Langton Capital – 2016-08-05 – Ladbrokes, Brexit slowdown, operator pessimism & other:
A Day in the Life:
Langton, still blundering around in New Mexico, has moved down to Albuquerque in order to soak up a bit of the Breaking Bad atmosphere & visit the rattlesnake museum. Still learning a bit re the restaurants, coffee shops etc. & will write more fully on it when we get back.
• Craft Beer is too strong. ABV of 7% is no joke. Perhaps we’re wrong but we’d not thought that beer was brewed for sipping.
• There are arguably too many craft brewers around. The choice is mind-boggling but how many super-strong, hoppy beers do you need? By the time you’re drinking your seventh (these are 355ml bottles), you won’t be able to remember what the first one tasted like. Or indeed be able to feel your extremities.
• Tipping is an issue. In Germany, Switzerland or Holland, you round to the nearest Euro/Franc & maybe add another one for luck. If you did that here, you’d be lynched.
• Fast food may be a guilty pleasure – but both the guilt and the pleasure may be positively correlated. The US is way beyond the UK. It’s arguably something of a problem.
• Sundry. US TV is awful. Adverts are repetitive & calorie-packed. Or they feature blood-sucking lawyers or aggressive OTC drug retailers.
Anyway, a shortened email – with perhaps some delay – will be going out for a little while. On to the news:
PUB, RESTAURANT & DRINKS PRODUCERS:
• CGA reports only 15% of hospitality industry operators are now optimistic, post the Brexit vote, about the future. Some 75% were optimistic in January
• CGA says ‘expectations overall are depressed’.
• However, CGA Peach has also reported that hopes that a weaker pound will buoy tourism has meant that hospitality operators are not as downbeat post the Brexit vote as other industry leaders.
• CGA reports that a property price slide could help put the brakes on ‘spiraling rental and property costs’.
• CGA says ‘London-based operators have emerged more upbeat than their peers trading outside the M25, with 26% optimistic for the short term’. It says ‘although expectations overall are depressed, operators in the capital are more likely to see benefits from tourism and falling property costs.’
• CGA says operators are concerned about input costs, falling consumer confidence, less staff availability and an overall skills shortage.
• Fullers has teamed up with four craft brewers to produce two bespoke cask ales available over the summer.
• Supermarkets have denied that they are not doing their part to fight obesity. A Which report says that over half of supermarket promotions (53%) are for ‘less healthy food and drink’ products.
• Consumption figures suggest that Brits have apparently shrugged off fears that eating bacon could cause cancer.
• MCA reports that Imbiba-backed Ruth & Robinson is set to relaunch with an opening in Hackney. The company, led by Sarah Weir, ‘sold its original site – The Fourteenth Colonie in Clerkenwell – to BrewDog last year, and pulled out of acquiring the Black Cap in Camden earlier this spring.’ The MCA reports the group ‘has now secured the London Fields pub site, formerly known as The Warburton Arms, in Mare Street, Hackney for an opening under the mooted name Martello Hall this autumn.’
• Intertain has exchanged contracts on a lease for a new venue in Chelmsford. The unit is currently a J D Wetherspoon pub. CEO John Leslie reports ‘this new site presents a fantastic opportunity for us. Situated overlooking the river in an excellent location in busy Chelmsford, the bar itself offers a large and adaptable space ideally suited to a new-style Walkabout. After we have completed the building work, we will be able to offer excellent live sport, zoned VIP areas, brilliant party nights and a great daytime food offer. We are looking forward to building our brand in this great city.’
• Brewdog has launched a $50m ‘Equity for Punks’ crowdfunding campaign in the USA. The group says ‘we’ve seen a huge amount of interest’ nd goes on to says ‘we’ve set up Equity for Punks USA on BankRoll, which is an awesome American platform for equity crowdfunding.’
LEISURE TRAVEL & HOTELS:
• Travel Weekly has reported that a number of agents operating as Travel Counsellors franchisees are fighting potential demands from the tax office for VAT totalling tens of thousands of pounds.
• STR has reported that the US hotel market saw occupancy reduced by 0.2% in the week to 30 July. Rate rose 4.6% and REVPAR was up by 4.4%.
• Numis is placing 10m shares in On the Beach currently owned by OTB Holdings.
• Ryanair carried 11.3m passengers in July, up 12%.
• IAG has reported that passenger kilometres increased by 15.7% in July.
• Ladbrokes yesterday reported H1 numbers. Revenues rose by 13.1% to £661.8m. PBT came in at £39.8m (2015: £24.7m). Basic EPS was 3.4p vs 2.4p and the dividend was held at 1.0p. CEO Jim Mullen reported ‘these strong numbers show customers are responding positively to the new strategy at a time when the sporting gods have generally been on our side and we’ve enjoyed some helpful bookmaker friendly results. This combination has helped boost profits in the first half of the year.’
