A Day in the Life:

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I think our dog has been reading Dickens.

This because his behaviour continues to resemble that of Pip in Great Expectations in that he hangs around when I’m cutting bread, is by my side when I’m eating a sandwich and is attentive when I’m unpacking the shopping and, on the very, very odd occasion when I drop something on the floor and he’s able to beat me to it and wolf it down, he assumes that I’ve been planning to feed him all along.

Therefore he sees staring at me and trying to influence my behaviour through some kind of Vulcan mind melt is a perfectly reasonable use of his time.

And, as his goal is clearly to wrap his body around as much food as possible over his lifetime, if he can force an error, nudge me into knocking a crust of bread off the kitchen counter and onto the tiles, then so much the better. Like a goal skidding into the net via the post, the crossbar and the back of the keeper’s head, they all count in the final analysis. On to the news:

The News:

Pub, Restaurant & Drinks Producer News:

• Revolution Bars saw revenue increase 2.9% to £111.8m as the firm recorded £2.9m in profit before tax for the year ended 30 June. Like for like sales rose 3% and the group oversaw a 60bps gross margin improvement. The encouraging figures are thanks in part to the group’s brand repositioning, introduction of new premium products and a more ‘food-friendly’ environment. The group having spent some £5.7m investing in its estate over the past year but remains debt free and benefitted from a £9m cash inflow, up from £5.5m in 2014.

• More from Revolution re FY15: Keith Edelman, Chairman, said: ‘The future, in a highly competitive and changing market, is an exciting one and one in which the Board and management are highly alert to the challenges created. Our performance in 2015 has given us a solid platform and our current pipeline of new bars gives us the confidence that we can grow the footprint of the Group. With a clear strategy and our depth of management experience, we remain confident that the business is well positioned for future growth and we expect to make continued progress in 2016.’

• More from Revolution re FY15: Revolution has already earmarked five new sites to add to its existing 57 bars next year, three of which are scheduled to open in H1. These sites are expected to open under its five-strong ‘Revolucion de Cuba’ brand. The bar operator added like for like trading over the past ten weeks has been in line with FY15 and that, although the market is ‘competitive and changing’, it is ‘confident that the business is well positioned for future growth’. The group cited its social media engagement, with 550,000 facebook friends, as one of the ways in which it is connecting with its target customer base of 20 to 40 year old females.

• Poppleston Allen reports that Liverpool City Council has begun its Late Night Levy consultation, which is set to end on 20 November.

• The ALMR has repeated that a late night levy in Liverpool would hurt the area’s night-time economy and should be considered only as a last resort. ALMR Chief Executive Kate Nicholls said: ‘We are once again repeating our call for local authorities to have caution when considering a levy and reminding them of the work already being carried out by the sector to address harms… We are urging Liverpool City Council to work with local businesses, not against them, and to consider all other options before introducing an additional tax on businesses.’

• Fullers is introducing the seasonal Red Fox, an ‘Autumn Red Ale’ boasting ‘fruity flavours and a rich, ruby colour’. The drink will be available from 28 September to 27 November.

• Chipotle is to reintroduce pork at 90% of its menus after taking it off earlier this year on supplier-treatment-of-animals concerns

• The sale of e-cigs to under 18s will be illegal from 1 October.

• Burger King has acquired popular Belgium hamburger chain Quick and will set about converting stores to the Burger King format. The deal will boost Burger King’s presence in France, where Quick is particularly popular.

• Burger King has released its own red wine brand, ‘Whopper Wine’, to celebrate the 40th anniversary of opening in Spain. McDonald’s also sells wine in a number of its South American sites.

• Josh Kobza, CFO of Restaurant Brands International, a shareholder in Burger King France, said: ‘This transaction represents a significant step forward for Burger King France, which will have more than 500 restaurants and 1bn euros of system sales following the transaction. Following the conversion, Burger King is expected to be the number 2 quick service brand in France, and France will become one of the largest markets for Burger King globally.’

