A Day in the Life:

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I suppose people do split into either being night owls or morning people but, and here’s a question for you, what do you do if you are neither?

Because I’m finding myself increasingly irritable in the morning but, after I’ve had a couple of cups of tea, a coffee and a wander around the office, the phone begins to ring and I get worse.

And then the wheels will no doubt fall off something or other.

That’s not designed to lighten the mood and I’m likely to hit another low. The IT systems will fall over, I’ll open an envelope with some demand for payment or other in it or I’ll be told that the dog’s eaten my slippers.

The boiler’s gone off, the road tax is due and the car itself has picked up another mystery ding and so it goes on until an email tells me I’ve got $25m to pick up in West Africa or that a very forward young lady in Russia wants to make my acquaintance but even that doesn’t do much to cheer me up. On to the news:

The News:

Pub, Restaurant & Drinks Producer News:

• Punch strategy, a taster with the Matt. Clark disposal. Punch will likely update in depth on strategy at FY numbers but, in its short RNS of 8 September re the sale of its 50% share in Matthew Clark, it did give some hints.

o Group reminded investors of its 2011 decision to split the group into core + non-core businesses

o The non-core pubs, 716 units at 22 Aug). ‘are predominantly small, wet led and have a much lower average net income per pub.’ They will be managed for disposal.

o Re the impact of the Small Business, Enterprise and Employment Act 2015, which introduced the notion of a Market Rent Only option, some changes are likely.

o Punch says ‘implement this legislation will not be completed until 2016’ but says ‘the Group has already begun to take a number of operational actions to address the potential implications on the Group of the implementation of the legislation’.

o These actions include ‘a review of new managed and franchised pub operating formats on a select number of sites’ and a ‘modernisation of our pub tenancy and lease agreements’ in addition to the implementation of a ‘commercial free-of-tie lease agreements and operating model.’

o Punch reiterated last week that it would reduce debt by £200m in the two years from Oct 2014 and says that ‘it is against the above background that the Directors determined to consider the disposal of the Group’s 50% interest in Matthew Clark.’

o More details to follow in November.

• PMA reports that incidences of violence in pubs are on the up. Registers a 24% rise in 2014.

• Diageo’s Johnnie Walker has unveiled its ‘Joy Will Take You Further’ campaign.

• Coca Cola is highlighting the removal of sugar from some of its products amid attacks from the health lobby. It says it has launched 27 new lower or zero-sugar products since 2005. It says ‘the advertising highlights the work we have been doing to offer people a greater choice of lower and no-sugar drinks, the investment we make in local community projects and our credentials as a British business.’

• M+C reports Imbiba-backed Darwin + Wallace has acquired a 4th site, the former All Bar One in Chiswick from M+B. It quotes M+B as saying ‘we continually review out estate and from time to time make the decision to sell businesses or explore alternative opportunities for the site locations to ensure we continue to drive shareholder value.’

• Lidl is to become first UK supermarket to implement minimum wage. It will pay UK staff min. of £8.20 + £9.35 in London.

• Cracker Barrel this week reported higher Q4 numbers but its shares fell on a disappointing outlook statement.

• BBPA re red tape. It welcomes proposals, says ‘often, red tape is not so much about actual regulations, but behaviour’.

• Square Pie is to launch a pie world cup to coincide with the Rugby version. Group says ‘during the 1st round, we sell the pies alongside our usual range in our restaurants on the day the respective teams are playing. This can be up to 8 specials per day’. It says ‘each pie sale counts as a point so you have winning and losing teams each day as their pies ‘play off’.’ The Pie World Cup final will be held on 31st October 2015.

• Oxford Economics has reported that UK hospitality + tourism industry employs 4.49m people, or around 10% of the workforce

• Midlands-based Pug Pubs is exploring funding options with a view to expanding, M&C reports.

• Aldi is suing over Bargain Booze’s ‘Aldi Shmaldi’ advertising campaign, which directly compares the two’s products. The campaign’s intention was to point out that that many big brands at Bargain Booze cost the same as Aldi’s own-brand counterparts.

• The BBPA has said that the Rugby World Cup will provide a big boost to pubs across the UK and expects over 5 million extra pints to be sold. The additional trade could be worth around £86m.

• UK retail sales volume grew by 0.2% in August month on month and 3.7% year on year, thanks to sales of school uniforms and online business. Meanwhile, average store prices fell by 3.3% compared with August 2014. BCC chief economist David Kern commented: ‘The figures reinforce our assessment that the UK economy remains too dependent on consumer spending. While a healthy consumer sector is important to the economy’s wellbeing, we believe that greater efforts are needed to make Britain’s growth more balanced, with greater emphasis on investment and exports.’

• More on retail sales: ‘At the same time, the deflationary forces in the retail sector are intensifying, and August was the 14th consecutive month of annual price falls in the retail sector. This reinforces our view that in spite of rising earnings, inflationary pressures in the UK economy are still muted, and the MPC can wait until well into next year before contemplating increases in interest rates.’

