daily-notes/ 

So it’s tough getting trimmed up by a nine-year old.

In my defence, our daughter’s nearly ten but the point remains the same and, as she learns more and more facts, many of which may be useful only in pub quizzes in the future, how many countries does the Danube flow through, what do you call a herd of porcupines etc., I keep getting questions sprung on me, the answer to which remain a mystery.

So should I bow to the inevitable or should I make more of an effort?

Either that or carry my phone around with me so I can feign a coughing fit and look up what Herbert Asquith’s middle name was whilst playing for time.

Anyway, it’s time for the news but if you would like to spread the love and add a colleague or acquaintance to this email list then just let me know. On the other hand, you could just forward it to them & suggest that they hit the ‘subscribe’ button at the bottom and then, via the miracles of modern science, it will bung them on the list.

The News:

Pub, Restaurant & Drinks Producer News:

• The BBPA points out that UK beer drinkers pay twice the European average in beer taxes and some 13 times more than in Germany. The body is campaigning for another cut in beer tax ahead of the Government’s next Budget on 16 March and notes in its quarterly Beer Barometer survey that annual sales of beer fell by 1.5% in 2015, while off-trade figures remained stable. Alongside the drop in sales, the National Living Wage, higher Business Rates, and the Apprenticeship Levy are all set to push up costs.

• BBPA Chief Executive, Brigid Simmonds, commented: ‘The figures are certainly not all bad news, as overall, Britain’s beer sales have stabilised over the past three years following years of sharp decline, due to the disastrous tax policy of the beer duty escalator, which saw beer tax rise by 42% from 2008 to 2013. Since then, we have seen growing confidence in the sector, but the figures show this is no time for complacency, and any return to tax rises would wipe out this fragile recovery.

• BBPA: ‘We need another one penny cut in the Budget – to safeguard jobs and much-loved pubs, and to help Britain’s hard pressed beer drinkers.’

• Pret A Manger has been voted the Most Admired Brand in the UK foodservice industry for the seventh year running.

• Krispy Kreme is to push coffee sales, attempt to double revenues from coffee to 10% of total. New CEO Tony Thompson says ‘we lost track of what we were doing in the coffee space. We’re not trying to get away from who we are. But coffee and doughnuts, they go hand in hand.’

• Tax on sugary food & drinks may be gaining traction. Health Secretary Jeremy Hunt says it is not ‘off the table’. Hunt told the BBC ‘David Cameron has said that if it isn’t a sugar tax then it needs to be something equally robust, but he has not taken a sugar tax off the table’. The government maintains that the responsibility should be shared between parents and retailers as well as manufacturers.

• Mitchells & Butlers plans to convert another 10 pubs to its Sizzling Pizza & Carvery format by summer 2016, writes M&C. The group has seen an average 55% sales uplift in converted sites so far as its stone-baked pizza and carvery concept proves a hit with consumers.

• Greene King is introducing its own pizza offer in The Hungry Horse in Beeston, Nottingham. Speaking to M&C, a spokesman said: ‘So we can evolve and develop our pub brands, we constantly review what we do and as part of this we are refreshing a Hungry Horse in Nottingham.’

• M&C Allegra Foodservice’s Top of Mind report has found the UK eating out market has risen by one million to a total of 47.5 million potential customers.

• BrewDog is preparing to launch a new bar in Hong Kong, which will offer 14 different draft lines including its flagship Punk IPA. The bar will be the brewer’s second in Asia after BrewDog Rappongi in Tokyo.

• A Spanish winemaker who recently died at the age of 107 attributed his long life to drinking four bottles of wine a day. Antonio Docampo, of Galicia, claimed to drink a hearty two bottles of red wine at lunch followed by two at dinner and, according to his son, ‘never drank water’.

• Majestic has reduced the price on over 500 single bottles of wine just four months after removing the six-bottle minimum that was acting as ‘a barrier’ to new business.

Leisure Travel:

• STR suggests US hotel industry will soften in the future but says that doesn’t mean it will crash & burn. It says ‘a natural easing of growth is underway, and absent a significant downturn in the broader economy, the hotel industry should experience a soft landing over the next few years, which could be similar to what the industry saw 25 years ago.’ It does concede, however, that there are new threats and says re Airbnb, it says observers may ‘think Airbnb will steal hotel demand and they are worried that the “growth of growth” is declining.’

