A Day in the Life:

Langton is away from the office this week. There will be no Daily Wrap and A Day in the Life will be back on Monday.

The News:

PUB, RESTAURANT & DRINKS PRODUCER NEWS:

• The Sunday Times has reported that Greene King is exploring plans to sell off its Loch Fyne restaurants for around £100m. The group bought the company for less than £70m in 2007.

• AG Barr FY numbers. Sales £258.6m vs £260.9m, adjusted PBT +7% at £42.6m, total dividend 13.33p, up 10%.

• AG Barr. Says has ‘maintained market share of total soft drinks in a challenging UK market’ with international volumes +40%. Roger White, CEO, reports ‘we have delivered a creditable financial performance in difficult market conditions over the past 12 months through continued tight cost control, rigorous cash management, executional improvement and further investment in our brands, assets and people.’ He says ‘we delivered a significant change programme across the year which has further strengthened our operational and process capability, providing a robust and flexible platform to underpin our long-term success.’ Mr White concludes ‘we have, over many years, invested in our strong and flexible operating model and believe we are well placed to continue to deliver consistent long-term shareholder value.’

• Fevertree co-founders Tim Warrillow and Charles Rolls have netted £18m via the sale of shares in the company.

• BrewDog is looking to take the spirits world by storm with the upcoming launch of its Lone Wolf Distillery next month. The brewer will focus on vodka first, before moving on to gin, whisky, and other spirits.

• Liverpool City Council has rejected plans for a late night license relating to premises that can sell alcohol between midnight and 6am, writes Poppleston Allen.

• Over four out of five Wine and Spirit Trade Association members (81%) believe that leaving the EU would create an uncertain trading environment. Meanwhile, 91% of members think Britain’s inclusion in the European single market has benefitted the industry and 78% are concerned that a ‘Brexit’ might restrict access to the common market.

• The ALMR is urging the government to credit the role pubs and bars play in UK society in its upcoming White Paper on culture.

• Four out of five British brewers are excited for the year ahead and expect turnover to increase, according to a poll by the Society of Independent Brewers Association. The organisation’s MD Mike Benner said: ‘More and more drinkers are discovering the huge range of fantastic beer brewed by Britain’s independent craft brewers. SIBA’s members brewed 532 million pints in 2015 and this demand for quality, locally brewed beer has helped our membership grow to 850 brewers, [which is] approximately 60% of all breweries in Britain.’

• Ridgeview’s sparkling wines are proving a hit abroad, with 30% of the company’s sales now made in export markets. The Sussex-based operator’s sparkling wines are now on sale in 12 different countries, and CEO Tamara Roberts attributed the ‘huge increase’ in exports to the growing standing of British wine.

• Alcohol Concern is calling for minimum unit pricing for alcohol after a supermarket survey found that the recommend 14 units a week can be bought for c£2.

• Tesco is selling Champagne at the below-cost price of £7.46 over Easter from 23 March to 3 April.

LEISURE TRAVEL:

• Chinese investment company Anbang has raised its offer for Starwood Hotels to $14bn, topping Marriott’s move

• The number of international visitors travelling to the UK in January grew by 6% year-on-year, with 2.5 million international visitors spending £1.28bn.

• VisitBritain director Patricia Yates commented: ‘These record-breaking figures highlight the increasing year-round importance of inbound tourism to the UK economy. Tourism remains one of our fastest growing export industries but also one of the most globally competitive which is why we continue to showcase, through our international marketing campaigns, just why Britain should top people’s list as a must-go now destination.’

• US hotel industry occupancy rose 1.9% to 70.5% during the week of 13-19 March. Average daily rate was up 4.2% to $127.72 and revenue per available room rose 6.2% to $90.04.

• The European hotel industry also saw growth across its key performance indicators (occupancy up 1.5% to 63.1%; ADR up 3.7% to €102.98; RevPAR up 5.2% to €65.01).

• Rail fares have increased 54% in ten years – more than double the rate of inflation – while customer satisfaction has improved just 7% over the same period.

