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:

Leisure in the wider market:

• Our Licensed Retail Index (see earlier email) shows that pub & restaurant companies underperformed the wider market last week

• However, whilst the miners, oil & gas stocks & financials drove the wider market upwards for a second consecutive week, that’s hardly surprising

• Whilst the FTSE All Share Index rose by 2.45% last week, major leisure stocks such as GNK, MARS, JDW & MAB were clustered around the 0.8% to 1.9% mark

• Acknowledging that there are wider moves that are beyond the control (or remit) of leisure analysts, we would suggest sticking with both the sector and with existing stock selection as, over time, leisure is an ‘aspirational’ product and growth, at the macro level, should be robust

• As ever at the micro-level, new entrants will make their presence felt

Evolution of product offers:

• We’ve commented on a number of occasions that, with regard to the hospitality industry, change is the only constant.

• But this also applies to other sectors.

• Indeed hospitality, in that it relies upon the direct interaction between the company involved and the consumer, may be a little less susceptible to ‘disruption’ than may some other industries

• Today our colleague Nick Bubb reports on a ‘leaked document that Tesco planners have looked at a scenario of cutting store staff numbers by 39,000 over the next three years.’

• Elsewhere, the FT points out that up to a third (around 1m) retail jobs may vanish by 2025. The BRC has said that there may be ‘fewer but better’ jobs available as the NLW pushes up costs and technology provides non-human alternatives for some functions.

• Of course never say never but it may be some time before the pub & restaurant industry feels anything like the same pressure.

Equity markets:

• Very much a ‘risk-on’ day on Friday but rather the reverse today.

• China hit 15mth lows earlier today. Global equities had de-coupled but that was enough to spook Europe.

• UK & Europe still holding >50dy moving averages, however and, to chartists, that means something.

• Recent trend of lower-highs would appear to have been broken – though hardly comprehensively. Remains to be seen whether the same is true of lower-lows.

• The alternative would simply be that short-term volatility had increased.

Broader economics:

• Whilst fortunes are made and lost at the micro level (you buy LLOY or MKS or BP rather than UK PLC as such), events are influenced – or even driven – by what goes on at the macro level.

• Here there are some signs of distress. Let’s not use the word ‘panic’.

• Observers, critics etc. are saying ‘do something’ but they tend to be short on detail

• ECB meets on 10 March and, after hinting at further action so broadly, Mr Draghi may be under pressure to deliver.

• But deliver what?

• In the absence of a new technology (steam, electricity, motor vehicles, internet etc. all of which amount to ‘working smarter’), wealth will come from working harder.

• Or longer and, as far as that’s concerned, there are few takers from amongst the ranks of politicians who need to be re-elected on a 4yr or 5yr basis.

• Earnings numbers across most markets are under pressure and further equity market advances may be on the back of widening PERs rather than on earnings delivery

• Helicopter money (QE and its derivatives) may be the short-term palliative but, over the longer term, perhaps we should ask China what to do.

Recession?

• It almost seems as though we are going to have a recession because, well, we’re bored of not having a recession.

Input prices:

• Oil price hit 2mth high’s (intra-day) on Friday but edging back now. Was almost $36 in the small hours of Monday morning but now (mid-morning) trading at around $35.20.

• Gold price stalled around the $1233 level. Nothing to say it won’t break through (likely on the upside) but it’s taking its time about it.

• Commodity of the day. Lean Hogs. As opposed to fat pigs, huh? Well yes and no. it’s a real thing & the commodity is often seen as a proxy for white meat (as the inputs for chicken and pigs are to some extent similar).

• Pigs continued. Here prices have been very weak up till around 3mths ago but prices have since recovered. Hogs now selling for around 71c per pound, up some 7% over the last 12mths.

• Pigs continued. Charts suggest the commodity has had a tougher last couple of days & price may be headed downwards. However, medium term trend is upwards – and this will put a little pressure on input prices across the hospitality industry.

• Gold vs Silver. One up, one down. Go figure.

Random information, hopefully not all of it useless:

• Mervyn King suggests another financial crisis is ‘certain’. Thanks a lot, Merv.

We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):

1. Coffee shops and cafès remain the top breakfast time venues but have also been gaining share in the lunch and dinner markets

a. JD Wetherspoon is striking the traditional Sunday roast dinner from its menu and will focus more on all-day meals such as burgers and burritos

2. Britain’s most popular café chains are serving sandwiches and pastries that contain high levels of salt, according to the Telegraph

3. Morrison’s enters into supply agreement with Amazon, agrees new terms with Ocado.

4. Kuoni reports FY numbers and EQT publishes offer prospectus for public tender offer for the Kuoni Group’s shares at CHF370

a. Kuoni FY numbers. Turnover +6.9% organic at CHF3.3bn. EBIT +6.3% at CHF81.2m.

b. Kuoni FY numbers. Says ‘the GTD and VFS Global Divisions performed very well in 2015.’

5. The number of international tourists visiting the English regions has reached a record level, with trips up 7% YoY to 11.7m

6. Spanish chain Meliá Hotels International saw pre-tax profits rise by 79% last year to €101.6m over 2014 & revenues +16% to €1.7bn.

7. SeaWorld shares have fallen 9% after the beleaguered company reported a 7.6% drop in FY 15 profits to $72.8m

8. Nintendo has slashed its FY profit forecast by 50% to 17bn yen (£150m), citing slow sales and the strong yen as deciding factors.

9. IMF MD Christine Lagarde has warned that the global economy could derail if global policymakers do not continue to act together.

a. Sterling reached a seven-year low against the dollar on Friday as Brexit fears weigh on the currency