A Day in the Life:

The more pessimistic amongst us say that you only rise in order to fall from a greater height.

And so it is occasionally with one’s emotions because imagine the psychological roller-coaster involved in a) seeing that a trendy gastro-pub near King’s Cross was doing an English Breakfast for £2.25 followed after being seated by b) finding that it was only referring to a cup of tea and that anything remotely connected with a sausage was going to cost the best part of a tenner.

Plus 12.5% service of charge, of course, all of which obliged me to walk out unsure as to whether I should pretend that I had misjudged the time & that my train was about to leave or whether I should tell the truth & admit that I was horrified by their prices.

In the end, I kind of did both but anyway, it’s time for the news and there’s rather a lot going on but if you would like to come off this email list please simply hit the unsubscribe button above. Similarly, if you are getting it forwarded and would like to go on directly or if you would like to recommend it to one of your colleagues, please just hit the subscribe button and/or suggest that your colleague does too.

The News:

Pub, Restaurant & Drinks Producer News:

• JDW buys back more shares, Mon bought 50k at 699p. Takes recent total to 1.29m shares for £8.42m (av. 650p per share)

• The BBPA has commented on yesterday’s increases in the National Minimum Wage to take effect from October of this year for those under the age of 25. Speaking of the impact on business, BBPA chief executive Brigid Simmonds said: ‘They [the increases] are above inflation, but not the seven per cent increase seen for those over 25. However, the increases will have an effect on the cost of employment for pubs, the majority of which are small businesses, so we need the Government to retain a clear focus on tax cuts, in particular beer duty, but also business rates, and a look at VAT in the hospitality sector.’

• Brewhouse and Kitchen has taken a lease on a 5,000 sq ft site at The Brewery in Cheltenham. Managing director, Kris Gumbrell, said: ‘We’re really excited to bring the Brewhouse and Kitchen concept to Cheltenham. The Brewery is the perfect destination for us within the town centre and the history of the site fits well with our love for brewing craft ales.’

• The ALMR has said that moves to safeguard music venues in England, announced as an amendment to the Town & Country Planning Order, should be welcomed. CEO Kate Nicholls says ‘this is an encouraging step forward and a most welcome step towards introducing the Agent of Change principle. The decision will mean that local authorities will obliged to factor-in the presence of existing venues that have fallen by the wayside for too long.’ She goes on to say ‘music venues are an integral part of the UK’s licensed hospitality sector and a keystone of the late-night offer in particular. We are rightly very proud of this country’s musical prowess but our best musicians need a place to perform and to hone their craft.’

• Minimum wage may ‘stretch’ parts of the economy reports the Low Pay Commission. Says some areas, such as care homes, could be hard-hit.

• Tossed has launched what it claims is Europe’s first cashless food-to-go outlet on Coleman Street, fitted with self-service kiosks instead of manned tills.

• McColl’s Retail Group has opened its 900th convenience store, in the village of Kemnay in northeast Scotland, as part of its aim to reach 1,000 stores by the end of 2016.

• Ocado results for the 12 weeks to 21 February show gross sales up 15.3% to £312.4m and average orders per week up 16.9% to £286.7m. Average order size has fallen, however, down 2.9% to £111.41, while the group’s cash and cash equivalents of £38.3m compares to £66.5m of borrowings. There is no news of Ocado’s much sought after international deal and, while the highly-valued group expects growth to continue, CEO Tim Steiner notes ‘the tough nature of the marketplace’.

• Sainsbury’s Q4 trading statement shows the first quarter of LfL total retail sales ex. Fuel (+1.2%) in over two years, with growth in both LfL transaction and volume growth. The retailer is also stressing its commitment to phase out the ‘vast majority’ of multi-buy promotions across its grocery products, as it continues to invest in price and product. Promotional participation is falling, and stood at an average of 28% for the quarter.