• Camelot’s new flagship lottery game will launch on 10 October. James Pearson, Camelot’s head of retail channel, said: ‘The new ‘Millionaire Raffle’ will guarantee at least two millionaires each week, while the move to 59 balls will see bigger rolling jackpots where average winning jackpots are expected to be triple what they are today. Retailers know first-hand the huge excitement that big jackpots bring and how this translates across to sales in their stores.’

• Aldi sales grew 31% to £6.89bn in the year to 31 December 2014, although operating profit fell c.4% due to increased investment. The discount supermarket group, which is the fastest-growing grocery retailer in the UK and its sixth largest, also announced plans to launch an ecommerce service.

• Aldi will begin selling wine by the case online ‘from early next year’ and will offer both delivery and click and collect options. Matthew Barnes, CEO of Aldi UK & Ireland, said: ‘Our launch online is another exciting chapter in our story. This will enable us to introduce the Aldi brand and some of our best-selling, best-quality and best-value products to thousands more customers across the UK.’

Holidays & Leisure Travel:

• Global property group Dalian Wanda has opened its $2.5bn Xishuangbanna resort in China’s Yuannan province. The development sprawls over 5.3sq km and houses over 1,000 rooms, a theme park, theatre and hospital.

Finance & Markets:

• World markets: UK down on mining (Glencore) fears, Europe lower, US down and Far East lower in Tues trade

• Oil price lower at around $47.40 per barrel

• New York Fed President William Dudley has told WSJ that Fed will likely raise interest rates later this year

• Reuters poll suggests B of England will raise rates early in 2016. Call is close with some believing a 2015 raise is possible

• 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

• Mark Littlewood, director general at the Institute of Economic Affairs, has responded swiftly to shadow chancellor John McDonnell’s speech. Littlewood commented: ‘John McDonnell’s economic rhetoric is deeply disturbing… Nor are his figures on clamping down on tax avoidance credible, unless one defines tax avoidance to includes stacks of activities which the government currently incentivises. What we are left with is a strategy which would entail huge private sector ‘austerity’ through tax increases rather than public spending cuts.

• ‘The Labour Party now believes the ingredients for long-term prosperity are higher taxes, higher spending, more regulation and government interference in industry. The overwhelming evidence from the last century suggests the opposite to be the case.’

• Land Registry figures point to a renewed north-south divide in the pace of house price movements. The North East, the North West and Wales saw house prices rise by less than 1% in the year to the end of August, compared to an 8.4% increase in the East of England, and a 7.6% rise in the South East.

Retail Roundup from Nick Bubb:

Overall View: Well, a year on from the trading warning issued by Next, all the retailers reporting today, ranging from Online fashion to sofa warehouses and High Street menswear, seem pleased with the way things have gone in recent weeks…

Sector trends/share prices: The All-Share index was down by 2.2% yesterday, with mining and commodity stocks under heavy pressure, but the Food Retail sector held up relatively well, dropping by only 0.3% overall (MRW +0.8%, TSCO -0.8%, CVR -2.1%). The General Retail sector was down by 0.8% overall (AO +1.1%, BOO +1.5%, PLND +1.4%, MOSB +2.8%, HOME +2.1%, TED +1.0%, ASC -4.3%, BRBY -2.9%, DC -1.2%, MKS -1.8%, NXT -0.9%, CARD -1.9%, DFS -4.2%, GMD -2.5%, SIG -3.1%, PETS -1.6%, LOOK -2.4%, VTU -2.5%). First thing today the market is expected to be down a bit, with Boohoo, ScS and Moss Bros (and MySale) in focus on the retail beat.

Super Tuesday Watch: For smaller company analysts, this morning brings 3 back-to-back results meetings, kicking off with mighty Boohoo at 8.30am, followed by ScS at 9.45am and then Moss Bros at 10.45am. Fortunately, the 3 companies all share the same hard-working PR agency, Buchanan, so the meetings are all being held in their offices in Cheapside in the City, conveniently located for us to visit the One New Change shopping centre afterwards. And the Online “flash Sale” website MySale has also announced its final results for y/e June and flagged an “encouraging start to current financial year”.

