Langton Capital – 2017-04-05 – Dart Group, Hollywood Bowl, food costs, visas & other:
5 Apr 17 – Dart Group, Hollywood Bowl, food costs, visas & other:
A DAY IN THE LIFE:
Don’t you think job descriptions have got a bit over the top recently?
I mean you need to be a self-starting people-person to work in a chip shop and an innovative and motivated team member to stamp people’s driving licenses at the DVLC.
And you’ll find yourself reading descriptions of people who, at the bare minimum, must have a second degree from an Ivy League college and a PhD in nuclear physics who are needed to facilitate the smooth running of our transportation system (i.e. sweep the streets) for £14,950 and you wonder how you yourself ever got onto the jobs ladder in the first place. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• UK consumers are spending over £21 more a week for food and drink according to data from Kantar Worldpanel, as retailers own-label ranges continue to see growth. Kantar data has shown an average 2.3% price rise on everyday items as inflation has sunk in. Kantar’s head of Retail and Consumer Insight, Fraser McKevitt, has commented that inflation showed ‘no sign of abating’ but expected it to continue, forcing customers to looking for cheaper alternatives.
• BRC reports food prices increased by 1% in the year to March, the fastest rate in 3yrs. However, there is still evidence to suggest that other goods are still getting cheaper. The BRC comments ‘global food commodity costs have risen by 17 per cent on average over last year’s figures, building substantial pressure in the food supply chain.’ It adds ‘although UK food shop prices are seeing their steepest rise this month for over two years, the increase is still only one per cent, reflecting the continuing intense competition between retailers. The limited increase is even more impressive, given the magnitude of the devaluation in sterling.’
• The FT reports that Germany’s billionaire Reimann family is set to buy US bakery and sandwich chain Panera Bread. It says that the owner of Keurig Green Mountain and Krispy Kreme could announce a deal within days. The deal price could be in the region of $7bn.
• NRN points out that US restaurant stocks have had a good start to the year. Share prices have risen by an average of 7%. NRN says ‘some of the better performances this year have come from some of the bigger restaurant companies.’ It singles out McDonald’s, Darden & Domino’s as strong performers and adds ‘the poorest performing companies on Wall Street have tended to be smaller companies like Kona Grill, Luby’s, Famous Dave’s and Fiesta Restaurant Group.’
• NRN says ‘grab-and-go’ restaurants (which it calls ‘fun-and-run’) have outperformed their sit-down peers.
• House of Lords inquiry into the Licensing Act 2003 could lead to changes in the “fundamentally flawed” legislation. Top of the trade’s hate list may be Late Night Licenses. There is a realistic chance that these will be scrapped. On the other hand, with Brexit looming, there will be major calls on government time from other directions.
• Dunkin’ Donuts is to offer forward-ordering from mobile devices in the US via Waze. The company says ‘we are proud to be the first brand to integrate with Waze to enhance the mobile experience and offer our DD Perks members with faster, more convenient ways for ordering ahead.’ The company adds ‘loyalty is the main focus for all that we do at Dunkin’ Donuts. Leveraging the best technologies and partnering with leading brands like Waze helps our brand continue to stand apart for valuing our loyal guests.’
• French, German and Italian groups have called upon their national competition authorities to investigate what they allege are anti-competitive practices undertaken by brand owner McDonald’s. They allege that McDonald’s should not be able to specify the price at which individual entrepreneurs sell products from franchised outlets. Some 80% of McDonald’s stores worldwide are owned by franchisees.
• Staples is reported to be considering a sale of its business.
• Pret A Manger has introduced a new twenty strong menu to its two London Veggie Pret sites. The first vegetarian and vegan dedicated Pret sites opened late last year in Soho, with a second being opened in Shoreditch earlier this year.
• Rosa’s Thai Café co-founders have launched a new Thai food concept called Saiphin’s Thai Kitchen, with a first site lined up in London Fields. The concept is currently self-financing, but the company is exploring external sources of funding, including crowd sourcing.
• Britain’s coffee shop operators will recruit another 40,000 baristas to support their growth plans over the next six years, per Allegra Group’s UK Coffee Report. The number of coffee shops in Britain will grow by more than 7,000 to over 30,000 by 2025, according to the report, which adds that an average of 24 coffee shops are opening every week across Britain.
HOLIDAYS, LEISURE TRAVEL & HOTEL
• Abta is prioritising freedom of travel ‘within Europe and beyond’ and is demanding protection of existing consumer rights for travel and tourism in the forthcoming Brexit negotiations. The group is also calling for greater clarity on future arrangements to give businesses ‘operational stability’ and wants the government to ‘seize opportunities for growth presented by Brexit.’ Abta’s report, entitled ‘Making a Success of Brexit for Travel and Tourism’ identifies ‘five central points’ of focus for the negotiations, suggesting the government: ‘Maintain our ability to travel freely within Europe and beyond; keep visa-free travel between the UK and the EU; protect valuable consumer rights; give UK businesses operational stability; and seize opportunities for growth.’
