A Day in the Life:

So we’re at that tricky time of year, do you wear a coat or not?

I mean it’s minus three or so out there at the moment but it’s forecast to warm up a bit and, as I’ve got to make a 5dy prediction on the Monday mornings that I come down to London, we’re talking about a medium term decision here.

Which means that I might well chance it.

I can probably fit a thin pullover under my work jacket and the trains are always too hot anyway, I mean how bad can it be?

Because it’s March, right? In like a lion, out like a lamb and, though I hate to admit it even to myself, we’re getting towards the middle of the month already.

Decisions, decisions. Anyway, thanks to those who sent feedback regarding the structure of the email, there were some interesting comments. We’ll probably be in a position to outline one or two changes later in the week.

Nothing too radical but we must move on. It’s time for the news so just to say that if you would like to come off this email list please simply hit the unsubscribe button above. Similarly, if you are getting it forwarded and would like to go on directly or if you would like to recommend it to one of your colleagues, please just hit the subscribe button and/or suggest that your colleague does too.

The News:

Pub, Restaurant & Drinks Producer News:

• Alixpartners’ Growth Co Index topped by all-day licensed café concept The Breakfast Club, which was launched in Soho in 2005. AlixPartners says the chain, which features speakeasy-style basement bars, has generated a compound annual growth rate of 147.4% over the last 3yrs.

• Wetherspoons has raised the prices on its Breakfast Club menu by between 5 and 10%, while the cost of a cup of tea or large filter coffee is now £1.10. The 950-strong pub chain also recently axed its traditional Sunday Roast offer.

• Caffè Nero paid no corporation tax in the last financial year despite making a £23.6m profit and growing sales by 8.5% to £241m. The coffee chain has not paid corporation tax since 2007.

• The boss of Just Eat has sold some £12.5m of shares in the online takeaway delivery company at around 393p a share. The group recently posted its annual results, which saw a 58% jump in sales to £247.6m, although it is facing mounting competition from the likes of Deliveroo.

• The Casual Dining Group is expecting sales of over £300m and run-rate EBITDA of c£50m for the year to 31 March.

• Pizza Hut is set to open its first restaurant in over five years in 2017 in the White Rose development in Leeds. More than £1m has been invested into the site as part of its £60m refurbishment programme.

• Telepizza, the fourth largest pizza delivery chain in the world with 1,311 stores in 14 countries, is seeking regional master franchisees for a UK-wide rollout.

• The UK wine industry has set itself the target of increasing export volumes from 250,000 to 2.5 million bottles by 2020. Meeting the target would grow the value of UK wine exports by c£30m.

• All Bar One is the only top 10 pub brand to grow its share of total visits at both lunch and dinner in Q4 2015, according to MCA’s latest Pub Brand Monitor. The M&B brand increased its lunch share by 1.2% YoY to 2.2% and from 0.6% to 1.7% at dinner. 

• Five Guys is planning to add 30 sites to its existing 41 in the UK this year and has plans to open in Spain and France.

Leisure Travel:

• Flights from Leeds Bradford airport were delayed on Friday morning due to snow across northern England.

• UK tourism ministers have agreed to ask the Treasury to commission research into a VAT cut for the tourism industry.

Other Leisure:

• The BBC is to make smartphone and tablet users pay the annual £145.50 license fee to watch its programmes.

• Cineworld down Friday on broker comment. Shares lose around 6% of value. Says ‘signs of maturity’ across geographies

• The number of physical stores selling music, films and games has surged to a record high thanks to non-specialist vendors such as supermarkets. There are now 14,727 physical stores selling music compared to 10,391 a year ago, according to the annual yearbook from the Entertainment Retailers Association (ERA). The number of supermarkets selling music jumped from 7,078 to 8,667, while retail chains such as Boots and WH Smith rose from 2,814 to 5,566.