• French travel market recovering per Phocuswright. Says market totalled some €43bn in gross bookings in 2015. STR comments ‘online travel agencies’ share of the French travel market reached 43% in 2015, and even with regulatory challenges and supplier efforts, Priceline/Booking.com will continue to dominate the French OTA landscape, constituting nearly 44% of the OTA market by 2017’.

• Elegant Hotels announces agreement to buy Swiss International in Barbados, the owner of Waves Hotel and Spa for US$17.7m

• Elegant adds ‘Waves is a 4-star, 70-bedroom all-inclusive resort located at Prospect Bay in the parish of St. James in Barbados.’ It says the property ‘occupies approximately 1.8 acres of freehold land, and its facilities include a restaurant, bar, gym and destination spa with18 treatment-rooms.’ CEO Sunil Chatrani comments ‘we are delighted to be acquiring such an attractive asset in one of the most desirable locations in Barbados. We see enormous potential for Waves, and are excited about the prospect of creating a family-friendly resort that will complement our existing portfolio and meet the exacting standards that our guests have come to expect from Elegant Hotels.’ He adds ‘as we said at the time of our IPO last year, acquiring new assets both in Barbados and the wider Caribbean is a key part of our long-term growth strategy, and we
continue to target a number of other opportunities of this kind.’

• UK hotel prices have increased dramatically due to the popularity of the RBS Six Nations tournament, according to Trivago. Cardiff’s rise of 317% (£122 – £510) for Wales vs. France is the highest recorded across the Europe-wide tournament, while Scotland vs. England (£113 – £280) has seen Edinburgh-based hoteliers increase their prices by 147%. Price increases in London have risen by 4% (£162 – £168) and 10% (£162 – £178) for games against Ireland and Wales respectively.

• The US hotel industry reported positive results during the week of 24-30 January 2016 as occupancy rose 2.5% to 57.1%, according to data from STR. Average daily rate for the week was up 2.8% to US$116.87, and revenue per available room rose 5.4% to US$66.77.

Other Leisure:

• Finnish brand owner Amer Sports finished 2015 with €2.5bn in revenues, up 5% YoY thanks in part to its gross margin rising from 43.9% to 45.2%. Group EBITDA more than doubled to €122m from €55m.

• Comcast-owned Universal saw Q4 earnings rise nearly 39% to $1bn after sales grew by 15.5% thanks to a strong performance from its theme parks.

• Fitbug Holdings has announced that it has ‘entered into a settlement agreement with Fitbit, Inc. to resolve all of the litigation and claims between them.’ It says ‘whilst the terms of the agreement are confidential, the immediate positive result of the agreement is that it removes the burden of any ongoing legal costs of this litigation from the Company.’

Finance & Markets:

• US economy adds 151k jobs in January, unemployment rate falls to 4.9%. Number sharply down on December’s 292k.

• US job creation slows, observers suggest points to slowing of economy. Annualised growth of 0.7% in Q4 vs 2% in Q3. Economists had been looking for an increase of around 190k jobs vs the 151k reported.

• World markets: UK & Europe down on Friday. US down later in the day & Far East down on Monday trade

• Oil price up a little at around $34.20 per barrel

Langton Licensed Retail Index – Major Movers

The LRI underperformed a falling market last week down 3.94%, while the All-Share was down 3.62%, buoyed slightly by a rally in basic materials stocks.

Pubs

Wetherspoon was our index’s largest riser last week, rising 3.05% to c693p.  The stock has almost entirely recovered from its dip to just over 600p following a Q2 update which disappointed investors, but has thus far allowed the group to buy back some £5m worth of its shares.

In the other big pub groups, Greene King (down 2.27%) and Marston’s (down 2.92%) were both down, but outperforming the market, though M&B continued its recent underperformance trick, falling 7.14%.

In the London pubs, Young’s shares undid much of Fuller’s outperformance, as the former rose 0.44% while Fuller’s was down 4.18%.

