Langton Capital – 2016-08-17 – July trading negative in regions, Carlsberg & other:
A Day in the Life:
Not a lot by the way of hard news.
Sun shining in London, tarmac steaming, Olympics on the telly & out of office replies running limit up. May be sending stuff into a vacuum out there. Still, keep calm and carry on. On to the news:
CURRENT TRADING – JULY COFFER PEACH TRACKER:
• Coffer Peach Business Tracker shows trading negative in regions in July but London keeping its head above water.
• Tracker suggests ‘post-vote Britain carries on eating and drinking out’. Regions negative but London busy
• Tracker: Says LfL sales +0.3% in July 2016 vs year ago. Says London outperforms rest of Britain at +2.9% vs minus 0.5%
• Tracker: Regional decline despite good weather suggests London may be benefiting from tourism boost but regions less so. The Tracker says ‘Britain’s managed pub and restaurant groups saw collective like-for-like sales grow 0.3% in July against the same month last year – the first indication that the country is not giving up on going out to eat and drink in the wake of the Brexit vote.’ It continues ‘performance was not uniform across the market, with London operators seeing a healthy 2.9% like-for-like sales uplift against July 2015, while those outside the M25 saw like-for-likes fall 0.5%.’
• Tracker: Peter Martin comments ‘pub groups also did better than restaurant chains’ at +0.9% vs down 0.6%. Tracker says this ‘was probably more to do with the good weather than anything else.’ This may be a little sweeping as capacity growth has been more of a problem across casual diners than it has for the pub companies.
• Tracker: Says ‘market will be relieved however that trade has more than held up post-referendum, as confidence among the bosses of pub and restaurant chains took a tumble after the vote’.
• Peter Martin says ‘operators in London emerged as slightly more upbeat about business prospects in the wake of the vote than their colleagues outside the M25, in part down to an anticipation of increased UK tourism – and that seems to have been reflected in sales on the ground. The London market is looking more robust.’ He says ‘sunny weather always favours pubs over restaurants, and that is particularly true during holiday periods.’
• Total sales in July +4.0% vs LfL sales +0.3% shows impact of new openings. Capacity issues remain somewhat concerning.
• Tracker: LfL sales +0.8% for the year to end-June with restaurant chains up 1.0%, pub groups ahead 0.7%. CGA Peach says ‘it’s been a fairly sluggish market so far this year and the Brexit vote doesn’t appear to have altered that trend one way or another – and July’s performance was actually stronger than April or May’s.’
• Tracker: Coffer Corporate Leisure reports ‘we expect to see costs continue to increase and margins erode over the coming months.’ It says this will put pressure on profits – but higher numbers of inbound tourists should be a positive for some destinations.
• Pub property. Coffer comments ‘following the referendum we experienced an initial hesitancy from the market to make big property commitments’. It goes on to say ‘but now that the initial shock has passed we continue to see similar activity as we did prior to the vote.’ Tracker adds ‘one of the biggest benefits to come out of the EU referendum result was certainty – certainty that at least we now know the direction of travel.’
PUB, RESTAURANT & DRINKS PRODUCERS:
• Carlsberg reports Q1 number, organic net revenue growth of 2% with total volumes down organically by 2%
• Carlsberg Q1: Says ‘2016 earnings expectation maintained’ & sees ‘operating profit growth by low-single-digit percentages’
• Carlsberg Q1: CEO Cees ‘t Hart says: ‘in the seasonally small first quarter, we delivered a solid start to the year. Applying our new value management approach, we are on our way to strike a better balance between market share, gross margin and earnings. We maintain our full-year outlook for organic operating profit growth.’ He continues ‘we continued to implement initiatives under the Funding the Journey and are focused on a timely and full delivery of the expected net benefits.’
• Carlsberg: Lower sales in Europe, UK volumes down. Net revenue DKK 13.0bn making a 3% decline ‘due to the negative currency impact of -5%.’ Says in W Europe, net revenue declined organically by 3% and volume was 7% lower. It says ‘we estimate that the overall Western European beer market was flat for the quarter. Our volumes were impacted by the delisting at a customer in the UK, our withdrawal from margin-dilutive contracts in Finland and Poland and tough comparisons, as Q1 last year was positively affected by stock-building ahead of the BSP1 implementation in some major markets.’