Boohoo:
Investors in Boohoo will be pleased to hear that top-line sales growth accelerated from the already bumper 37% reported for Q1 (at constant exchange rates) to 39% for H1 as a whole, so Q2 (the 3 months to end August) was very strong, particularly in the UK, despite a tough comp and the poor August that the High Street suffered. The beat on the top-line isn’t matched on the bottom-line, given the planned reduction in gross margin and the step up in customer acquisition and overhead costs, but it’s good to hear that H2 trading has got off to a good start and that Boohoo say “We are trading in line with current market expectations for full-year EBITDA”. The analysts meeting at 8.30am is likely to focus on the huge 32% growth in active customers, the success of the big warehouse extension last month and the success of the Autumn/Winter 2015 marketing
campaign “#WeAreNow”.

ScS: After the infamous profit warning back on Election Day, ScS is still rebuilding investor confidence, but today’s finals for y/e July should help the process, with a chunky dividend, as expected, and the Board expressing confidence that the dip in trading in April was “no more than a temporary setback”, as demonstrated by the positive LFL sales order intake in the last few months of the financial year and a continuation of that trend in the first nine weeks of the current financial year. With sales order intake running up 13.3% on a LFL basis, ScS say that “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”, so analysts should be pencilling a decent profit recovery for the new-year, ahead of the results
meeting at 9.45am.

Moss Bros: There has been no news on trading at Moss Bros since the AGM update on May 15th, when things were going well, with LFL sales up by 7.4% in the first 15 weeks of the first half (to end July), so today’s interims should be reassuring, as the company says that “the Group’s trading performance continues positively, in line with the Board’s expectations and the business is well placed to make further progress during the second half”. LFL sales were up by 9.7% in the whole of H1 and the last 8 weeks have been up by 10.4% LFL. The group has also announced that after six years of service, Robin Piggott, the FD, has notified the Board of his intention to retire at the AGM on 20th May 2016.

Next: 
Having noted yesterday that this week will see the “Indian Summer” continue, with a big high pressure system sitting over the UK bringing more dry and settled conditions, it’s worth recalling that it was this day last year that Next issued their famous warning about the adverse impact of the warm weather in September on trade and advised investors that it would have to reduce its full-year sales and profit expectations if colder weather did not materialise during October. At the time, this seemed unnecessarily cautious, but it turned out to be prescient, as the weather did indeed continue to be warm during October…A year later and September to date has seen more helpful weather for Next and other fashion retailers, although they will be starting to squirm at the forecast that this benign spell could now stretch into the weekend… 

John Lewis Sales Watch: That great High Street bellwether John Lewis has been doing well in Fashion sales so far this month, but last week faced a tough comp from all the High Street promotional activity that erupted a year ago (and which was repeated last week by Debenhams, HOF, M&S and Next) and the fine weather on Saturday may again have taken the edge off store footfall. But the launch of the new Apple iPhone should have given a boost to Electricals sales and total sales will have been lifted by the successful opening of the new Birmingham store. Ahead of Friday’s official figures for w/e Sept 26th, we would again pencil in c4%/5% LFL sales growth.

Today’s Press and News:
We haven’t had time to see all the papers yet, as we have to make our way to the Boohoo results meeting, but the big talking point is yesterday’s news (on the back of the 2014 results) that Aldi UK is launching Online early next year, although MD Matthew Barnes is widely quoted as saying there are no plans to do Grocery Online…The FT headline is “Aldi Online push to add pressure on supermarkets”, flagging that a middle-class shift helped the no-frills discounter to ring up nearly £7bn in sales last year, whilst the Times runs with “Aldi shrugs off price war profit hit in pursuit of increasing sales” and the Daily Mail highlights that Aldi is to use the same delivery service as Fortnum & Mason to sell wine Online. The FT market report notes that Home Retail bucked the market downtrend yesterday, with a gain of 2.1% after Cantor
Fitzgerald added it to its “Buy” list. The FT’s “Doing Business in Birmingham” supplement highlights the fact that from this month the city will be the only location outside London boasting a John Lewis, a Selfridges and a Harvey Nichols department store. And Lion Capital, the former owner of footwear designer Jimmy Choo, is considering returning to the upscale footwear market with a takeover of the luxury shoe retailer Kurt Geiger, according to Sky News last night.