Enterprise was sharply down, losing 7.07%, while Punch slightly outperformed the market, down 2.03%.

Other Leisure

Domino’s was the index’s single worst performer last week, down 9.5%, while Whitbread (-5.38%) continued to underperform as did Cineworld (-4.79%) while Merlin was slightly better than the index falling 2.78%. Will Brumby – will.brumby@langtoncapital.co.uk

Langton Food Retail Index – The Grocer’s Dozen

Our UK Food Retail stocks proved a safe bet in a turbulent week, outperforming the FTSE 100 and 250 to the tune of 4%. Majestic was the standout performer as investors continue to respond well to its changes to stock and pricing, while Greggs continues to languish at near-52 week lows following its January rerating.

Grocers

The supermarket stocks continue to perform well, with Tesco up 3.39% to 174.68p, Sainsbury’s rising 2.21% to 250.51p, and Morrisons shares increasing by 1.45% to 176.21p. The three stocks are up by an average of over 11% since the start of the year versus a more or less flat performance from the FTSE 100.

B&M also continues to recover the ground it lost as a result of store sales cannibalisation in its last set of results and its shares have risen by nearly 15% since its dip to c250p in early January. The group has perhaps been too highly rated in the past, but its growth ambitions mean it is well worth monitoring.

Specialty/Wholesale

Greggs (-4.84% to 991.5p) and Majestic Wine (+8.98% to 389.07p) have had contrasting fortunes of late. While the market has understandably moderated its appraisal of Greggs’ (admittedly still considerable) growth prospects, investors appear to be backing Majestic as the wine retailer comes out with a steady news flow of strategic and tactical adjustments. The latest is the news that the group plans to cut prices across as many as 500 lines. Jack Brumby – jack.brumby@langtoncapital.co.uk

Retail Roundup from Nick Bubb:

Saturday Press: There wasn’t much about Retailing in the Saturday papers, although the Times and the FT, inter alia, both flagged that Burberry has revealed plans to restructure its show calendar and retail strategy, to capitalise on the “see now, buy now” consumer culture. And both the FT and the Independent had articles about the prospects for Chinese tourist spending, as Chinese New Year approaches. Finally, in the Evening Standard on Friday the City Editor regretted John Lewis’s decision to ditch its store-by-store weekly sales figures.

Sunday Press:
The Sainsbury bid for Home Retail was again a front page topic for the Business section of the Sunday Times, highlighting that the South African billionaire Christo Wiese looked at bidding himself for Argos, whilst the paper also has a big background article (headlined “Coupe has a cunning plan for Argos”) with the inside track on the deal and the scepticism about it in the City. And on the back of the deal the Sunday Express flags that former M&S boss Stuart Rose has predicted a wave of further consolidation on the High Street. The Independent on Sunday had a follow-up piece on Burberry’s plan to make the clothes in its Fashion catwalk shows immediately available to customers (beginning this September), but otherwise the paper to read was the Sunday Telegraph, as it had a plethora of Retail stories and features, starting on the Business front page with
the revelation that the beleaguered BHS is working with KPMG on some radical plans to close a lot more stores. And Ocado was in focus, with the Sunday Telegraph flagging that there are tensions with Morrisons over its apparent refusal to supply goods into the new Ocado Andover warehouse, whilst the Sunday Telegraph also noted that the US hedge fund Lone Pine has taken a £60m short bet against Next after it admitted that its Online advantage over its rivals may be waning. Finally, the Sunday Telegraph had a feature interview with Matt Williams, the CEO of Topps Tiles, noting that he never had any intention of working in the family-owned firm for so long and that Online retailers have had very little impact on the tile market…

Today’s Press and News: The Times follows up on yesterday’s story that BHS is planning more store closures and the Guardian highlights that institutional investors had warned Next last autumn that it needed to file proper accounts to justify its special dividend payments. Otherwise, it’s thin pickings, although there are a few snippets about the report from Visa of improved High Street spending in January.