• SBRY: Clothing delivered over 10% growth and Entertainment also performed well, with c11% growth driven by some big releases. Sainsbury’s Bank continued its good performance with 15% volume growth in Insurance new business and 12% growth in Travel Money in-store transaction volumes.

• SBRY: With no new news on the Home Retail saga, Mike Coupe, chief executive, commented on the supermarket’s outlook: ‘We have traded well this year and are making excellent progress implementing our strategy. The market will remain competitive but we are confident that we will continue to outperform our major peers.’

Leisure Travel:

• Egyptian tourism bosses are hopeful flights from the UK and Russia to Sharm el Sheikh will soon resume amid reports of high-level discussions between government officials.

• STR’s February 2016 Pipeline Report shows 497,409 rooms in 4,057 projects Under Contract in the United States, up 14.2% year on year. ‘Industry demand growth is slowing and supply growth is picking up. As a result, occupancy gains are shrinking,’ said Bobby Bowers, STR’s senior VP for operations.  ‘The increase in construction activity means more supply will come online at a point fairly late in the current cycle. The focus for hoteliers will be on whether demand can keep pace and how pricing will be affected.’

• Europe had 163,826 rooms in 1,139 hotels Under Contract in February, up 14.9%.

• Kuoni FY numbers, says sees ‘higher earnings from continuing operations’. Turnover CHF3.35bn, operating earnings CHF124m (+17.3%)

• Kuoni FY: Says ‘completion of EQT’s public tender offer [is] expected by mid-year 2016.’ Restructuring ‘progressing well’.

• Kuoni CEO Zubin Karkaria reports ‘the Kuoni Group is reporting a positive increase in organic growth and operating earnings.’ He says ‘there were particularly good performances in 2015 from the GTD Division’s businesses dealing with worldwide distribution of hotel accommodation and destination services, and from the visa service provider VFS Global.’ Mr Karkaria adds ‘the restructuring of the GTS Division and the adjustment of support and group functions are progressing as planned and delivering the expected results. The focus on global business-to-business activities in growth markets, initiated in 2015, is developing well.’

• Kuoni concludes FY results saying they ‘are a good starting point for the successful expansion of Kuoni’s leading positions under the intended new ownership of private equity company EQT.’

• Kuoni on current trading. Says ‘as of 6 March 2016, the percentage changes in booking levels and turnover for 2016 compared with the equivalent prior-year period were as follows in Swiss franc (CHF) and local currency (LC) terms’ – Global Travel Distribution +1% and 0% and Global Travel Services down 8% and down 9%.

• Latest Hotel Price Index from Hotels.com shows that the average cost of a room across the UK rose by 4% last year. Hotels.com says ‘last year was a fantastic year for visitors to the UK thanks to its thriving culture and abundance of international sporting events. Although we have seen a slight increase in the average room rate, prices paid by consumers are still great value overall.’

• A Chinese consortium has made a bid for Starwood Hotels, effectively gate-crashing the deal already announced with Marriott International. A group led by Beijing’S Anbang Insurance has put in a $76-a-share cash bid for Starwood, an offer that beats the cash-and-shares deal struck with Marriott in November.

Other Leisure:

• Gym Group reports FY numbers, says ‘strong revenue and profit growth + record number of new site openings [is] underpinning future growth’

• Gym Group. Reports revenue £65m (2014: £45.5m), loss before tax £12.4m but adjusted proforma profits of £5.3m.

• Gym Group: Says 19 gyms opened in 2015 (total 74) with one now opening per week.

• Gym Group: total members at year end 376k, up 28.3% on last year. Says made ‘strong start’ to FY16. CEO John Treharne reports ‘2015 was a landmark year for The Gym Group with an acceleration in roll out and strong results, culminating in a successful IPO.’ He says ‘our low cost, affordable and disruptive model, which we relentlessly strive to improve, resonates with consumers as demonstrated by the near 30% increase in membership in 2015. In January 2016 we moved through the 400,000 member mark.’