• Ladbrokes comments ‘encouragingly we have delivered a good performance across all the key customer metrics outlined in last year’s strategic plan and that gives us confidence that we are well placed to deliver against our stated 2017 targets.’ CEO Jim Mullen concludes ‘we will continue to compete hard on pricing, product and customer services and maintain a relentless focus on meeting and exceeding customer expectations. With the merger on the horizon we recognise there is a lot of hard work still to come, but this is an exciting time for Ladbrokes and we approach the opportunities ahead with a strong sense of confidence.’
• Retail group GAME has forecast full year sales of £815m versus sales of £867m last year.
FINANCE & MARKETS:
• The Bank of England has slashed its UK growth forecast. The Bank will also buy back £70bn of government and corporate bonds.
• Bank of England downgrade to economic forecasts is largest in 20yrs. It says the economic outlook has ‘weakened markedly’.
• Bank of England forecasts unemployment will rise, house prices will fall.
• NIESR has welcomed Bank rate cut.
• IEA says the ‘decision to cut the base interest rate is both disappointing and ill-advised. The post-Brexit economic problems are down to consumer and business uncertainty and will not be solved by introducing monetary stimulus. By lowering interest rates, the Bank of England will distort the economy and potentially reduce growth.’ It comments ‘instead of altering monetary policy in a whirlwind panic based largely on surveys of business intentions, we need policies to de-regulate the economy in order to provide a healthier environment for business investment that will improve productivity and living standards.’
• Langton would suggest it’s marginal in scale but implies that rates will stay lower, for longer. That means we will be borrowing more from the future. AKA inter-generational theft.
• BBC comments on economic outlook. Says consumer confidence falls by largest amount in 26yrs.
• BBC says chance of a recession is 50-50.
• BBC points out housing market activity much lower & says job-cutting could accelerate across some sectors.
• Shadow chancellor John McDonnell says UK should borrow more to invest.
• Neil Woodford funds see ‘tough start to the year’. Says some investors will be disappointed. His funds have markedly underperformed the UK All Share, having fallen by 16.6% against a 9.8% loss for the index.
RETAIL NEWS WITH NICK BUBB:
• BDO High Street Sales Tracker: We flagged on Wednesday that John Lewis had a half-decent end to July last week and today’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains for w/e July 31st flags that Fashion Store LFL sales were up by 1.1%, its best result for eight weeks (albeit against a soft comp), whilst total Online Non-Food sales were up by just over 20%.
• Weather Watch: With sunny and dry weather conditions now returning, Fashion retailers will be unsure whether to laugh or to cry, as autumn clothing ranges are already in the shops…but memories about “the weather” are notoriously short-term, so, ahead of Tuesday’s BRC-KPMG Retail Sales survey for July, we turned to the Retail weather consultants Planalytics for their regular monthly overview of how last month’s weather “should” have affected the High Street. And the headline for July this year was “Was it record breakingly hot?”, with “Strong demand for summer product”. Overall for the UK the month was warmer and drier than both last year and normal, but it was a tale of two halves. The first half of the month was cooler than both last year and normal, with a significantly warmer second half of the month and consumer demand
• Trade Press (1): The front cover of Retail Week magazine features a photo of a young worker with a bagel stuffed in his mouth and the headline is “The way we eat now”, flagging that from the rise of breakfast-on-the-go to the growth of delivery services like Deliveroo, dramatic change is under way in food retail. RW also has a profile of UK newcomer Mercato Metropolitano’s debut food store in Borough Market and an article about how the growing menswear market is a big fashion opportunity. In terms of news stories, RW focus on the news that Sainsbury’s is stepping up its operations in China by expanding its presence on the Tmall marketplace (and in the UK is rolling out its Tu athleisure range to 170 stores), as well as the announcement that Morrisons has slashed the price of more than 1,000 products, as it seeks to reassure customers following Brexit. RW also
• Trade Press (2): Drapers magazine celebrates its 129th birthday today with a double-issue and a timely feature on “All roads lead to Rio”, via a spotlight on Brazil, including Havaianas’ head honcho talking about their business is about more than just flip-flops and an article about seven of Brazil’s best new brands to watch. Drapers also have articles about the pick of the product from the recent London menswear fair “Jacket Required”, the Fat Face CEO’s solution to the High Street scourge of discounting and the hot retail topic of Personalisation. In terms of news stories, Drapers focus on the news that the menswear supplier Bagir’s turnaround plan is beginning to bear fruit, the plus-size womenswear chain Yours Clothing is set to open 10 new stores in the UK over the next six months, the Manchester-based young fashion etailer Pretty
• News Flow Next Week: There’s not much going on next week, apart from the Olympics in Rio (come on Team GB), but the BRC-KPMG Retail Sales figures for July first thing on Tuesday should make for better reading, whilst Thursday brings the DFS pre-close and the Card Factory pre-close.