OTHER LEISURE:

• Batman v Superman: Dawn of Justice has taken $424m (£300m) at the box office worldwide in its first five days despite mixed reviews. That is the fourth highest ever global total, the sixth-highest US opening weekend, and a record for a March debut.

FINANCE & MARKETS:

• The US economy expanded at an annualised rate of 1.4% in Q4 2015, up from an initial US Commerce Department estimate of 0.7%. An improving labour market and greater consumer spending are credited with the upgrade.

• Chancellor George Osborne said on Thursday the government is likely to give the Bank of England powers to regulate mortgages used by landlords to buy homes. The BoE has said growth in the buy-to-let mortgage market poses a potential risk to financial stability but it wants to assess the impact of tax changes on the sector before taking any action.

• World markets: UK & Europe down on Thursday but US better yesterday. Far east mostly down in Tuesday trading

• Oil down a little at around $40.00 per barrel

Retail Roundup from Nick Bubb:

Next:
At the analyst’s presentation on Thursday morning, the estimable Next CEO Simon Wolfson was in good form, joking at the start that the packed room resembled the drivers stopping to look at accidents on motorways. He went on to say the “good news” was last year and the “bad news” was the outlook for this year, although he didn’t refer once to the “walking up the down escalator” metaphor he used in the results statement. Despite the gloomy outlook for Next Directory credit customers, he said the business was working hard to offset the drain with new iniatives on Online marketing, stock availability and delivery options, so that the expansion of the branded operation Label and Overseas sales could deliver some overall growth. He also emphasised that 55% of the new space being planned for Next Retail is devoted to Homewares, whilst
colder weather could deliver some upside for Q4 trading in Clothing this year. So, despite the lowering of full-year sales guidance by 2%, we didn’t come away from the meeting feeling particularly gloomy and were astonished to see the share price plunge further (as the market paid far too much attention to the odd verdict of veteran analyst Tony Shiret that it had been a “Highly Negative Meeting”).

Next Share Buyback Watch: We had expected the notoriously shrewd “Mr Share Buyback Man” to leap up from his desk at Next HQ on Thursday after seeing the share price plunge and order his brokers to “Buy, buy, buy”. But no such announcement was forthcoming, implying that either he had sloped early on holiday for the Easter break or that Next wanted to keep their powder dry and let the market settle down a bit, as the year is yet young. However, at the meeting Simon Wolfson said that although Next is not planning to spend more than £110m on share buybacks this year, they were not ruling it out, if the conditions were right. As the share buyback limit hasn’t changed from £69.62, we would be surprised if Next don’t move into the market this week, if the shares stay as low as around £56.50, for fear of losing face… 

Friday’s Press:
The papers on Friday were dominated by the highly negative reaction to the Next results on Thursday, with CEO Simon Wolfson’s comments about 2016 likely to be “the worst year since 2008” catching many headlines. The editorial comment was supportive, however: the Times said the gloom was overdone and Tempus column said the shares are a Buy, as the c15% fall on Thursday was “wildly overdone”, whilst the Telegraph opined that “only a fool would write Wolfson off”, the Guardian said “Next is not a write-off” and the Daily Mail highlighted that “Wolfson is by a long chalk Britain’s most cerebral shopkeeper”.  In other news, the Times noted that McColl’s have appointed the FD Jonathan Miller as their new CEO and the subdued ONS Retail Sales figures for February (see below) got quite a lot of coverage,
with the Guardian flagging up the weak Clothing sales. BHS remained in the spotlight, with the Daily Mail revealing that BHS has agreed to borrow £60m from the vulture fund Gordon Brothers to help it stay afloat, whilst the Times noted that BHS has only got six months to reach an agreement with the Pension Protection Fund to inject new funds. And the Guardian flagged that JD Sports has leapfrogged Sports Direct in market cap terms and that the provincial department store group Beales has won the support of its landlords to cut rents on 11 of its 29 stores.