News Flow This Week: Tomorrow brings the Sainsbury Q2 update and the Topps Tiles pre-close. And, as it’s the end of the month, the CBI Distributive Trades survey for “September” is out this morning and tomorrow also brings the monthly GFK Consumer Confidence Index.

Nick Bubb – nicholas_bubb@hotmail.com

Monday 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:

Rugby World Cup:

• England lost their first game – and the first big game of the tournament – to Wales by 28 points to 25.

• Not that the score means a lot to anyone other than the viewers because, sad to say, it’s the result that counts.

• And if England were to make an early exit from the Tournament, a proportion of the country’s pubs would be rather upset about it.

• But a material number wouldn’t be as it would mean that the UK’s food-led pubs could get back, more or less, to business as usual

• This because the Rugby (or the World Cup, the Euro’s or whatever) tend to both drag bodies & their money away from food-led outlets and they also leave some of the latter with something of a problem

• That is, should they show the sport – and risk upsetting families eating their tea – or should they pretend that it isn’t happening and risk having dad decline to take the family out, effectively losing the pub in question business that will not come back again

• Other loser from sporting events tend to include the holiday companies (less so at this time of year, more relevant given the timing of the big football events), cinemas, indoor attractions and other recipients of fair weather sports fans in general

Punch Taverns’ comments re strategy etc.

• Punch Taverns’ directors seem to be making themselves available and are commenting on the industry, tax matters and other issues.

• This, coming on top of the company’s teaser comments included within its RNS re the disposal of the group’s stake in Matthew Clark, suggest that a more fleshed-out comment on the group’s strategy will be forthcoming with the group’s full year numbers due 12 November.

• We would expect to see the group making comments very similar to those of Enterprise Inns (in May) such that it will be exploring managed & franchised options, will be selling more units, will keep some as they are and will set up an arms’ length property co in order to manage those units that choose to go free of tie.

London hotels:

• It’s always scary at the top.

• Sure, you would rather be at the top than the bottom but, when somebody asks you if the only way is down, it’s hard not to reply in the affirmative.

• Hence London hoteliers should be (and are) making hay whilst the sun is shining.

• But they should have one eye on the future and, when PWC suggests that the weak Euro is dampening visitor numbers from the Continent, it is simply echoing comments made by Merlin Entertainment earlier in the week.

• And this will ultimately impact rates.

• It may be that domestic UK, Russian, US and Chinese visitors are currently filling London hotels – and long may that continue – but an absence of European visitors will at some point make itself felt, occupancy levels are likely to slip a little and then rates will be cut in order to chase volume.

• Cycles were ever thus.

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

• SAB/InBev. Bid likely this week. The latter currently working on trying to keep it ‘friendly’ and the former working on getting the price up.

• Sugar. We’re genuinely not sure if there’s a smoking gun out there. It’s hard to get a neutral opinion – or at least one not influenced by one or other side of the argument – but the body language of the major players would seem to indicate that they would like to offer low or no sugar alternatives to their key products at the very least. The issue will clearly continue to impact producers, retailers etc. for some time to come.

• Red meat prices have collapsed recently. Pork (which is a workable proxy for chicken most of the time) has been weak for a while but feeder cattle prices are now down 23% on a year.

• Mining shares gave up 7% last week. Travel stocks had a reasonable day Friday (TUI +3.6% and IAG +4.1%). For some reason, TCG was a shade lower.

• China PMIs are on Thursday. Markets could remain a little nervous ahead of them (and over them and after them).