Finance & Markets:

• Premier Li Keqiang has admitted that China will struggle to keep its economy growing by at least 6.5% over the next five years. The country is focusing on creating more jobs and addressing inefficiencies in its existing industries.

• Almost 84,000 new cars were sold in February in the UK, making for the most active month since 2004, according to SMMT figures. Sales were up 8.4% YoY.

• US economy added 242k jobs in Feb, considerably more than the 190k expected by economists. The larger number has increased noise re another short term rise in interest rates.

• US shows average hourly wage growth slowed to 2.2% in Feb from 2.5% in Jan.

• Interest rates in UK could fall further says ex-MPC member David Blanchflower. He says rates could stay low till 2021.

• DG of the BCC John Longworth has resigned after being suspended for coming out in favour of a Brexit

• China’s head of state planning Xu Shaoshi has said that China will “absolutely not experience a hard landing”. So that’s settled then

• Challenger bank Shawbrook has suggested that some banks are offering larger loans to borrowers than is prudent. Shawbrook’s CEO Steve Pateman says ‘when you see people lending high loan-to-values and doing affordability tests on current payment rates, that is just crazy, it is like shutting your eyes and hoping for the best.’

• FTSE at 2mth highs.

• World markets: UK & Europe up on Friday, US also higher. Far East mostly higher in Monday trade

• Brent moving smartly higher. Trading at around $39.50 per barrel.

Langton Licensed Retail Index – Major Movers

The LRI was practically unchanged, up 0.16%, last week with the wider market up 1.83%, as several big names held the Licenced Retail Index back.

Pubs

M&B was the outlier on the upside amongst the pubs this week rising 6.52% to 293p.  The group’s shares have been very weak in recent weeks, falling to nearly 250p in February, having been above 470p in summer 2015, following some lacklustre like for like sales and yet another CEO change.

At the other end, Wetherspoon had a slightly worse week, down 0.42%, with broker sell notes holding the stock down.  The shares have recovered since their dip to nearly 600p in January, but still remain a way off their 800p highs from last year.   The group has been infuriating analysts by allowing its margin to be eaten away to just over 6%.

Greene King and Marston’s were more in line with the wider market, rising 1.12% and 2.14% respectively, with the London pubs up similarly, where Young’s was up 2.35% and Fuller’s up 0.66%.

Enterprise was up 1.87%, but Punch underperformed yet again, down 2.84%, as fears over the group’s debt remain.

Other Leisure

Whitbread had a bad week last week, down 1.98% as the group’s Q4 trading update revealed somewhat sluggish growth.  The group faces some pretty big short term headwinds, with the weather impacting Costa sales in the UK, and perhaps more importantly, a downturn for the UK hotel market on the cards. The group’s shares now trade at c16x earnings and yield c2.5%, making them seem more reasonably priced than they have done in recent years.

Cineworld took a dive on Friday, ending the week down 5.29%, as a broker sell note came out indicating that the 2016 cinema schedule could be tougher for the group, with more children’s films, which generally have lower average ticket prices. We’d argue that this has little to do with the underlying business, and with 2015 having one of the best film release schedules in recent memory, what did analysts expect? Will Brumby – will.brumby@langtoncapital.co.uk

Retail Roundup from Nick Bubb:

Saturday Press:
Many of the front pages of the Saturday papers focused on the news that the under-pressure Chancellor has quietly dropped his controversial plans to cut pension tax relief in the Budget (eg the headlines “Osborne retreats on pensions tax” in the FT and “Osborne abandons assault on pensions” in the Times), but the main Retail story continued to be BHS, after announcing nearly 400 jobs losses in HQ and store management on Friday. The Times quoted an anonymous landlord casting doubt on the wisdom of voting through the CVA, comparing it to “putting a band aid on a femoral artery wound”, whilst the Daily Mail flagged that BHS is nearing a resolution of its big pension fund deficit and the Guardian highlighted that BHS’s secretive new owner Retail Acquisitions has given itself a £8.4m loan from the company. In other news, the Times and the
Daily Express flagged that Mountain Warehouse has teamed up with the TV explorer Steve Backshall to create a new range of outdoor clothing for children, whilst the lead story in the Daily Mail stockmarket report was that Barclays have downgraded Associated British Foods over concerns about Primark’s push into the US. Finally, writing in the Times, Simon Wolfson, the once highly regarded CEO of Next, pontificated that, on balance, Britain would be better off out of Europe.