• Dart Group has updated on full year trading saying it expects PBT to be ahead of current market expectations. This is because of lower than anticipated winter losses. Dart says ‘looking ahead to the year ending 31 March 2018, forward bookings in the Leisure Travel business for summer 2017 are satisfactory.’
• Dart adds ‘trading at Fowler Welch, our Distribution & Logistics business is promising, as it continues to focus on growing and successfully developing existing and new business opportunities.’
• Dart concludes ‘although it is still early in the leisure travel booking cycle, given current forward bookings and the recent successful launch of our new operating bases at London Stansted and Birmingham airports, the Board expects to meet current market expectations of profit before taxation for the year ending 31 March 2018.’ It says it will publish its Preliminary Results for the year ended 31 March 2017 on 13 July 2017.
• AccorHotels is teaming up with Travelsify to personalise online hotel booking and has also acquired VeryChic, a member-based seller of discounted luxury hotel rooms, for an undisclosed sum.
• Tian An China is believed to have bought Southplace Hotel from Frogmore in a deal worth £70m. It is reported that D&D London will continue to run the hotel alongside the new owners.
• The Foreign Office tells British travellers to ‘take extra care’ in St Petersburg following the bombing on the metro which killed 11 people.
• Hollywood Bowl updates on H1 trading, says it ‘has traded well through the first half of the financial year’.
• Hollywood Bowl sees H1 total revenue growth of +7.8% with LfL sales +1.2%. It says ‘this is in spite of the Easter trading period falling in H2 for FY 2017 compared to H1 for FY 2016. Based on historic performance, this switch in the Easter trade has reduced LFL in H1 by c.2.0%pts.’
• Hollywood Bowl says its ‘strong LFL performance has been driven by the ongoing successful execution of our organic growth strategy.’ It adds ‘we continue to invest in improving the customer experience through transformational centre refurbishments (a total of six are expected to be completed in FY 2017, one completed in H1) and our rebrand programme.’
• H Bowl concludes ‘the Group continues to trade in line with the Board’s expectations for the full year.’ It still plans to open ‘two prime location centres per annum against strict selection criteria, focussing on both new centres and existing centre acquisitions.’ CEO Stephen Burns comments ‘this is another strong trading and operational performance from the Group which goes to underline the strength of our business model, the great teams in our centres and the success of our capital investment programme.’ He concludes ‘we are on track at the half year and are focussed on delivering our goals and maximising the opportunities being created by our refurbishment programme and our strong new centre and acquisition pipeline.’
• Telegraph reports that the betting industry will simply have to live with new curbs on FOBTs (fixed odds betting terminals). Trade association BACTA has suggested that thousands of high street shops could close if ‘punitive’ betting limits are imposed.
FINANCE & MARKETS:
• A KPMG survey reports that Brexit-prompted worries over trade disruption, tariffs and access to the Single Market has seen the UK fall from the top place for foreign direct investment to fifth.
• Bank of England sees recent rapid rise in consumer borrowing as a potential threat to stability of the financial system. It is viewing the situation from the point of view of the banks considering how damaging widespread default could be on company balance sheets. It says personal debt growth ‘reached an annual growth rate of 10.9% in November 2016 – the fastest rate of expansion since 2005 – before easing back somewhat in subsequent months.’
• Housing market. Topps Tiles reported sluggish sales yesterday saying that these ‘reflected softer market conditions.’
• US trade deficit fell in February. Albeit to a still massive $23bn in the month and down from an all time record shortfall in January.
• UK construction PMI fell to 52.2 in March. Any number above 50.0 implies continued expansion.
• Brent up to $54.47 from $53.01 yesterday.
• Sterling down vs US$ at $1.2444 and lower vs Euro at €1.1656.
• UK 10yr gilt yield little changed (up 1bp) at 1.07%. Recent falls in the rate suggest markets believe base rates will remain ‘lower for longer’.
• World markets: UK & Europe up yesterday with Wall St also higher. Far East lower in Wednesday trade.
YESTERDAY’S LATER TWEETS:
• Later tweets: AO World said last week that white-goods’ sales were coming under some pressure. Big ticket items face cutbacks? Remember Hofstadter’s Law
• Let them eat turnip. Aldi has cut the price of cauliflower in the light of a bumper harvest. The price of most other things has gone up
• ASDA Income Tracker suggests 47% of consumers think their income is about to fall. Only 6% see it rising.
• ASDA Tracker suggests ‘60% of UK families’ spending power falls year on year as the average growth continues to slow’.
