Langton Capital – 2016-06-02 – Evolving formats, food deflation, Brexit & other:
A Day in the Life:
Langton is on hols this week so there’s something of a skeleton email going out & there won’t be a full ‘Day in the Life’ until next week. On to the news:
PUB, RESTAURANT & DRINKS PRODUCER NEWS:
• Bloomberg has reported that the US Justice Department is set to approve AB InBev takeover of SAB Miller later this month. It says conditions will be attached. These may include measures to prevent what will be a beer giant from edging craft brewers out of the market.
• Carluccio tells MCA it is considering multiple trading formats for the business going forward.
• Casual Dining Group shuffles senior team & moves James Spragg to newly-created role of COO
• Enterprise Inns yesterday bought back 100,403 shares for cancellation
• Krispy Kreme has reported Q1 revenues +3% at $136.5m. Group is to be acquired by JAB Holdings subject to regulatory approval
• Ruby Tuesday has completed the sale of its Lime Fresh Mexican Grill brand to EverFresh Endeavors for $4.6 million. It says ‘Lime Fresh Mexican Grill is a strong brand with broad customer appeal. However, we believe focusing exclusively on the brand transformation of our namesake Ruby Tuesday restaurants is in our shareholders’ best interest.’
• EasyCoffee is opening a new store in Leicester Square.
• Cracker Barrel reports Q3 numbers. Group reports LfL sales +2.3% with operating margin of 9.6% in Q3 vs 8.2% in the same quarter a year ago. CEO Sandra B. Cochran reports ‘during the third quarter, we had positive comparable store restaurant and retail sales growth, and continued to outperform the casual dining industry. With the reduction in commodity costs, and our management team’s focus on cost savings initiatives, we increased our operating income by nearly twenty percent. We are encouraged by our May sales results, which we believe have been driven in part by customer enthusiasm around our summer menu offerings.’
• Cracker Barrel reports shift of Easter into March ‘resulted in a positive impact on comparable store traffic in March and a negative impact on comparable store traffic in April.’
• Cracker Barrel re outlook. Group says ‘based upon year-to-date financial performance, recent trends, and current estimates, the Company raised its full-year earnings guidance. For fiscal 2016, the Company now expects to report earnings per diluted share on a GAAP basis of between $7.75 and $7.85, and on an adjusted basis of between $7.45 and $7.55.’ Group ‘now projects food commodity inflation to be flat for the fiscal year.’
• Waitrose took a record 5.3% of the UK grocery markets over the last quarter reports Kantar. The “big four” grocers – Tesco, Sainsbury’s, Asda and Morrisons – continued to lose market share. The grocery market overall was “essentially flat”.
• A BRC Nielsen poll has concluded that deflation is continuing in the UK food market with overall prices down by 1.8% on an annual basis in May, down from 1.7% in April. BRC CEO Helen Dickinson reports ‘the fact that today’s figures remain deflationary doesn’t come as a great surprise. We’ve experienced a record run of falling shop prices and, for the time being, there’s little to suggest that’ll end any time soon.’ Nielsen reports ‘shop price inflation remains below consumer price inflation and falling food prices are still being driven lower by global commodity prices as well as intense competition, which shows no sign of relenting any time soon.’
• JD Wetherspoon chairman Tim Martin has issued 200k beer mats featuring a call for the UK to leave the EU.
• The Costa Concordia captain, Francesco Schettino, has had his 16yr jail sentence upheld. Some 32 people died when the ship that he was captaining hit rocks off the Tuscan island of Giglio.
• Saudi Arabia’s sovereign wealth fund has taken a $3.5bn stake in Uber.
• New research has suggested that Brexit could cost the UK’s tourism industry around £4.1bn in lost income per annum. If fewer people travelled abroad as well, then there could be some compensating benefits.
• US hotel purchasers spent US$40.5 billion on hotel real estate acquisitions in 2015 per STR data.
• STR says there has been a shift towards new construction in the hotel industry. It says ‘while overall investment in the hotel industry continues to rise, we have definitely seen a shift toward new construction over the past couple of years with rising asset prices and strong demand levels encouraging new hotel development in many markets.’
• Bowlplex in Poole has undergone a £0.5m refurb. It is to become a Hollywood Bowl. Steve Burns, CEO at The Original Bowling Company reports ‘the Poole rebrand marks the first of many significant investments we plan to make in the Bowlplex estate over the coming three years.’ He adds ‘with the Tower Park refurbishment already receiving some excellent customer feedback from the residents of Poole, we’re looking forward to the next stages in our Bowlplex refurbishment programme of creating fantastic, upgraded environments under the Hollywood Bowl brand.’
FINANCE & MARKETS:
• OECD has reported UK economy would suffer “a large negative shock” if it left the EU.
• Markit CPIS PMI shows a slight rise in UK manufacturing activity in May.
• Rate of UK house price inflation slows. Prices up 4.7% in year to May vs 4.9% in year to April & 5.7% in year to March. Prices up 0.2% in March on a monthly basis.
• Brazil’s economy shrank 0.3% in Q1 2016, the fifth consecutive quarterly contraction, official figures show.
• World markets: UK & Europe down yesterday. US markets up & Far East mostly higher in Thursday trade
• Oil challenging $50 again. Edging slightly higher & trading at around $49.80 per barrel
Retail Roundup from Nick Bubb:
Today’s Press and News:
FTSE Watch: The FTSE index quarterly review was published yesterday evening, with luxury shoe retailer Jimmy Choo and the motors group Lookers ejected from the FTSE 350 index, as expected, but one noteworthy new entrant to the FTSE 350 index is the recently-floated media group Ascential (which is the illustrious owner of Retail Week and Drapers magazines, inter alia), with a market cap of just under £1bn.
Halfords: Yesterday’s final results from Halfords are at the upper end of the previous £78m-82m profit range, at £81.5m, broadly flat on last year on an underlying basis, but there’s not a lot to shout about (as indicated by the lack of a “shouty” headline for the press release), although the statement goes on at great length about the progress with the “Moving up a Gear” programme”. There is nothing new in the forward guidance either (with another flat year expected), apart from a caveat about the possible hit to gross margins from dollar weakness below $1.50, but no doubt management will find something to fill out the time at the 9am analysts meeting.
Kantar Watch: The headline of the latest Kantar grocery market share survey this morning is “Big Four retain shoppers despite strong growth from competitors”, flagging that the 12 weeks ending 22 May show the overall market to be essentially flat, with food price deflation remaining at 1.5%. But the real insight will come from the detailed 4 week figures to May22nd: more on this tomorrow, along with the rival Nielsen grocery market share figures.
Yesterday’s Press and News:
News Flow This Week: Things are quiet this week in terms of company news, given skool half-term, but the fast-growing Vertu Motors has made another acquisition today (the Gordon Lamb Group in Derby) and the FTSE index quarterly review is out this evening, with Jimmy Choo and Lookers expected to be ejected from the FTSE 350 index. Nick Bubb – firstname.lastname@example.org