Sunday Press:
The big focus in the Sunday papers was inevitably on the problems of BHS, with the main story the Sunday Times revelation that Philip Green may be forced by the Pensions Regulator to pay up to £80m into BHS’s pension fund, “one year after selling the chain for £1”. The Sunday Express said that BHS could be put into administration unless its landlords agree to the CVA, the Mail on Sunday has a profile of BHS’s CEO Darren Topp (who says that BHS’s issues are part of a wider problem in the High Street) and a Business editorial in the Observer argues that alienating its landlords and borrowing more funds from the business will not help BHS to survive. Elsewhere, the Sunday Times has a good background article on the situation at BHS (headlined “Close to the rocks”) and notes how the expensive rents and long leases on many stores result partly from
sale-and-leaseback deals by Philip Green after he took the business private in 2000. In other news, the Sunday Telegraph highlights that Steinhoff and Sainsbury’s are playing a “game of chicken” as they weigh up rival bids for Home Retail, as, under a quirk of the Takeover Panel rules, whichever company bids first triggers an automatic 53-day extension for their rival suitor. The Mail on Sunday reported that John Lewis Partnership may offer a new bond for savers and also noted our view that the annual Partnership bonus is likely to be cut to 9% or 10% on Thursday. The Sunday Express flagged that Halfords is set to unveil a new range of kid’s bikes, designed by Bradley Wiggins. Finally, the Sunday Telegraph ran a huge photo of the Duchess of Cambridge on its Business section front page to illustrate the news that the struggling Whistles fashion chain may be bought
by the South African group Foschini, whilst, not be outdone, the Sunday Times had a big photo of John and Belle Robinson of Jigsaw to illustrate the news that the fashion chain is up for sale.

Today’s Press and News: The FT and the Times follow up the Sunday Times revelation that Philip Green is talking to the Pensions Regulator about propping up the BHS pension deficit, but the big new story brewing is that the new Sunday Trading rules may be watered down to placate angry Tory MP’s and avoid a Government defeat (as reported by the Telegraph and the FT, inter alia). The FT and the Independent have previews of the Morrisons finals on Thursday. News flow so far today otherwise is confined to an announcement from Mulberry that its new Finance Director comes from Dyson, of all places, and an upbeat trading update from the fast-growing motor dealer Cambria Automobiles.

Grocer Watch:
The widely followed Grocer “33” weekly supermarket pricing survey in Saturday’s magazine was won by Asda again, on the face of it, as the Asda basket of £57.99 was no less than £7.40 cheaper than 2nd placed Tesco, but that gap was neutralised by a £7.59 instant cash-back voucher from Tesco…Sainsbury was also able to cancel out the Asda price gap, with a £9.33 Brand Match voucher, but Morrisons was nearly £10 more expensive and Waitrose was a whopping £16.88 off the pace…The separate Grocer “Mystery Shopper” weekly survey on Store Service and Availability was won again by Sainsbury, as its 40,000 sq ft superstore in Bridgewater in Somerset topped the rankings, with a very solid score of 80 out of 100 (including 18 out of 20 for stock availability). The Grocer also had a feature article on the Morrisons/Amazon tie up (“The perfect fit or sleeping with
the enemy?”) and a review of the “Top 50 Independents” in the industry (headed by the Home Bargains chain, owned by TJ Morris).