Grocer Watch: The widely followed Grocer “33” weekly supermarket pricing survey in Saturday’s magazine saw a surprise win for Tesco, to continue the unpredictable start to 2016, with the Tesco basket of £56.96 emerging just under £2 cheaper than Sainsbury (which was 58p cheaper than Asda). The Waitrose basket of £69.58 was again well off the pace. The separate Grocer “Mystery Shopper” weekly survey on Store Service and Availability was won by Asda, as their 55,000 sq ft superstore in Carlisle topped the rankings, with a score of 79 out of 100. The Grocer “Power List” of the top 100 people in the industry was topped by Chris North of Amazon UK, knocking Matthew Barnes of Aldi down to 2nd place, with Lidl’s CEO in 4th place and Tesco’s Dave Lewis in 5th place. 

News Flow This Week: it will be interesting tomorrow morning to find out how good the BRC-KPMG Retail Sales figures for January are, after the strong start to the month (we’d expect overall LFL sales to be 1%/1.5% up). And after the focus last week on its plans for Argos, it will also be interesting to find out tomorrow morning how the Sainsbury core business is doing, via the latest monthly Kantar and Nielsen Grocery market share figures (for the 4 weeks and the 12 weeks to Jan 31st). The Dunelm interims on Wednesday will be the first public outing for the new CEO, John Browett. Nick Bubb – nicholas_bubb@hotmail.com

Friday Wrap:

This was produced for distribution Friday afternoon: So the trading day is grinding to a close. We’re another day older but are we any wiser? After a day of intensive head-scratching, pen flipping and gossip, we have been considering the following:

Big ticket spending:

• Car sales still looking good (see Nick Bubb this morning for data) with sales at 11yr highs.

• But, if the share price moves of some of the majors (Pendragon down 30% in a few weeks) is to be taken at face value, the market would appear to believe that the bulk of the recovery may now have happened

• This could lead some to suggest that consumer spending may switch back towards smaller-ticket items in the coming months

US dollar weakness:

• The US Fed put rates up in Dec 15.

• The thinking then was that rates would go up Stateside four times in calendar 2016 (in the quarter-end months)

• Thinking now is that rates will actually go up between zero and four times

• And Zero is winning out with many observers now saying that the Dec 15 hike was a mistake and that there should be no further increases until 2017 at the earliest

• IG has betting on a December rate rise (the first this year) as only 47% likely

• This has hit the US dollar. We’re told that the Greenback is on course to record its worst week since 2009.

• Sterling looks as though it has strengthened (which it has) but this is due to USD weakness rather than GBP strength. The GBP actually fell yesterday against the Euro

• So a weaker USD is being priced in.

• As most commodities are priced in USD, this may mean that commodity prices (in Euros, GBP, Yen etc.) are cheaper but, in fact, it often means that the USD prices rise in order to compensate for this

• Either way, holidaymakers will notice the difference in Florida but it’s unlikely that the price of oil and/or soft commodities will fall in Sterling terms just because the Greenback is taking a bath.

Implications for UK interest rates:

• Voting yesterday switched from 8-1 against a rate rise to 9-0.

• This has led some to suggest, Langton among them, that a rate rise in the UK during the current year is unlikely.

Just Eat continues with roll-up strategy:

• Just Eat has announced four acquisitions for a total of €125m. See earlier email for detail.

• Shares up sharply in response – albeit from a sold-off position.

• Group says the acquisitions, in Spain, Italy, Brazil and Mexico, will be ‘accretive to adjusted EPS for the 2016 financial year and to add £5 million to 2017 EBITDA.’

• Arithmetically, with JE’s rating sitting at around 50x for the current year, this is perhaps unsurprising.

• Taking the above back a stage, it is equivalent to saying that, when you add in synergy benefits etc., JE is making the acquisitions on a PER of <50x

• Nonetheless, the group’s shares wanted to bounce and they have manged to do so

Random information, hopefully not all of it useless:

• JDW now spent £5.14m on buying back 820k of its own shares at an average price of 626p over the last couple of weeks

• Waitrose’ halo slips. Sales in the week to 30 Jan down by 2.4%. Suggests LfL sales could be down by as much as 5%. It says that it was “a challenging week”. On the back of what we believe was a disappointing Christmas for the upmarket retailer, one may begin to question its performance over the near term.

• Commodity prices pinging around. Cocoa now very weak and sugar, which had been strong, may be rolling over