• Uncertainty globally as sovereign bond yields fall. Stagflation fears? Concerns re Trump, policies in general as reflation trade stalls
RETAIL NEWS WITH NICK BUBB:
• Grocery Sales Watch: As usual, the two rival monthly panel surveys of grocery spending both came out at the same time yesterday morning and Nielsen said that takings at the tills for the last four weeks, to March 25th, slumped by as much as 2.6% versus the same period last year, because of the shift of Easter. But the more bullish findings from their rival Kantar were that industry sales rose by 1.4% in the 4 weeks to March 26th (Kantar run to a Sunday rather than a Saturday), albeit that was still below industry price inflation of 2.3%. However, the detailed Kantar figures for the 4 weeks showed that Aldi/Lidl really skewed the outcome, by growing their combined sales by a hefty 18.7%, well up on the 15.2% growth that they achieved in the previous 4 weeks and way ahead of the -1.8% of the “Big 4”: Tesco was -1.4% in gross terms over those 4 weeks, Morrisons was -2.2%, Sainsbury was
• John Lewis Partnership Sales Watch: We flagged a week ago that trading would probably look better for Waitrose last week (Week 9 of the new-year), given the extra trading day compared to the post Easter period last year…and we were right. In w/e April 1st, Waitrose sales were up by 14.7% gross (up c12.5% “LFL”), so over the last 9 weeks combined, Waitrose is now running only 0.3% down gross (c2% down LFL). The new Haywards Heath store opened last Thursday, the largest shop opening for Waitrose in 2017 (it features some of the new drinking and dining ideas, including a sushi counter, wine bar, and the new ‘Kitchen’ fresh meal concept). Over at John Lewis, however, things were still depressed by the late Easter impact, with sales down by 6.0% gross (c8% down “LFL”), thanks to a near 16% slump in Electricals sales. John Lewis is now running down 0.2% gross (c2% down LFL) on a
• ASOS: Yesterday’s interims from ASOS (for the 6 months to end Feb) were slightly ahead of City expectations, with sales up 31% on a constant currency basis and PBT 14% up at £27.3m (adjusted for the closure of the Chinese business). So it was a bit of a surprise to see that the shares plunged 7%/8% early in the morning, but investors were evidently a little spooked by the guidance that full year PBT was only anticipated to be broadly in line with the market consensus, despite raising sales forecasts, given “continued reinvestment of the FX benefit, together with the transition costs into the new Eurohub 2 facility, sourcing inflation and a number of other structural cost headwinds”. Full-year profit upgrades had been expected, but the analyst’s meeting was reassuring and the shares later recovered, to end the day basically unchanged.
• Topps Tiles: The Topps Tiles share price was also weak yesterday morning, after the trading update for the 26 weeks to 1 April, but in this case the shares continued to fall during the day, closing down by 7.7%. What upset the City was the revelation that LFL sales fell by 4.1% during Q2 and the news that trading improved though the quarter and that full-year profit forecast should just about hold, thanks to cost control, was little comfort. Matt Williams, the CEO, said: “Market conditions over the second quarter have been tougher, but the business has responded well with tight control of costs. While we are taking a prudent view on the outlook for the balance of 2017, an improving trend over the second quarter provides some encouragement”.
• Today’s Press and News: There is plenty of coverage of the ASOS and Topps Tiles updates in today’s papers, although the FT goes a bit far with a big article headlined “Asos shares slide after price cuts squeeze margins”, given the later recovery in the ASOS share price (see above). ASOS also gets prime billing in Lombard column in the FT, via a piece entitled “Asos cuts its cloth for growth but leaves a bit less margin for error”. Topps Tiles would normally get overshadowed, but its weak trading catches a few headlines and there is also quite a bit of coverage of the latest Kantar grocery market share figures: CityAM flags that “Aldi and Lidl snap up more grocery market share as big four falter” and the FT market report notes the disappointment in the City yesterday with Morrison’s performance. The Times flags an IGD report that “there is a new shopper in town who is demanding,
• News Flow This Week: Tomorrow brings the Mothercare Q4 and the Dunelm Q3 is out on Friday.
• Amazon Watch: We flagged yesterday that we took a short break in Seattle at the end of last week before arriving here in Colorado and although our main focus in Seattle was on the excellent local museums and art galleries and the other sights, it did not escape our attention that Amazon’s home town is Seattle…Indeed, such is their demand for office space, that Amazon have taken over a big chunk of office blocks quite close to the downtown area. And it was at the foot of one of these office blocks that they are trialling the first Amazon Go “checkout free” convenience store, although it is still only open to Amazon staff at present (given some technology gremlins) and it is closed at weekends. Elsewhere in the city, Amazon is trialling its own grocery Click and collect sites…and we saw several Amazon Fresh branded delivery vans downtown. Further afield, past the giant University of