Saturday Press:
The FT was not published on Friday, but it caught up with Next on Saturday, with Lex column penning a piece headlined “crying Wolf”, thundering that the share price slump “looks an overreaction, given how Next’s chief executive, Lord Wolfson, has form for overhyping the downside” and concluding that there is “little chance…that Next will fall off its perch, as Tesco did in Food Retail”. The FT also had a feature profile of one Mike Ashley (“A shy and retiring retail insurgent”), noting that “the Sports Direct founder thinks of himself as an outsider and wants to keep it that way”, flagging that “the transformation of Lillywhite’s has attracted wide opprobrium” and quoting one of his few on-the-record friends, the veteran property guru Malcolm Dalgleish. The Guardian kept up its flow of retail
stories, reporting that the Pension Protection Fund is on the verge of taking a stake of at least 33% in BHS and profiling Sports Direct’s hard-nosed Head of Retail Karen Byers. The Daily Mail had a lurid expose headlined “Philip Green faces calls to be stripped of his knighthood as he buys another yacht…while BHS teeters on brink of bankruptcy”. Finally, the last ever edition of the Independent flagged that the Government is set to review the remit of the Groceries Code Adjudicator, following criticism that it does not have the power to protect farmers from unfair trading practices.

Sunday Press:
BHS remained in the spotlight after last week’s CVA, with the Sunday Times reporting that BHS is close to selling the lease on its flagship Oxford Street store to its landlord, Abu Dhabi’s ruling family, in a deal that could raise £55m, whilst the Mail on Sunday flagged that  BHS management will have explain within weeks to the Pension Protection Fund how it will deal with its £571m pension black hole and the Sunday Express noted that many other High Street chains are struggling to pay their rent ahead of Quarter Day. The Sunday Telegraph highlighted that short-sellers have increased their bets against Halfords in recent weeks. Finally, there were a couple of interviews with Retail heavyweights: the Sunday Times interviewed the outgoing Waitrose MD Mark Price about his new role as the Minister responsible for Trade and Exports, whilst the Sunday Telegraph interviewed
Richard Pennycook on the challenges of saving and reviving the Co-op.

Monday Press: On the Bank Holiday yesterday, the papers were a bit thin, but the Telegraph highlighted that John Timpson, the veteran and maverick Chairman of the shoe repair firm Timpson, has backed a British exit from the EU in the forthcoming referendum, saying that it would be a risk worth taking…whilst the FT had a feature on the rise of Online second-hand car dealers.

Today’s Press and News: After the Bank Holiday yesterday, news is again a bit thin, with the headlines taken by the impact of “Storm Katie” on the South of England and a gloomy survey of the outlook for the City of London: encapsulated by the CityAM front page headline “Perfect Storm”.

Grocer Watch: The widely followed Grocer “33” weekly supermarket pricing survey in Saturday’s magazine was won by Asda again: the £65.26 Asda basket of Easter-focused items was £3.60 cheaper than nearest rival Morrisons, despite charging 50p more for Hot-cross buns! Needless to say, the Waitrose basket of £85.87 was way off the pace, although that was skewed by charging £17.58 for a leg of lamb (vs £8.80 in Asda and Morrisons, £11 in Tesco and £22 in Sainsbury)…The separate Grocer “Mystery Shopper” weekly survey on Store Service and Availability was won by Morrisons, as its 30,000 sq ft supermarket in Portsmouth topped the rankings, albeit with a relatively modest score of 76 out of 100 (Waitrose store came bottom again, as their Horley store in Surrey, near Gatwick, got a score of just 55, getting only 4 out 20 for stock availability).

Planet ONS Watch:
While everybody was watching the Next share price plunge on Thursday morning, the Office of National Statistics unveiled what life was like last month on that strange parallel world, the Planet ONS, via the Retail Sales figures for February (the 4 weeks to Feb 27th). In the real world, it was, of course, a slow month, as per the flat LFL sales outcome of the BRC-KPMG survey, and, for once, the City economists got it right, given the ONS report of a small 0.4% month-on-month dip seasonally adjusted sales volume  (up 3.8% year-on-year). All sensible people ignore such measures, however, and focus on the non-seasonally adjusted sales value figures, which showed a slight slip in growth, from 2.6% in January to 2.1%, albeit that outcome was boosted by suspiciously good Food Retailer sales growth of 1.5% and some optimistic-looking figures for Small Businesses…The key Non-Food
sales growth was also 1.5% in February, despite Household Goods retailer growth of 6.1%, held back by a 3.1% fall in Clothing and Footwear specialist sales…