Holidays & Leisure Travel:

• HRG reports that Moscow is still the world’s most expensive destination for hotel accommodation despite recent depreciation of rouble. The ARR in the Russian capital was up by 6.1% last year to £266 per night.

• Ryanair is expanding into Spain and Italy with four new routs set to fly from Milan, Bucharest, Comiso and Seville from 1 December. Chief commercial officer, David O’Brien, said: ‘We will continue to operate and grow at Milan Bergamo airport and, as demonstrated by the success of our dual airport strategies in Brussels, Glasgow and Rome, Ryanair will remain the ideal choice for both business and leisure customers.’

• US hotel occupancy fell 6.4% to 63.8% during the week to 12 September, while ADR was down 1.2% to $116.07 and RevPAR fell 7.5% to $74.03. Trade was impacted by the Labor Day bank holiday.

Other Leisure:

• Merlin analysts’ meeting: Group reiterated that it will forego a year’s growth in FY15 but good stuff going on beneath surface

• MERL meeting: Reiterates Alton Towers setback expected to be 6mths to 18mths in duration. FY16 will be impacted.

• MERL meeting: Thorpe Park feeling some Alton Towers issues, Midway performing well though strong Sterling an issue.

• MERL meeting: Gardaland in Italy exciting, foreign visitors now 30% up from 5% + new openings globally very strong

• MERL meeting: Lego better than expected, theme parks worse. Some may say that ‘improves’ the flow of earnings

• MERL meeting: Many accommodation infill opportunities remain, ditto geographic infills in US + Asia in general

• MERL meeting: overall impression is of a co that has had a setback but which has underlying growth baked in for many years

Finance & Markets:

• US leaves rates unchanged, some relief but more worry on basis of ‘may go up next time’. Has to be correct once, right?

• Fed policy hold seen as nod to global economic worries, slow growth etc. Major (positive) impact may be in EMs. Ms Yellen said ‘the outlook abroad appears to have become less certain’ and added ‘in light of the heightened uncertainty abroad … the committee judged it appropriate to wait.’

• New unemployment claims fell last week in US to lowest level in 8wks

• UK mortgage lending in first 8mths of this year is ahead of full year lending in both 2010 and 2011 (at £138.6bn to date)

• UK markets down yesterday, Europe slightly higher but US down ahead of rate decision. Far East mostly up on the news

• Oil price down a little, trading at around $49.10 per barrel.

Retail Roundup from Nick Bubb:

Poundland: After the provisional outcome of the CMA inquiry on Aug 25th you may have thought that was it in terms of the Poundland takeover of 99p Stores, but there was still a formal process to go through, so the CMA has made a song and a dance today of announcing proudly that it has now finally cleared the deal. The CMA found what was obvious to everybody anyway that “…the companies are each other’s closest competitors but after the merger they will still face competition from other value retailers such as B&M, Home Bargains, Wilko and Bargain Buys, along with Tesco and to an extent Asda”. Poundland now aim to complete the acquisition of 99p Stores by the end of September and further information on its plans for 99p Stores will be given with the interim results on 19 November.

Planet ONS Watch:
We flagged yesterday that Capital Economics were probably too gloomy in expecting a 0.3% fall in “seasonally adjusted Retail Sales volume”, month-on-month, in August (the 4 weeks to Aug 29th) on that strange parallel world, the Planet ONS…and overall volume was actually up by 0.2% on this basis, although the ONS does not seem to have adjusted its August figures for the calendar shift of the Bank Holiday into September. Interestingly, total sales were only up by 0.9% by value on last year on a non-seasonally adjusted basis in August and the two sub-groupings of “Large Businesses” and “Small Businesses” were up by exactly the same amount, but in Clothing etc there was a notable divergence, with the ONS noting, a little bizarrely, that “feedback suggests that the increase in the amount spent in Small textile, clothing and footwear
businesses was a result of increased sales of school uniform”. The figures for Online sales were also interesting, with total Online sales growth of 7.4% the lowest increase in this measure since November 2012, but Online Food sales rose by 10.9% last month.

BDO High Street Sales Tracker: this weekly High Street sales index assembled by BDO is still a useful guide to Fashion trading momentum and sales have been notably poor in recent weeks, but the first week in September burst back into life, on the back of the autumnal weather, Bank Holiday and “back to skool” trade. However, BDO has revealed today that last week slipped back again, disappointingly, with overall Fashion store LFL sales in w/e Sept 13th down by 0.2% (despite a very weak comp and more helpful weather, albeit discounting was much reduced). And, similarly, Total BDO LFL Store sales (including some Homewares and “Lifestyle” retailers) were only up by 0.8% last week, although overall Non-Store/Online sales remained strong, with LFL sales up by a hefty 27.7%.

