Langton Capital – 2015-09-15 – Daily Wrap: Tour operators making hay? Evolution, deflationary fears & other:
Leisure Wrap & Other:
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. As always, contact us if you’d like further details:
Tour operators set to prosper?
• If TCG and TUI manage to update positively on 24 and 30 September respectively, then we can’t say that we weren’t warned.
• Home Retail Group, JD Wetherspoon, the BDO Retail and the Coffer Peach Leisure trackers, Greene King and various other operators have already said that they believe a larger proportion than expected of consumers were on holiday overseas in August.
• Barclaycard (see today’s email) has confirmed the trend. The plastic provider hasn’t been too subtle about it labelling its 14 Sept research ‘spending growth slows in August as Brits head abroad to escape summer washout’. The report is here – buoyant overseas holiday market
• Planalytics has said that August 2015 was ‘another cool & rainy month’ – see today’s Nick Bubb comments.
• Selling out of stock in the Lates market is crucial and, though both TCG & TUI operate in a number of geographic source markets, the UK seems to have performed extremely well.
• We would expect comments to that effect on 24 and 30 Sept and are somewhat surprised that the shares have not moved up a little further in anticipation of such statements.
• A glance at the bank of commodity prices that Langton looks at daily (courtesy of the FT) does bring to mind just what a clear & present danger deflation is. The National Living Wage should perhaps be seen in this context. Perhaps Mr Osborne is using corporate coffers in order to increase prices.
Evolution – alive & well, seen most clearly in wine retailing today:
• Standing still is often not an option.
• In today’s email we highlight 1) the fact that Majestic is to retail own-label wine, 2) WDR highlights a double-digit increase in online wine sales and 3) the WSTA suggests that there is little brand-loyalty in the wine market – suggesting that retailing skills should be to the fore as the brand itself is insufficient to drive sales.
Random information, hopefully not all of it useless (re most leisure operators etc.):
• Against a sea of red as regards other commodities, the corn price has been strong recently – you have to be careful where you pitch your starting price but the cost of corn is actually up around 19% over the last 12mths. See below:
• Oil, on the other hand, is markedly less than half of the price that it was 12mths ago:
• Marks & Spencer shares rose from £4 to £6 on recovery hopes in H1 this year. They have now lost half of the rise.
• Interestingly Kingfisher today says ‘we remain encouraged by the macroeconomic backdrop in the UK’.
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. Majestic Wine launches own-label wines. Says ‘Definition range showcases…the most important wine styles in the world’.
2. Wilson Drinks Report says total volume of wine sold online in UK in Q1 rose 9% with sales value +11%
3. Wine + Spirits Trade Association says majority of British wine drinkers have little or no brand loyalty
4. Harry Ramsden’s, the fish and chip shop chain, has posted a 10.1% rise in like-for-like sales to £13.3m
5. Ocado saw Q3 group sales rise by 17.3% to £272m for the 12 weeks to 9 August as average orders per week increased 16.6% to 190k
a. Ocado CEO: ‘We are pleased with the continued steady growth of our business in a retail environment that remains tough.’
6. Sainsbury’s is to work with Chinese e-commerce giant Alibaba to sell a number of products in the country
7. Barclaycard reports ‘spending growth [on leisure] slows in August as Brits head abroad to escape summer washout’
8. 12 Mexican tourists have been accidentally killed by Egypt’s military police, who were pursuing ‘terrorist elements’ at the time.
9. Flybe has called for APD to be either scrapped or ‘dramatically reduced’ in an open letter to the chancellor.
10. World markets: UK markets down yesterday ahead of Fed decision Thurs night. Europe + US down but Asia up in Tues trade
a. Oil lower at around $46.30 per barrel of Brent crude
b. India’s inflation rate fell to 3.66% in August amid increasing calls for a cut in interest rates.
c. UK lenders including Santander and Nationwide have returned to selling mortgage products at 95% loan-to-value.