• Gym Group CEO John Treharne reports ‘a strong site pipeline for 2016 will see us continue to expand at a fast rate to take advantage of our considerable opportunity.’ He concludes ‘we have a proven model, strong market fundamentals and financial strength to continue to prosper and deliver value for shareholders both in 2016 and much further beyond.’

Finance & Markets:

• Eurozone industrial production rose at its highest rate in more than six years in January, up 2.1% thanks in part to a sharp increase in output from Ireland. The result comes after negative readings in November and December and is the highest since September 2009.

• The EY Item Club has warned that George Osborne could ‘make a weak economic situation weaker’ if he introduces more spending cuts. The Club believes the chancellor should refrain from further cuts until the domestic economy picks up, although reports suggest Osborne is planning further cuts ‘equivalent to 50p in every £100’ of public spending by 2020.

• CBI says 80% of its members questioned in a survey want to stay in the EU. CBI Director General Carolyn Fairbairn says ‘the message from our members is resounding – most want the UK to stay in the EU because it is better for their business, jobs and prosperity. Walking away makes little economic sense and risks throwing away the many benefits we gain from being part of the EU.’

• Oil price down on predicted lower demand. Trading at around $39.20 per barrel. OPEC says it still expect supply from outside the cartel to fall by 700,000 bpd this year.

• World markets. UK and Europe up yesterday, US also higher but Far East down in Tuesday trading

• Eurozone industrial production was up by 2.1% in January, a larger rise than had been expected

• The Bank of Japan left interest rates and monetary policy unchanged yesterday

Retail Roundup from Nick Bubb:

Sainsbury:
Ahead of the next key stage of the Sainsbury battle with Steinhoff for Home Retail (aka Argos) later this week, Sainsbury has been keen to keep its share price moving up and today’s Q4 trading update (for the short nine week period to March 12th) is headlined, a little inelegantly, “Positive like-for-like Retail sales growth (exc fuel) for the first quarter in over two years”. Truth be told, however, 0.1% LFL sales growth is rather modest and is not a great surprise, given the slight calendar boost. There is no comment on the profit outlook for the year, but CEO Mike Coupe simply says “We have traded well this year and are making excellent progress implementing our strategy. The market will remain competitive but we are confident that we will continue to outperform our major peers”. Interestingly, Online Grocery sales grew at nearly 14% (with
orders up by nearly 19%). There is a conference call at 8.30am and, apart from delving into the news that “vegetable-based product innovations including boodles (butternut squash noodles) and courgette (spiralised courgette) are proving extremely popular with our customers” (!),  the analysts will doubtless try and prise some comment on Sainsbury’s intentions ahead of the formal “PUSU” bid deadline for Home Retail on Friday…

Ocado:
Ahead of today’s Q1 trading update (for the 12 weeks to February 21st) all the focus has been on the re-negotiation of the Morrisons deal with Ocado and the protracted search for an Overseas licensing deal, but there is, needless to say, no mention of anything like that in today’s statement. Fortunately, Ocado is able to report some decent trading, with gross retail sales up 13.8% (orders up 16.9%). Tim Steiner, Ocado’s feisty CEO, says: “We are pleased with the steady progress in our business, maintaining double digit sales growth in a retail environment that remains challenging, and post period end we shipped over 250,000 orders in a single week for the first time…Notwithstanding the tough nature of the marketplace, we expect to continue growing ahead of the online grocery market”. The next deadline for Ocado’s management to come up with some deal news is
the interim results on June 28th…

Today’s Press and News: We haven’t had time to read all the papers yet, as we have to make our way to Cheltenham (!), but BHS is in the spotlight again, with the Telegraph flagging that Hermes Investment Management, which is a landlord of two BHS stores, has said that it is not in favour of the CVA. And the main editorial in the FT thunders that “Pension regulator should press Philip Green over BHS”, claiming that rules about the responsibility for pension benefits should be tested in this case. In other news, the Independent flags that Online fashion retailer Missguided’s website crashed yesterday, after it was unable to handle the volume of customers logging on to take advantage of half-price special offers. 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:

JD WETHERSPOON & RESTAURANT GROUP:

• On 25 Feb 2014 we commented on RTN concluding ‘RTN is a good company but [one should] consider switching to JD Wetherspoon’.

