A Day in the Life:

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So we popped up to the edge of the moors the day before yesterday & spent the afternoon in and around Helmsley.

And the town, which is a little twee for some tastes, has a lot going for it what with its castle, its impressive market square, its various pubs, cafes, restaurants and cake shops and its view of the moors looming to the north etc. but, I would argue, what it maybe doesn’t have in abundance is the killer instinct that would drive it to wheedle every last penny out of those people who have doubtless visited their fair burgh in order to spend money.

I mean why else would the cafes close at 5pm?

And why would their ‘all-day-breakfasts’ finish at 11am (alright so I added the ‘all-day’ bit) and why would they stop serving hot food at 2pm?

I mean ‘we’ve turned the grill off’ is hardly an excuse, is it? And ‘the chef’s gone home’ is little better because, in a town the size of Helmsley, you could get him or her back in less than 90 seconds.

So, having spent £2.90 in the car park and having wandered around the castle (free to English Heritage members), we had a cup of Earl Grey followed by another cup of same two hours later and then left.

We were down less than a tenner as a family and would have gladly spent five times that much if somebody had just left their tills turned on a little longer. On to the news:

The News:

Pub, Restaurant & Drinks Producer News:

• Conviviality reports owners of Matthew Clark (Punch is 50%) have said they will not sell MC to a third party before 5 Sept. Conviviality adds ‘the Undertaking also contains break fee provisions under which the Company may be liable to pay a break fee of £1m if agreements to effect the Acquisition are not signed within certain agreed parameters by 4 September 2015 (or such later date as referred to above).’ It adds ‘the Sellers may be liable to pay the Company an aggregate break fee of £1m if they agree to sell Matthew Clark to a third party buyer within 180 days of withdrawing from an agreed deal with Conviviality.’

• Walkabout operator iNTERTAIN confirms it is to open 2 new venues sited in Lichfield + Solihull in the West Midlands. The group points out the acquisitions follow the opening of Walkabout Brighton in May, the company’s first new opening since 2009. The 2 new units will reopen in time for the Rugby World Cup in September as ‘new-style’ Walkabouts. The group says the units ‘will have a high focus on food, offering customers light bites, main meals, sharing dishes and party plates’ and iNTERTAIN CEO, John Leslie adds ‘we’re very excited to be opening these two new venues. We now have a fantastic platform from which to build for the future. Solihull and Lichfield are both great towns and we’re looking forward to introducing customers to our ‘new style’ Walkabout.’

• The Sun reports that Londoners drink the least amount of alcohol in Britain. Section of population not drinking for religious, social, health or other reasons

• ASDA reports it is to increase price it pays its milk suppliers to “a level that will assist” farmers”

• The M+C reports that smokehouse concept Red’s True Barbecue is to come to Liverpool in November. The group will invest £1.1m at its 150-cover site on Hanover Street.

• A report by the Royal Society of Public Health suggests that the smoking ban should be extended to children’s playgrounds, alfresco dining areas, parks, squares and outside school gates.

• The Morning Advertiser writes that Hackney Council has been forced to abandon its consultation into a late-night licensing policy. The borough had proposed a law that would close new pubs, bars and nightclubs at midnight and prevent licences from being granted in certain areas, although this has now been scrapped after mistakes were found on an important document.

• Greene King has recruited its 1,000th apprentice this year after committing to recruiting 2,000 by March 2016, according to the MA.

• Conviviality Retail will help rebrand 100 franchisees for free, providing them with internal branding, fascia and new tills.

• Sainsbury’s has launched its Tu clothing website providing nationwide access to the collection for the first time.

• Pop-up retail is now worth £2.3bn to the UK economy according to an annual report from the Centre for Economics and Business Research (CEBR). Pop-ups now account for 0.76% of total UK retail turnover. The research reveals that the pop-up retail sector is growing at 12.3%, having increased £200m in the past year, and now employs over 26,000 people.

Leisure Travel:

• Hertz reports sales down 5% in Q2. Strong dollar impacted numbers (down 13% outside USA), some falls in off-airport rental numbers.

• The terrorist attack in Tunisia will cost TUI between €35m and €40m

• HVS Q2 Hotel Bulletin shows REVPAR up by 4% across UK in quarter, still positive but lowest rate in 2yrs. Glasgow, with REVPAR +14%, is the fastest-growing across the 12 cities reviewed.

• HVS suggests Serviced Apartments remains one of the most attractive markets in the accommodation space. It says ‘the serviced apartment sector has gained momentum over the last three years and seems to be on the point of transitioning from a niche market to mainstream, not only with consumers but also with investors, developers and operators.’

