Langton Capital – 2015-11-30 – Daily Wrap: New capacity, fizzy drinks, evolution, holidays & 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:
• It’s not us guv’nor say a number of operators.
• And, when they do concede that they are putting on units (as Azzurri has done with ASK & Zizzi), they seem to say that it’s because they have a unique offering or have broad appeal and that the wider consumer base deserves to have access
• Meaning that this could become something of a micro-macro issue.
• That is to say, what is good for each individual operator is not necessarily good for the market as a whole
• But the problem here is that there is no self-correcting mechanism.
• At least not this side of rising rents, stretched balance sheets, pressured LfLs, lower margins and ultimately a number of business failures
What’s in a name? MPs seem inclined to tax sugary drinks.
• Taxing fizzy drinks may be more easily said than done.
• Wherever there are definitions, there may be operators trying to game the system.
• Manufacturers may (but probably won’t) powder their drinks, remove the fizz or, and this at least would be an agreeable outcome, reduce the sugar in their products
• But they may also squeal about the sugar in tomato sauce, the sugar in baked beans, the sugar in pretty much everything else – and they will have a point.
• So maybe the answer would be to tax sugar at source.
• But here you would effectively have to treat the product as you do alcohol. That is that it has one price the production side of bonding and another price once the tax has been included and it can be passed on to consumers
• Only the consumers here would be business operations as sugar at source is a B2B market.
• Perhaps do it through VAT?
Evolution in the casual dining market:
• Evolution continues, MAB suggests Christmas dinner bookings in pubs and restaurants have increased some 202% since 2012.
• It says the number of meals sold in the first two weeks of the month has tripled from around 90,000 in in 2012 to 272,000 in 2014, with a key trend appearing to be more consumers going out for more than one Christmas event.
• This fits in with comments from a number of operators to the effect that, whilst consumers remain parsimonious overall, they are still willing to spend on ‘big days’ such as Mothers’ Day, Valentine’s Day and the days around Christmas
• Elsewhere, operators have commented over a period of years that customer numbers for Christmas Day itself continue to rise
Random information, hopefully not all of it useless:
• Sterling stable, oil price down, commodities all weak except El Nino products (cocoa, sugar, OJ). Same old same old.
• Thomas Cook shares giving a bit back today but managed four straight days of gains last week post FY numbers.
• Jet2 has suggested that holiday sales have softened since the outrages in Paris. This is hardly unexpected and the share prices of the major operators should have taken this on board a week ago or more.
• Markets last Friday skewed by the drop across mining shares. The (mining heavy) FTSE100 was down whilst the FTSE250 was up. The All Share, which is dominated in terms of market cap (c70%) by the FTSE100, was down.
• Black Friday, whilst not a damp squib, seems to have come in below expectations. Online sales, however, were particularly strong.
• Interesting to contrast the LfL sales performances of Conviviality Retail’s Wine Rack with Majestic Wines. Both groups have updated recently with the former saying LfL sales were up 5.3% and the latter revealing a 4.6% drop.
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. Azzurri, owner of ASK, Zizzi + Coco di Mama reports that it invested a record amount in new openings in last year.
a. Azzurri (ASK, Zizzi) reports sales of £250m in last financial year (+6.6%) with EBITDA +16.5% at £31.8m.
2. MPs back call for 20% tax on sugary drinks. Quite how the small print would work on that one has yet to be determined
3. Costa is trialling a new store concept with an improved food offer for the breakfast and lunch market called Costa Fresco
4. Asda reduced the price of unleaded by 4p to 99.7p across its 273 UK filling stations in a three-day promotion
5. A new report by Mintel suggests more than a quarter of wine buyers would spend more than £10 on a bottle of wine.
6. Stock Spirits Group has cut its full-year profit forecast, blaming a drop in demand for flavoured vodka and devaluation of Polish zloty
7. Amazon says it had its biggest sales day in the UK on Black Friday, selling more than 7.4 million items
8. Research from M&B finds Christmas dinner bookings in pubs and restaurants have increased some 202% since 2012.
9. AB InBev is ready to sell Peroni and Grolsch in an attempt to push its £177bn merger with SAB Miller past EU regulators.
10. Jet2holidays has reported that sales have slowed since Paris attacks
11. Coral Group, currently set to merge with Ladbrokes, reports FY numbers to 26 Sept. Numbers exclude Gala Retail. Revenues +6%
a. Coral group EBITDA +1% at £205.3m. Excluding World Cup impact, says EBITDA was +30%. Online EBITDA +99% ex World Cup + regulation
12. Nationwide reports slowing in house price growth in Nov. Says prices up 0.1% in month of Oct and up 3.7% on year.