A Day in the Life:

So if some people, often unfairly selected by gender, are said to have a black belt in shopping, I wondered just what I’m good at?

I mean we can discount languages, maths and science meaning that it might be something a little more esoteric, maybe making a mean cup of tea in the morning, for example. Or popping down the sandwich shop or checking out the pubs in any given area or even just having a moan about things in general.

But even the latter I don’t do so well all the time, I’m out of ideas. On to the news:

The News:

Pub, Restaurant & Drinks Producer News:

• M&B is fitting stone-baked pizza ovens in all 188 of its Vintage Inns pubs as part of a menu refresh that also includes a wagyu burger in brioche bun. All of the country pub sites are expected to have the new menu and pizza ovens by the end of April.

• JD Wetherspoon founder Tim Martin has warned against introducing a sugary drinks tax due to ‘pseudo-medical advice concerning food’. Martin added plans for a sugar tax are based on ‘fashion, not science’.

• Vijay Mallya’s £53m severance package from Diageo has been frozen as India’s financial conduct watchdog has named him as part of a money laundering investigation. India’s Debt Recovery Tribunal has ruled in favour of the State Bank of India, after it called for ‘first right’ to Mallya’s pay-off package from alcohol giant Diageo. The bank is heading a consortium of lenders that are seeking redress for loans to the businessman on which he has defaulted, and it is thought he could owe over £800m to creditors.

• Scottish retailers will soon have to comply with new laws regarding e-cigarettes after the Scottish Parliament passed the Health Bill. The new rules mean the e-cigs will become age restricted.

• Itsu has launched a delivery app.

• BHS has warned that it could collapse owing £1.3bn. Not sure that was meant to happen. KPMG warns ‘if the CVA proposal is not approved at the relevant meetings, or is otherwise not implemented, it is very likely that BHS Limited will no longer be able to trade as a going concern, which would result in the appointment of administrators.’

Leisure Travel:

• A ‘robust’ forecast for European travel will drive hotel trading but revenue growth will remain weaker this year, according to PwC’s latest European hotels forecast.

• PwC reports on European hotel market concludes ‘we expect trading fundamentals to continue to improve across virtually all the cities in 2016 and 2017, but after an exceptional 2015, the growth(for most) will be weaker than 2015. Most will still see a continued increase in ADR particularly. With occupancies already high in many cities, most will see growth coming from ADR. The staying power of this growth trend in these cities is impressive.’

• PwC hotels: Says Rome will be best city in 2016 in REVPAR terms (+19.2%) and London will lag (at +1.9%).

• PwC hotels: Says ‘hoteliers we speak to corroborate this and are increasingly confident that 2016 will see trading improve further, although many voice concerns around the stormy economic and geopolitical backdrop, local supply issues and pressure from shared apartments and accommodation models such as AirBnb.’

• PwC hotels: Says London occupancy to stay high ‘despite high supply additions and only a marginal increase forecast’.

• PwC hotels: Says ‘in 2017, most cities, except Geneva and Zurich, see further ADR growth’.

• PwC hotels: Backdrop, Eurozone GDP is expected to continue to expand by around 1.6% in 2016 and 1.7% in 2017, its fastest growth rate since 2011. PwC says ‘many visitors to Europe come from further afield and the improving economic situation in the US should lead to increased numbers of tourists in the future. But, the global outlook remains mixed and the changing balance of global growth, low oil prices and geopolitical risks will determine the global economic outlook for 2016.’

• PwC hotels: Re supply, says ‘in 2015 demand for rooms (rooms sold) increased by around 3.1% while supply growth (rooms available) saw only a 0.8% gain and this imbalance is expected to continue, although pipelines are picking up in 2016. European cities with the largest pipelines include London, Istanbul, Moscow and Berlin.’

• The Scottish Passenger Agents’ Association is hoping for a cut in Air Passenger Duty in the May elections. SPAA President Alan Glen commented: ‘This year is a hugely important year politically, not only for the whole UK with the impending EU Referendum, but also for Scotland – with the Holyrood Election followed by the devolution of significant powers.’

• STR data indicates that 2015 was the first year since 2010 in which the European hotel industry passed hotels in the US in YoY RevPAR growth.

• Eurostar has cancelled and changed services this week as a result of planned strike action in France on 9 March.

Other Leisure:

• Paddy Power Betfair FY numbers, says both parties have ‘performed well pre-merger’.

• PPB FY: Announcement is pre-completion of the merger but some numbers reported as ‘group’.

• PPB FY: Revenue for combined entity +24% at €1.1bn ‘with double digit growth across all Online and Retail divisions’

• PPB FY: Group operating profits +10% to €180m or +50% pre-new taxes. FY dividend +18% to 180c.

• PPB FY: CEO Breon Corcoran reports ‘we were very pleased to complete the merger of Paddy Power and Betfair, creating one of the world’s largest online betting and gaming companies with enlarged scale, enhanced capability and distinctive complementary brands.’ He adds ‘these results show that both businesses entered this merger on the back of strong trading momentum.’

• PPB CEO Cororan adds ‘our belief in the strategic rationale for the deal has only been strengthened following our early days as a combined operator. The combination of two industry leading operators, with aligned strategies and a strong cultural fit, is hugely exciting and the enhanced efficiency from operating at greater scale means we are well positioned to compete in both existing and new markets.’ He concludes ‘the integration of the two businesses is progressing well and we look forward to capitalising on the opportunity we have to drive future profitable growth.’

