Langton Capital – 2015-09-25 – Daily Wrap: Day-parts, evolution, big-ticket spending & 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:
Day-parts, evolution, remaining relevant etc.
• Various studies suggest that restaurateurs should try to sell more at lunchtime. Do they get paid to say that?
• But based on the truism that rent, rates etc. are paid 24/7 and it’s not a good idea to let any would-be revenue-generating opportunity go begging.
• Horizons takes it a little further as director of marketing and business development, Emma Read comments that ‘consumers expect to be able to eat when they want, wherever they happen to be whether it’s out shopping, at work, travelling or in a garden centre. Lunch is extending beyond its traditional times – it could now be anything from mid-morning to late afternoon. Operators need to be prepared for this and adapt.’
• This leads us on to our on-going theme of evolution.
• You have to keep an eye on costs, of course. Breakfast sales may be depressing margins at JDW and not even that retailer would seek to keep its kitchens fully-staffed through the night but, overall, customers will ultimately get what they want – and if existing operators do not supply the goods, then a new entrant might.
• Further re evolution, we note that Taco Bell is now serving alcohol in the US, Pizza Express has said that it will deliver in London, Starbucks is to lend staff the cost of their rent-deposits and ABInBev is buying more craft breweries.
• It would appear that doing nothing is not really an option.
Big ticket spending versus small ticket:
• Sainsbury reports Q2 numbers next week.
• The group, whatever its tussles with its direct competitors, was early to spot the drift to big-ticket spending last year and in the first half of this.
• It went so far as to suggest that this should abate by the end of this calendar year and it’s October next week.
• Will be interesting to see if the group makes any further update re the nation’s annoying propensity to spend more on carpets, motor cars, holidays, furniture etc. versus good old bread, butter and bottles of milk.
Leisure – The Week Ahead
• Revolution Bars has its Full Year numbers on the 29th. The group listed back in March at 200p per share, the bottom of its indicated range. Since then the shares have fallen to c185p, admittedly in a falling market. Eclectic Bars has posted two profit warnings in the two years it’s been listed which may lead some investors to wonder if the late night drinking market is a sensible investment.
• Sainsbury’s produces its Q2 results on the 30th. The group suggested towards the start of this calendar year that it believed that small ticket spend should catch up to big ticket spend by the end of 2015 though this has yet to materialise.
• Saga has H1 numbers on the 30th, which, from a leisure perspective may be interesting for any comments on the August holiday market. Domestic leisure companies have been suggesting that August saw many UK consumers leave the country, though this seems to have been met with limited optimism from Tui and Thomas Cook.
• Compass has its Q4 on the 30th. Read across for UK leisure based companies is limited, but the group stated at its Q3 update that it felt ‘excited about the significant structural market opportunity globally and the potential for further revenue growth, margin improvement and continued returns to shareholders.’
• UK Mortgage approval levels come out on the 29th, having rebounded to February 2014 levels last month. UK GDP figures also come out on the 30th, having returned to pre-recession levels last time around. Will Brumby – firstname.lastname@example.org
Random information, hopefully not all of it useless (re most leisure operators etc.):
• Markets all down yesterday – but that was before Ms Yellen’s speech, which clearly changes everything (not).
• Commodities belie hope of swift economic recovery, all lower. Except cocoa (weather), corn & wheat. Seeing the ‘recovery’ in the latter two prices requires the use of a microscope.
• Allied Minds’ share price halves. Just saying. Big for Mr Woodford. Ditto Drax. Not a good month, perhaps?
• SBUX says it will bust NLW, Lidl said the same thing last week. Others will have to follow suit or only have the pick of reject-staff. Hard to do the analysis but it’s worth remembering that this cost does have a silver-lining; would-be customers will have more cash in their pockets and, for those operators that remain relevant (see above), this can only be good news.
• Magner’s (C+C) does seem rather keen to own UK assets – either production or retailing. Earlier in the year it made approaches to Spirit Pub Company and now it would appear that it has been talking to Carlsberg. Group could provide an exit route for PE houses, perhaps Stonegate, though large, could be of interest?
• Interest rates: US betting now firmly on a December rise.
• Waitrose had another tough week last week. Bit early to suggest that the love-affair may be over but…
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. Horizons says the lunch market represents a big opportunity for the on-trade. Consumers expect to be able to eat when they want.
2. Starbucks has promised to raise UK wages to just under £8 per hour in November, will offer interest free loans for housing
3. Magners-maker C&C has held discussions with Carlsberg to acquire its UK business as recently as last month
4. ACS warns that ‘Convenience store investment [is] falling’ ahead of NLW investment and is down 35% over the past three months.
5. Chapel Down on course for good year, revenues +33% in 6mths to end June. Still wine sales +57%
6. Coca Cola is to sell 9 production facilities to 3 of its largest bottlers in a move to sell more low-margin assets
7. MatchPint has reported that pubs need to spend £63 per day in order to provide a comprehensive sports offer on TV
8. Pizza Express to launch delivery business. Says planned in short term to be available only in Central London
9. McDonald’s is to source potatoes from British farmers only. The group is already one of the largest buyers of British potatoes
10. With beer sales in the off-trade now making up c70% of total beer sales (by value), ALMR calls for help for hospitality sector
11. Report suggests Asia Pacific beer market could grow at a CAGR of 5% from 2014 to 2020 to $220bn
12. Citizens Advice has warned that young adults facing ‘stifling’ levels of debt after borrowing from banks + payday lenders
13. Tourism minister Tracey Crouch has insisted that she regards the outbound tourism industry as equally important to domestic tourism.
14. US ‘on track’ for interest rate rise this year says Janet. She tells Uni. Massachusetts that economic prospects ‘generally appear solid’
15. BBA has said that expectations of a rise in interest rates and ‘competitive’ deals are fuelling an increase in mortgage lending.