• HVS points out that the conference market ‘proves bright spot in UK hotel slowdown’ saying that, whilst conferences are holding up relatively well, ‘there are now signs of a slowdown in the sector prompted largely by the weakening of the Euro, a downturn in long haul visitors and strong competition from other European cities.’ It says ‘London saw RevPAR up just 3%, attributable to high comparable figures in 2012/13 as well as the weakening of the Euro and the fact that with occupancy flat, or decreasing, hoteliers have been unable to increase rates to compensate.’

• The amount of hotels under contract in Europe fell 9.5% year-on-year in July to 804 hotels totalling 131,389 rooms. Istanbul reported the most rooms under construction with 4,584 rooms in 23 hotels, while Greater London had 3,759 rooms in 22 hotels with Moscow and Greater Amsterdam close behind.

• STR data shows there were 3,597 projects totalling 430,917 rooms under contract in the US in July, marking an 11% increase year-on-year.

• The Foreign and Commonwealth Office (FCO) has issued a warning to all British travellers to avoid the port area of Tianjin. The announcement comes following a massive industrial chemical explosion in the city on Wednesday night which has left at least 44 people dead and more than 500 injured.

• July proved to be Birmingham airport’s busiest ever July after passenger traffic increased by 2% year-on-year to over 1 million. Birmingham airport CEO Paul Kehoe said: ‘This is the twenty-seventh month of continuous passenger growth at Birmingham and it’s excellent to see the million passenger mark broken in July.’

• UKinbound has urged airport shops to pass on VAT savings to travellers as they are supposed to.

Finance & Markets:

• US retail sales rebounded in July on back of strong car market. Bounce has strengthened view that rates will rise shortly

• Oil price: Brent trading at $49.20. West Texas Intermediate somewhat lower, actually scraping 6.5yr lows

• Greek economy grew by 0.8% in Q2 and statisticians revised up their Q1 estimate from down 0.2% to flat

• World markets: UK mixed yesterday, Europe up and US down. Asian markets mostly down in Friday trading

Retail Roundup from Nick Bubb:

Conviviality Retail:
It’s been well over a month now since Conviviality Retail (the “Bargain Booze” and convenience store business) announced that it was suspending its shares while it negotiated the potential acquisition of the drinks wholesaler Matthew Clark, but this transformative deal has edged a lot closer today, after the news that is has beaten off rival bidders and entered into “a non-disposal undertaking” with the owners, Punch Taverns. This means that Punch can’t sell Matthew Clark to a third party buyer before 4 September 2015 and will have to pay a break fee provision of £1m if a deal isn’t agreed by then, so that is a useful incentive to tie things up with Conviviality soon and the timetable is now a bit clearer. How Conviviality will pay for the acquisition remains to be seen, as Matthew Clark is potentially double their size, but investors
should provide decent support once the terms and deal synergies become available.

BDO High Street Sales Tracker:
the weekly High Street sales index assembled by the accountancy firm BDO is still a useful guide to Fashion trading momentum, but, as we always have to point out, the headline figures are just for Stores and continue to exclude Online sales (in contrast to the practice of nearly every retailer, eg the weekly John Lewis Fashion figures). And the BDO “Fashion” sub-index is compiled from the figures of c35 relatively upmarket High Street chains (the likes of French Connection, White Stuff, Oasis, Karen Millen, Coast, Hobbs and TM Lewin), so it is not a picture of the mass-market. Nevertheless, it is interesting that BDO Fashion store sales have generally been poor in recent weeks (the 4 weeks to 26th July saw LFL sales down by 1.4%) and BDO flag today that w/e Aug 9th was disappointing yet again, with overall Fashion store LFL sales down by 5.5%, despite a modest comp.
Overall LFL Store sales (including c20 Homewares and “Lifestyle” retailers) were down by 4.1% and total Non-Store sales were only up by 9.5%…

Trade Press:
The main news headline on the front page of “Retail Week” magazine today is “Amazon lines up Fresh threat to food retailers”, flagging that Amazon is poised to send shockwaves through the grocery market, after it moved a step closer to launching its Fresh proposition in the UK by taking over the 300,000 sq ft former Tesco warehouse in Weybridge. RW also notes that Morrisons has launched a new brand of milk offering customers the choice to pay more per litre to support dairy farmers, Boots is reviewing its airport VAT policy after retailers were warned they may face a Parliamentary investigation over tax relief, the Tesco Clothing chief Richard Collins is stepping down and will be replaced by the former BHS boss Richard Price and Morrisons will follow its rival Tesco’s lead by bringing in “friendly, human and polite” self-service
checkouts to its stores. RW also has an interview with the Retail entrepreneur Theo Paphitis and his right-hand man Kypros Kyprianou. The Editor of RW notes in his column that, “from the aisles to the airports”, some of Retail’s biggest names faced open revolt from suppliers and shoppers over the past week, thundering that “it was right for Morrisons to give some ground to milk farmers” and that “the general airport experience is pretty dismal”.