Finance & Markets:

• Bank of England has said that it is prepared to inject more liquidity into the UK economy over the EU referendum period

• Japan recession less steep than feared, economy shrank by annualised 1.1% in Q4 vs earlier estimates of around 1.5%

• Euro zone finance ministers are to discuss debt relief measures for Greece once international lenders verify that Athens has carried out reforms. It is thought the talks will focus on extending the maturities and grace periods of loans from the euro zone, alongside certain interest rate reductions to cap annual debt servicing costs at a manageable level. Euro zone ministers first want to see that Greece has implemented reforms of the pension system and the income tax, set up an independent revenue agency and adopted a strategy to deal with non-performing loans.

• Cyprus will successfully complete its bailout programme at the end of March and is able to fund itself after three years of financial reforms.

• UK & European markets down yesterday. US better but Far East mostly lower in Tuesday trading

• Oil price slightly lower this morning but still holding above the psychologically important $40 mark. Trading around $40.25 per barrel

Retail Roundup from Nick Bubb:

BRC-KPMG Retail Sales for February (4 weeks to Feb 27th):
In January, the outcome of the BRC-KPMG Retail Sales survey was strong, at +2.6% LFL, which was a marked change from the broadly flat trend of previous months, but February saw the figures return to type, disappointingly, with LFL sales only up a tad overall (+0.1%, to be precise). The slowdown was very much Non-Food driven, as Food looks to have been down again by c1.5% LFL, implying that Non-Food was only about 1.5% up LFL last month. Interestingly, the BRC flags that Non-Food was again driven by “big-ticket” demand, with Furniture and Home Accessories the best performing sub-sectors, with Clothing and Footwear the worst, “as the volatility of the weather meant that shoppers had no strong incentive to buy in the new Spring /Summer ranges”. David McCorquodale, the UK Head of Retail at KPMG, also noted that “The home and the heart drove
February’s sales growth, as home improvement and Valentine’s Day campaigns brought their rewards…Jewellers also saw sales sparkle on a romantic revival”. Online Non-Food sales growth slowed, to +10.7%, but still contributed 2.1 percentage points to the year-on-year growth of Non-Food total sales in February, implying that Non-Food Stores saw sales just over 0.5% down LFL.

Today’s Press and News:
BHS is all over the papers again, after it warned suppliers that it will go bust if it doesn’t get the CVA through and that the BHS pension deficit has ballooned in size, but there is also lots of coverage of the talk that a so-called “mystery investor” has built up a 5% stake in Burberry, as noted by the FT and the Times, inter alia. The Daily Mail market report leads with the rumour that US luxury business Coach is stalking Burberry and Lombard column in the FT thunders that Burberry should not sell itself too cheaply. And with all eyes on BHS, the struggling small department store chain Beales has issued a plea to landlords to reduce rent on 14 of its stores, via another CVA.  And in terms of today’s news, the fast-growing Vertu Motors has issued a bullish trading update, upgrading full-year profit expectations but also warning that it is looking
at raising fresh equity to fund more acquisitions. Nick Bubb – nicholas_bubb@hotmail.com

Monday Wrap:

This was produced for distribution yesterday 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:

Capacity, new openings etc.:

• Capacity issues remain front of mind. Today we mention Five Guys, Pizza Hut and Telepizza as amongst the large number of operators looking to put on sites in the UK

• This may mean that, with the economy hardly powering ahead, the cake has to be sliced more thinly

• This will negatively impact incumbents. Particularly any that are lazy and entitled and who haven’t yet been put out of business by more nimble competitors

• Even for those professional operators that have remained relevant to their customers, new entrants could push up property (and ultimately wage) costs

• For the new entrants themselves, however, putting on capacity could – and indeed should – lead to higher sales, profits etc.

Commodities & input prices:

• Oil stronger. Going down as we write but still holding above the $39 level. Part of the US$ price rise may be put down to dollar weakness but the oil companies still won’t be complaining.

• Gold price also firmer but down a little over that weekend. Oil / gold ratio (that is the number of barrels of oil needed to buy one ounce of gold) has fallen from 34.4 on Friday morning to 32.3 this morning. Longer term average has been in the region of 16x to 18x.

• Commodity of the day. Hogs again, recent strength continues. Price now up by some 14% over the last 12mths

• Weaker soybean prices lend weight to suggestion that ‘downstream’ foodstuff prices could remain depressed. Price now down 20% over a rolling 12mth period.

• Re property costs, as mentioned above, new entrants could be forcing prices to rise. However, the proposed BHS CVS seems to have grabbed the headlines. Whilst the nature of property law means that most rents will continue to rise even if ‘spot’ prices fall, such moves could mean that new leases may be just that little bit less expensive than they would otherwise have been

UK big ticket sales:

• Feb car sales in the UK hit a 12yr high.

• Big ticket (cars, furniture etc.) spending still seems to be holding up.

• This was meant to have abated (to the benefit of small-ticket retailers) by the end of last year.

• Didn’t seem to happen & wheedling money out of the consumer remains a feature of leisure retail marketing

Economics:

• Jobs’ data in the US Friday suggest that ‘recession’ is less rather than more likely. Rate rises tentatively back on the agenda. March rise possible but unlikely.

• Meanwhile data elsewhere (Europe & China) suggests that slowdown may be taking hold. Deflation an issue on the Continent, more QE likely there from Thursday. China not to have a hard landing. Says China.

Random information, hopefully not all of it useless:

• US$ weakness a bit of a recent feature. Sterling up vs dollar, sideways vs Euro.

• Equity markets set break winning run.

• Weather. Interesting to see that warm weather in December ‘hit retailers’ and now cold weather in Feb has done the same. Makes sense for the fashion retailers at least as they will have been receiving spring & summer stock for a couple of weeks now and there will have been relatively few consumers willing to battle their way through the snow in order to buy a pair of shorts