News Flow This Week: This week is fairy busy, with tomorrow bringing the BRC-KPMG Retail Sales for February, plus the latest Kantar and Nielsen Grocery market share data. On Wednesday we get the Lookers finals and the Retail Business Technology Expo (RBTE) at Olympia. And then Thursday brings the Morrisons finals, the John Lewis Partnership finals and the much-awaited Home Retail Q4 trading update. 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:

HOTEL INDUSTRY:

• See yesterday’s email and 60 Seconds article for our take as to how the cycle will pan out.

• We believe that the HOTEL CYCLE IS PAST ITS PEAK. Both in the US and in London but perhaps less so in the UK’s regions. 

• CAPACITY STILL GOING ON IN LONDON. Today (see earlier email), we have the news that Accor is spending £160m on new hotels in the UK

• This spend will include a 39-storey Novotel at Canary Wharf. Three of the five planned hotels will be in London.

• Accor has said it would continue to look for further opportunities in the UK. It says ‘whilst focusing on the Asset Management of our hotels, we continued working on development opportunities and are adding great hotels in exceptional locations to our portfolio.’

• NEW ENTRANTS. Pubs are also putting on capacity. Shepherd Neame recently reported stellar accommodation numbers, GNK, JDW, MARS and others are all putting on rooms via lodges and as a part of existing pubs. Others, such as Tune, EasyHotel etc., are also putting on rooms.

• Overall, we believe the (downward) momentum in the hotel cycle will be hard to avoid. Whitbread may likely ‘have more information’ by the time of its FY numbers in April – but that information needn’t be good.

RETAIL (INCLUDING LICENSED RETAIL) RENTS:

• Landlords are fat cats who do nothing for their money.

• At least that’s one theory.

• WHAT GOES UP, MUST COME DOWN. BUT NOT RENTS.

• Operators are understandably frustrated that, when business models evolve, for example when the internet takes trade from the High Street, rents do not adjust accordingly.

• Now’s not the occasion to precis property law but they tend to be upward only.

• Rents are sticky on the way down. In fact they only tend to move down when there’s a disruptive event. DISRUPTIVE EVENTS CAN RESET RENTS.

• Property Week suggests ‘struggling department store BHS has said it will enter into a company voluntary arrangement (CVA) in an effort to revive the business.’

• BHS says ‘it is essential it resets its costs in order to achieve a successful turnaround of a business that has been loss making for many years’.

• This could involve giving the keys to a number of stores back to their landlords.

• It says these stores are ‘over-rented’.

• BHS says ‘the CVA proposal that we have announced today is a necessary milestone…Some of our stores are loss making as we are being charged rents that are too high relative to today’s market. The CVA will address this issue.’

• Dumping toxic rubbish is hardly a new idea but, in some instances, the actuality or the threat thereof is the only way in which an operator can get his landlord’s attention

• Should this go ahead it might engender a feeling of realism in some landlords but what it will do is potentially leave another sad hole in the High Street.

• RE WHITBREAD. And the above, incidentally, wouldn’t do wonders for footfall and for Costa’s coffee sales.

Input prices:

• Oil up, gold up. What’s going on? Gold certainly breaking new ground at over $1270 per ounce.

• Oil price holding just below $37 per barrel. Not bad but the gold/oil ratio is at 34.45. That is, it takes 34.45 barrels of oil to buy an ounce of gold, not far off the all-time peak of around $36 hit last month. The longer term average is around half that.

Random information, hopefully not all of it useless:

• Bad day for leisure on the markets yesterday, particularly travel. Top ten losers in the FTSE100 and FTSE250 included Whitbread, Carnival, TUI, Merlin, IAG, Thomas Cook & Paddy Power.

• Whitbread down on Q4 update but the others impacted by oil price & betting worries.

• Whitbread down another quid today (at the time of writing). Now looking quite reasonably priced – except for the concern that earnings forecasts may come under downward pressure of the hotel cycle continues on its downward path

• Sterling picking itself up off the canvas.

• ECB meets next week. Observers seem to agree that M Draghi has to do something, disagree as to what