Langton Capital – 2016-01-08 – Daily Wrap: Alcohol guidelines, sinful sugar, ‘special’ offers, supportive shareholders & 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:
• Nanny state etc.; those points are all well-made elsewhere.
• The easy stuff (too much alcohol is bad, being drunk is sub-optimal etc.) is agreed by all parties.
• Hence the debate, which is kept alive in part by paid lobbyists, salaried journalists, remunerated charity bosses and the like, is about how much is too much
• So just a few questions.
o Whether 14 units is the right number or the wrong number, how can one size fit all, not least across the genders?
o If the required calorie intake, oxygen intake, heat output etc. is different for men and women, how can the alcohol figure be the same?
o How can hospital admission figures etc. be rising when alcohol consumption is falling? Could there not be a third factor, different categorisation of complaints, for example?
o Accepted that ‘too much’ alcohol is bad, is enough attention being paid to causality (or the lack of it) versus a link by association/simple correlation. No stats whatsoever here but it’s likely that tattoos are positively correlated to alcohol intake – but there is no causality. Okay, so there’s the odd regrettable stag night…
• We could go on but feel that this is getting a little stale already. The news has achieved at least one of its aims in that it has kept the news presses rolling, the lobbying industry in employment etc.
When are ‘special’ offers not so special?
• Well when they’re every-day, of course.
• See earlier email (A Day in the Life) for comments on printer ink, pizza offers etc.
• See also detail on proportion of bottle premium ales now on ‘offer’.
• Typically this is three (£2) bottles for £5 and, once the consumer has paid £5, why would he/she pay £6.
When is a supportive 25% shareholder a monkey on your back?
• Ask J Sainsbury.
Sugar, back in the news:
• Perhaps it’s not possible to take the politics out of the politician. By this we mean that an easy, consensual topic (don’t be fat, be healthy) is always a more attractive topic than a thorny, perennial, potentially career-destroying subject (like education, health etc.)
• Hence sugar is back in the news.
• Sugar, a relatively soft target, is back in the news – see earlier email, BBC etc. for details.
• A tax may work. See Mexico data, plenty online.
• It’s hardly libertarian non-interference but, compared with addressing inequality, religious strife, the Middle East, the demographic time-bomb, the impoverishment of youth by the baby-boom generation etc., it must be an appealing topic.
• What next, vilify bacon?
Single ‘product’ companies.
• Is Poundland a good idea?
• I mean if you own the company, I can see that the position has to be justified to some extent but, if you can be B&M (and sell everything to everybody at every price), then why be Poundland and sell everything for a quid?
• Perhaps that’s a gross oversimplification.
• Or perhaps not as Nick Bubb writes this morning ‘the other new news was that Poundland confirmed that they would trial a multi-price format in the spring, taking 6 of the Family Bargains stores inherited from the 99p Stores deal…’
Oil price bounce; can you see it?
• The oil price is off the bottom. But a glance at the chart shows that this is a twitch in what has otherwise been a downward slope
• Brent now off around 30.6% over the last year.
• Interestingly gap over West Texas is down to circa zero.
• Against such a backdrop, it’s arguably strange to see the natural gas price has been strong recently.
Random information, hopefully not all of it useless:
• Retail stocks hogging the headlines, Christmas, mild weather & all that. Retailers in the winners & the losers yesterday, mostly news driven. Good performers included Next (bounce), M&S (CEO jettisoned), Home Retail (bounce post drop post bounce post bid approach), Supergroup, JD Sports & others. Fallers included Poundland (poor numbers) B&M (sympathy) and Sports Direct.
• Retail Week features an interview with SBRY CFO John Rogers suggesting that 2016 could be grocery’s year of recovery. Good luck with that.
• Bit of a bounce going on. Oil price, equity markets, you name it. Most things are just peachy.
• We didn’t quite hit our 24 August lows but, that said, the major US indices have already made their worst start to New Year trading on record.
• And all’s not quite so well in the currency markets. Sterling down vs both US$ and Euro. No big moves at this stage but such a drift, if maintained, would put upward pressure on prices.
• That may be seen, at this stage & in the virtual absence of inflation, as much the lesser of two evils.
• No sooner is the bounce in gold visible to the naked eye than the metal goes into reverse. Price down as risk assets become more attractive. This on a very short term view. Partially driven by the move in China to suspend its market ‘circuit breakers’. Hardly the strongest of fundamental reasons.
• Cocoa price gone sharply into reverse. Price of sugar still high but other inputs, e.g. soybean meal, still extremely weak.
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. Sugar tax, previously ruled out, is no longer ruled out. PM Cameron says “obesity crisis” may warrant action.
2. New guidelines on alcohol have cut recommended drinking limits and claim there is no such thing as a safe level of drinking.
a. New advice on drinking cuts recommended max for men to 14 units per week, the same as for women.
3. The price of premium bottled ale continues to plummet in the off-trade, according to December’s Premium Bottled Ale Report
4. Ruby Tuesday reports Q2 numbers, LfL sales +0.8% in only the second consecutive quarter of growth. Margins +175bps.
5. Constellation Brands Q3 numbers, EPS $1.42 vs$1.33 last year. Says FY16 outlook improved on back of strong beer business
a. Constellation Brands has announced plans to build a $1.5bn 10m hectolitre brewery in Mexicali, Mexico
6. London-based Spanish restaurant chain Camino has reported December like-for-likes up by 19% across its four sites.
7. JDW CEO Tim Martin draws further attention to high rate of tax paid by pub industry, calls for ‘sensible rebalancing’.
8. Guardian suggests Sainsbury’s largest shareholder, the QIA ‘could be prepared to block a £1bn bid for Home Retail Group’.
9. The peak booking season has started well, with independent agency groups reporting strong demand for ‘safe’ destinations
10. UK bookings at Hoseasons +27% in first 5 trading days of 2016, three of which surpassed its best-ever sales performance.
11. Aviation Safety Network says last year had one of the fewest number of fatal airliner accidents (16) on record
12. HVS has said that increased demand for hotel assets could provide exit opportunities for investors in 2016
13. Sportech has announced that its Spot the Ball VAT appeal has been scheduled for either 7 April 2016 or 8 April 2016
14. UK chancellor George Osborne has said that the UK faces a “cocktail” of serious threats from a slowing global economy in 2016
15. UK house prices up by 9.5% in 2015 reports Halifax. Nationwide said they rose by only 4.5%.