News Flow This Week: The big two events coming up on the horizon are the Marks & Spencer Q4 update on April 7th and the Tesco finals on April 13th, but this week is quiet, after Easter, with just the monthly GFK Consumer Confidence survey on Thursday morning to look forward to. Nick Bubb – nicholas_bubb@hotmail.com

Thursday 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:

A TOUGHER 2016?

• Adnams earlier today said that, whilst 2015 had benefited from a somewhat better economic environment, it was expecting this to be less helpful in 2016.

• The group reported ‘the economic mood for much of 2015 was reasonably buoyant, though it is clear that consumer spending patterns continue to evolve quickly, and it has been very important for us to keep our finger on the pulse of the market and our eye on future trends.’

• It says, whilst 2015 was buoyant, ‘sentiment at the start of 2016 has been less so.’ It blames Brexit fears and a general economic slowdown’.

• Elsewhere today, retailer Next has reported ‘the year ahead may well be the toughest we have faced since 2008.”

• Re 2016, Next continues by saying ‘it may well feel like walking up the down escalator, with a great deal of effort required to stand still.’

• CEO Simon Wolfson says ‘it will not be the first time we have felt this way, and our experience is that the effort put into improving the business in tough times can pay handsome rewards when conditions improve’.

• Sounds like hard work but, if Mr Wolfson is correct, then good operators, those remaining relevant to their markets and serving product that appeals to customer at a price they are willing to pay, could yet succeed in what does look like being a tougher environment.

EVOLUTION. SERVICE, PRODUCTS, YOU NAME IT:

• Today we report that Google is bringing its Android Pay mobile payment service to the UK.

• In this it will be competing with Apple.

• Cash may, at some point go the same way as cheques.

• A number of operators, perhaps seeking publicity, have said that certain units will no longer accept cash.

• It may be some time before this spreads to the mainstream but, it we can learn anything from the recent past, it is that change can happen quickly and that operators that fail to stay in touch will find themselves soon at a competitive disadvantage.

• Elsewhere, the ALMR’s Future Shock report concludes that young people between the ages of 19 and 24 are increasingly choosing food over alcohol.

• Vertical drinking just isn’t what it was.

• Just ask Eclectic, Deltic or any other operator servicing the youth market.

• Though selling food remains an attractive option – though even here, sharing platters, other products in the ‘grazing’ market, soft drinks, coffee and ethically-sourced products may be in the process of squeezing out pie and mash.

• The ALMR reports ‘young people are increasingly planning their social lives around eating-out, turning away from drink and towards food. On average, under-25s are eating out between 5-6 times per month…The boom in eating-out, particularly in casual dining outlets, has seen a renaissance of our high streets driven by younger consumers. This is not only helping to drive growth in our local economies, but help contribute to healthier consumption and changing attitudes towards alcohol.’

COMMODITY & INPUT PRICES:

• Oil price down on glut fears. Only a dollar, though, which suggests that sometimes more credence than is justified is sometimes given to the ‘reason’ for the fall.

• Gold stable.

RANDOM INFORMATION, HOPEFULLY NOT ALL OF IT USELESS:

• Crowd-funding. Pact Coffee pulled its fund-raise & is now sacking staff. Smacks of ‘growth-via-retrenchment’. Often a somewhat confused strategy.

• Bull market taking a day off, prices currently lower.

• Currencies. Sterling down against both Euro and Dollar. Brexit fears doing the damage. Probably not too much of an impact at present but, it this persists, it will impact inflationary expectations.

• Sterling & Brexit. Cost of hedging against further Sterling weakness has apparently increased as odds on a Brexit have shortened.

• Bank of England suggesting that risks of exceeding 2% inflation target more than one year out have increased. Pointing currently to labour costs and a suggested further tightening of the labour market but weak Sterling will also ultimately have an impact.