Trade Press:
The startling front-page headline of “Retail Week” magazine today is “Boardroom makeover puts women in charge”, flagging that Kingfisher’s pioneering decision to put women in the majority in its top executive team has prompted calls for other retailers to follow suit. RW also highlights that Tesco Labs won the Retail Week “Hackathon”, with an innovative kitchen assistant device, BHS has bolstered its Food offer in the new-look Watford store revamp, Morrisons is testing a new fascia in its recently revamped Merrion Centre Leeds store, AO.com boss John Roberts has said that there is a lot of “guff” talked about personalisation and that more needs to be done to put the customer first, the Card Factory founder Dean Hoyle has made a “sizeable” investment in the variety chain The Works and will become its Chairman and
Sainsbury’s has launched in China through a partnership with Alibaba’s Tmall website. RW also has a separate Multichannel supplement. In his column, the Editor of RW notes the success of the Retail Week Tech and Ecommerce Conference this week and thunders that “Innovative people are as important as tech”. The Editor of “Drapers” magazine gives a good write-up in his column to the new Primark store in Boston, after a visit to the opening last week. The main news story in Drapers is that BHS has received a £85m loan to fund store refurbishment, but it also notes the recent management changes at Jaeger and at Joules, as well as its “Independent Awards” this week.

News Flow Next Week: The French Connection interims are on Monday, along with an AO.com (aka AO World) analyst’s trip to HQ in Bolton. The Card Factory interims, the House of Fraser Q2 update and the latest monthly Kantar Grocery data come out on Tuesday. The John Lewis new store opening in Birmingham is on Thursday and the latest Nielsen Grocery market share figures come out on Friday.

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:

Fed meeting, US interest rates:

• Just in case anyone had forgotten, the US Fed concludes its 2dy meeting tonight & will announce its September interest rate decision during the night, our time.

• Inevitable and a long time coming but the world may be a different place in the morning.

• Interestingly US markets closed at 4wk highs on Weds night.

SAB Miller, acquisitions in general:

• A sage market commentator today opined ‘the prospect of a global mega-merger (SAB Miller/AB InBev) did no harm to the mood yesterday’

• He went on to say ‘such demonstrations of corporate confidence despite recent volatility can play an important role in rebuilding sentiment.’

• And this is true unless it is not.

• Because mergers can also be driven by the desire to cut costs which itself may be driven by the fear that growth is slowing.

• With this in mind, we observe that the international brewers had been banging on about EM growth for ages but now they’ve stopped.

Merlin Q3 update – read-across for leisure in general:

• Putting the accident & global growth opportunities to one side, Merlin, which hosted a Q3 update meeting earlier today, made a few interesting observations that have implications for leisure as a whole.

o It said that London visitor numbers from the EU were down on the back of the weak Euro (strong Sterling).

o They are also seeing ‘less domestic visitation’ in London – the implication being that more people were abroad on holiday in August. We would expect TCG and TUI to be upbeat when they report on Q4 on 24 Sept and 1 Oct respectively.

o The group’s Gardaland (Italy) site was extremely busy & MERL suggested that some of the foreign visitors, predominantly Germans, visiting the site, may have visited London were Sterling not so strong.

o The group’s Midway attractions performed more strongly in the UK’s regions than they did in the Capital.

Thoughts on London:

• Merlin has suggested that overseas visitor numbers are down.

• London pubs are still busy. This is intuitively reasonable as overseas visitors may have made their absence felt more re the London Eye than they did at the Dog & Duck. It’s a culture thing.

• The same can’t be said for some London restaurants. Tourists eat. And a smaller number of tourists will eat less than a larger number would have done.

• Add to that capacity is going on.

• This may end badly but, as we have commented on other occasions, at the micro-level, new entrants cause more trouble for incumbents (and the total market) than they do for themselves.

Immediate spending power & longer term inflationary pressures:

• UK wages are on the up. We’re reliably informed that the +2.9% YoY annual growth rate (ex-bonuses) recorded in the three months to July was the fastest recorded rate of wage growth since February 2009.

• Inflation is at zero percent – so it doesn’t take a genius to work out that real wages are also increasing by 2.9%.

• And, whilst cheaper commodity prices are captured in the 0% inflation figure mentioned above, the reduction in commodity prices impacts every-day items more directly than may be imagined.

• Every day price reductions feature re utility costs, petrol, food and the like whilst areas of highest-inflation (or at least lack of deflation) will be areas heavily dependent upon labour costs.

• These include contracts for personal service etc. such as hairdressers, taxis, plumbers, private school costs and the like – and these don’t have quite the same immediate impact upon the wallet (at least mentally) as does cheap petrol & milk.

• More cash in various pockets should feed through to affordable treats by the end of the year. Currently, larger-ticket items are taking more than their fair share.

• Longer term, of course, currency moves (strong Sterling) & cheap commodity prices may both reverse.

• This could coincide with locked-in wage rises of 3% to 5% and inflation could re-emerge – but it has to be said that, at the moment, there is virtually no signs of this happening.

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

• Oil near $50. Represents a rise over the last few days but still has to be put in context, the black stuff is down around 48% over the last 12mths.

• Foodstuffs: Cocoa quite pricey, corn prices off the bottom but red meat prices, after holding up v white meat costs for some time, are now through the floor.

• Punch aiming to sell a Camden pub for £2.5m. Suggests that there are still a few gold bricks knocking around.