• We said (back in early-2014) ‘…and that’s wonderful [good cash flow, predictable new openings etc.] but you could say the same thing about Wetherspoon’

• We added ‘JDW has twice as many units as does RTN. They tend to be larger in terms of revenue and group sales at JDW (caledarised for 2013) were £1.34bn against the £0.58bn for that year just reported by RTN.’

• We said ‘margins are admittedly lower but JDW is, if anything, a more widely recognised brand. It has a functioning estate and growth prospects in the nation’s city centres, in its suburbs, on the nation’s motorways and now in Ireland and may, at these relative prices, offer a better option to would be shareholders than does Restaurant Group.’

• This has proved to be the case with JDW outperforming RTN by more than 60% in the year to date alone

JD WETHERSPOON & RESTAURANT GROUP CONTINUED:

• And why, we would ask, isn’t RTN buying its own shares back?

• JDW is.

• Does RTN believe that new units represent a better use of capital?

• Presumably so but has nothing changed as a result of RTN’s shares losing 45% of their value this year?

• One would imagine that, on the margin, the price drop would mean that RTN’s shares represented some sort of opportunity and, as we continue to believe that actions speak louder than words, we will await developments.

OIL PRICE:

• Does the fact that the IEA says there is growing evidence that oil prices are stabilising actually mean anything?

• Is it weather forecasting by looking out of the window and saying it’s raining?

• And, even if the comments do mean anything, are they likely to be correct or could they be a contra indicator?

• Well there are billions of dollars bet daily on the veracity or otherwise of the IEA’s comments and far be it from us to second-guess the various pointy-heads involved in such predictions

• But what we would suggest is that cycles tend to be cycles because they are, well, cyclical.

• On the supply side, low prices lead to lower production which, in turn, leads to higher prices.

• The reverse is true with high prices and, as regards demand, higher demand at low prices will lead to a firming of that price and, once again, the opposite will happen when prices are high.

• So much, so obvious but, with US rig counts at multi-year lows and the global oil majors shelving projects and mothballing some existing facilities, oil supply could be an issue in due course.

• And that leaves the market second-guessing and third-guessing what the market will do tomorrow. Was forever thus.

• Another contra-indicator, of course, could be the suggestion that the Chancellor is about to slap extra taxes on fuel knowing that the underlying price is low. If that doesn’t signal the bottom in terms of price, then we’re not sure what does.

HOLIDAY COSTS RISE AS EURO STRENGTHENS:

• Talking about contra-indicators, it was always perhaps likely that M Draghi’s long-anticipated (and expected-Euro-weakening) comments last week would coincide with the low point for the common currency

• Because the Euro has done little but strengthen over the last few trading sessions

• And, as this has come on top of a preceding period of Sterling weakness, it does mean that a pound now buys you around 8% less in terms of Euros than it did 6mths ago.

• This will impact holiday costs for many Britons.

• Certainly ‘brochure’ prices (admittedly there aren’t many brochures actually around any more) are fixed for one, maybe two seasons in advance – but 1) the cost changes will feed through in time and 2) the impact for the holidaymaker when he/she hits the resort will be immediate.

• This latter point is important as it means that holidaymakers may have less spending money left when they return to the UK than would otherwise have been the case.

• Pubs, restaurants and the like may feel the impact here later in the year.

Random information, hopefully not all of it useless:

• World equity markets strong, US now trading above its 20dy moving average for the first time this year

• Oil gold index. Takes 31.6 barrels of oil to buy an ounce of gold this morning. It took ‘only’ 30.6 last Thursday. Ratio was as high as 34.5 on 4 March. Longer term average said to be around 16-18.