• Carlsberg: Re outlook, says ‘based on solid Q1 results, we maintain our financial expectations for 2016’. Group sees ‘low-single-digit percentages organic operating profit growth’ and a cut in debt.
• W Morrison has sold its stake in US online grocer FreshDirect for £45m in a further withdrawal from the US.
• A new Wetherspoon pub in Chatham, Kent, has been criticised on social media for banning tracksuits and hats.
• Flat Iron Square is set to open in early October 2016 as the first part of the new Low Line in London’s Bankside.
• A coalition representing thousands of small businesses is urging the government to ditch former Chancellor George Osborne’s tax on soft drinks.
• M&B chief executive says the introduction of the National Living Wage is a game changer for the sector and could work in his company’s favour per MCA.
• Phil Sermon, managing director of Vapiano UK, has told MCA that the group will open three sites this year.
LEISURE TRAVEL & HOTELS:
• Virgin East Coast workers have suspended planned strike action. The RMT says this “does not mean the dispute has been completely resolved”.
• Over 170m people in the US (53%) have not taken a holiday in the last year, according to the seventh annual Allianz Travel Insurance vacation holiday index.
FINANCE & MARKETS:
• Rising fuel prices helped to drive the UK’s inflation rate up to 0.6% in July according to ONS figures.
• Sterling rose slightly yesterday against a weak US$.
• NY Fed president Wm Dudley has said a September rate rise is possible. He reports ‘we’re edging closer towards the point in time where it will be appropriate I think to raise interest rates further.’
• World markets: UK & Europe down yesterday, US also lower. Far East markets up a shade in Wednesday trading
• Oil price down after sharp bounce. Brent crude currently trading around $48.90 per barrel.
• UK house price inflation grew to 8.7% in June, according to the new House Price Index, bringing the cost of an average home to £213,927.
YESTERDAY IN A NUTSHELL – SEE LIVE TWEETS ON WEBSITE:
• Pret A Manger cuts losses in its 65-strong US division to £3.56m after seeing like-for-like sales increase 6.1% in the year ended 31 Dec
• Rail fares have grown at twice the speed of wages since 2010, according to trade union research
• Nearly a quarter of Brits would rather binge watch their favourite show than go out to dinner with family or friends per Bookatable.
• In four weeks’ time the new polymer £5 note enters circulation, to be followed by a polymer £10 note next summer & new £20 note in 2020
• EasyHotel has announced a third franchise hotel in Amsterdam. The 96 room unit will be located on Ankersmidplein street
• Lib Dems say the cost of a family holiday to Europe up by £300 due to fall in the value of the pound following Brexit vote
• STR’s July 2016 Pipeline Report shows Greater London has the most rooms in construction in Europe
• Brexit slowdown? ICAEW says confidence slipped, reports that ‘already on a firmly downward trend [it] has been hit further by Brexit.’
• BRC has reported that the national town centre vacancy rate rose to 10.1%. High street footfall crept up in July
RETAIL NEWS WITH NICK BUBB:
• Yesterday’s Press and News: The main Retail story, as noted by the Guardian, the FT, the Times, the Daily Mail and the Telegraph is that workers at Sports Direct’s Shirebrook warehouse will receive back-pay of about £1m for non-payment of the minimum wage, after an agreement with HMRC and the Unite union. The Times picks up yesterday’s Telegraph story that closure of the final BHS stores that are still trading has been delayed by a week, to clear stock. The Telegraph flags that Specsavers has applied to trademark the words “should’ve” and “shouldve” in an attempt to protect its advertising slogan. And we are told that the Sun highlights the Grocer magazine finding that shoppers are paying up to 65% more for items at Waitrose than at Aldi. Finally, the FT market report notes that the hedge fund Elliott has increased its stake in Poundland from
• Retail Week Rich List: Our eye was, inevitably, drawn to the ranking of Philip Green when Retail Week magazine published a list of the “Richest 100” people in Retailing yesterday. Zara owner Amancio Ortega tops the list, with Amazon’s Jeff Bezos the highest riser. And Philip Green (and his wife Tina)? Well, he was only 46th…on £3.22bn. The methodology owed much to the Sunday Times “Rich List”, so that the valuations of Top Shop and Arcadia are a little fanciful…but at least £280m has been knocked off the total as a provision against any demand that the Pension Regulator may make to help towards the BHS pension deficit…