Yesterday’s Press and News: The scandal that Airport retailers like Boots, Dixons and WH Smith are claiming millions in VAT discounts on duty free items without passing savings on to customers continues to get blanket coverage in the newspapers and the industry seems to be struggling to respond. The improved ScS trading update is picked up by the Telegraph, the Times and the Daily Mail and there are a few snippets about the news that Sainsbury’s is to launch a website offering its full range of Tu clothing (supported by 710 outlets, including convenience stores, offering a “Click and collect” service), whilst the Independent flags that Sainsbury’s has shelved an 80,000 sq ft superstore in Middlesbrough despite completing construction work on the building and its car park, claiming the site was “no longer viable” due to changing shopping habits…

News Flow Next Week: The Wal-Mart/Asda Q2 on Tuesday is probably the highlight of next week’s news flow, but the WH Smith pre-close trading update on Thursday may get more focus than usual, given the recent row about Airport VAT policies, whilst the ONS Retail Sales figures for July are also on Thursday. 

Nick Bubb – nicholas_bubb@hotmail.com

Thursday 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:

Current pub trading (all licensed leisure retailers etc.):

• The latest Coffer Peach Tracker confirms a number of recent trends.

• Restaurants are performing more strongly than pubs but, in London, LfL sales are under a little pressure due to new capacity. This is less of an issue in the Provinces where branded chains have considerable traction.

• Pubs inside the M25 are still performing well and wet sales are strong. This will be partially as a result of better weather.

• The gap between total sales growth and LfL sales does still highlight the fact that there is a lot of new capacity still going on.

• We would caution here that new entrants are often (or at least sometimes) more of a problem for incumbent operators & for market stats as a whole than they are for themselves.

• If branded restaurants outside the M25 are seeing growth of as much as 12.3% against July last year (including new openings) we have to conclude that something is definitely going right.

• If anything, the better performance of restaurants is even more impressive considering that good weather, such as that seen in early July, tends to favour wet led pubs rather than eating houses per se.

Are these the good times?

• The Peach Tracker numbers are good (above) and we have average earnings increasing by 2.4% to boot.

• This is well ahead of (virtually zero) inflation suggesting that many consumers will have more money to spend going forward.

• True unemployment blipped up a little over the last quarter.

• And true there is still a lot of spending on large ticket items but, overall, we tend to agree with J Sainsbury’s observation/prediction that spending should shift back towards ‘affordable treats’ before the end of the calendar year.

TUI, Thomas Cook & leisure travel (re major tour operators):

• TUI has managed to reassure the market that tragic issues in Tunisia and farcical issues in Greece do not spell the end of leisure travel.

• TUI’s shares are up 7% or so and rival Thomas Cook’s shares are up by around 3%.

• We would suggest that, after recent weakness, both moves are justified but consider that, if anything, the upward move in the price of Thomas Cook is a little churlish.

• The group is now conservatively run and has its JV with Fosun to help it drive business going forward.

• On a current year (partially recovered) PER of 14.5x and a 2016 multiple of less than 10x earnings, we believe that Thomas Cook’s shares offer good value.

Random information, hopefully not all of it useless (re most leisure operators etc.):

• Oil price up a shade, nothing that you’d notice.

• US burger chains turning to alternatives other than beef given the rise in the latter’s price. Innovation still alive & well.

• Greece: So Mr Veroufakis is sniping from the side-lines. Well it was always likely that he would see his removal as just cause for him to criticise and, as it will be some time before the situation is clear, he is hardly risking his reputation, such as it is, by saying that it will be difficult to make any deal re Greece stick.

• Has Waitrose’s halo slipped? See Nick Bubb comments in earlier email.

• Interestingly, Cineworld has not mentioned the weather. Admittedly in its risk warning it does concede that ‘unusual weather patterns such as unseasonably warm summers or extreme snowfalls in winter can impact attendances at cinemas and, particularly where this coincides with a major film release could have a significant effect on revenues’ but it does not refer to the hot weather in early-July as being of any cause for concern.