Langton Capital – 2015-09-29 – Daily Wrap: Big ticket spending, rugby, world markets & 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:
Big ticket v small ticket spending:
• The former has been eclipsing the latter for some time.
• Car sales, carpets, furniture, holidays etc. have been buoyant whilst small-ticket leisure has been a little weaker than may have been expected. See earlier emails for details.
• J Sainsbury, which reports Q2 numbers tomorrow, was bold enough earlier this year to say that this was a phenomenon that it expected would have worked its way through the economy’s system by the end of the calendar year.
• Well it’s Q4 on Thursday and, though SBRY is only commenting on its Q2, it would be nice to see them say something mildly positive about spending patterns.
• Having said that, there’s plenty of time before anyone comments knowledgeably about Q4.
• In the meantime, our colleague Nick Bubb quoted furniture retailer ScS as saying that the setback in sales it suffered in April was temporary (probably pre-General Election worries) and comments ‘improving consumer confidence in the UK and a robust housing market supports our belief that demand for high ticket items, and in particular for furniture and floor coverings, will continue to grow.’
• Perhaps ScS would say that, wouldn’t it but numbers from various operators, from the Coffer Peach Tracker & from other sources tend to suggest that big ticket continues to take more than its share of consumers’ free cash flow.
Random information, hopefully not all of it useless (re most leisure operators etc.):
• Revolution. Aims to double the number of Revolucion de Cuba outlets from 5 to 10 in the next year. Something must be going right.
• Rugby. So did the pub companies’ shares fall yesterday on the back of England’s possible exit from the Rugby World Cup? Well, given that everything seemed to be in free-fall, it was hard to tell.
• World markets. There’s an attempted recovery going on. Just in time to coincide with the Chartists’ most dire warnings about breaking out on the downside, etc. On a less humorous note, the US indices in Q3 this year are set to turn in their worst quarter (not just their worst Q3) in 4yrs.
• With regard to world markets, the word ‘ominous’ is getting an airing. It won’t be long before someone reminds us that the crashes of 1907, 1929 and 1987 all occurred in October. Check the calendar and cue Twilight Zone music.
• It was a big risk-off kind of day yesterday. National Grid up, miners, oils and the like, down.
• Interest rates. Fed leaking that rate rise ‘this year’ still looks likely. Reuters poll suggesting Q1 next year for a similar move in the UK. Both dates pretty much in line with consensus.
• India cuts rates by 50bps to 6.75%. Shows rates can go down as well as up. On the subject of rates, everyone’s favourite uncle Carl Icahn is tweeting that low interest rates may have created (unspecified) asset price bubbles.
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. Revolution raises sales 2.9% to £111.8m in FY to end-June. PBT £2.9m, margin higher, more food sold
a. Revolution FY15: Keith Edelman, Chairman: ‘The future, in a highly competitive and changing market, is an exciting one’
b. Revolution FY15: ‘We remain confident that business is well positioned for future growth + we expect to make continued progress in 2016.’
c. Revolution: Earmarked 5 sites for purchase for 5-strong ‘Revolucion de Cuba’ brand. Trading in 10wks of FY16 in line with FY15
2. Poppleston Allen reports that Liverpool City Council has begun its Late Night Levy consultation, which is set to end on 20 November.
3. Chipotle is to reintroduce pork at 90% of its menus after taking it off earlier this year on supplier-treatment-of-animals concerns
4. Sale of e-cigs to under 18s will be illegal from 1 October.
5. Burger King has acquired popular Belgium hamburger chain Quick and will set about converting stores to the Burger King format
a. Burger King has released its own red wine brand, ‘Whopper Wine’, to celebrate the 40th anniversary of opening in Spain
6. Aldi sales grew 31% to £6.89bn in the year to 31 December 2014, although operating profit fell c.4% due to increased investment
a. Aldi will begin selling wine by the case online ‘from early next year’ and will offer both delivery and click and collect options
7. World markets: UK down on mining (Glencore) fears, Europe lower, US down and Far East lower in Tues trade. Oil down at $47.40
a. N York Fed President Wm Dudley tells WSJ Fed will likely raise interest rates late in 2015. Reuters poll re UK rates points to Q1/16
b. US consumer spending up in Aug by 0.4%. Core inflation also up a little. Taken as signs of firming economy + consistent with higher rates
c. IEA re new-old-Labour: ‘John McDonnell’s [shadow chancellor] economic rhetoric is deeply disturbing’. Numbers ‘not credible’.
d. Land Registry figures point to a renewed north-south divide in the pace of house price movements. Hardly new news