Langton Capital – 2017-04-21 – Restaurant Group, Crowdcube pricing, Subway & other:
Restaurant Group, Crowdcube pricing, Subway & other:
A DAY IN THE LIFE:
I was asked the other week whether I was trying to blend up an interesting new flavour of tea.
But, since we follow the ‘big tin with random packets of tea bags tipped into it’ system chez Langton, the answer was ‘no’.
The blend is more a ‘what’s on top of the pile’ concoction. It’s comprised simply of whichever three tea bags come out of the tin first though, statistically, it should be about 50% Yorkshire Breakfast, 20% Earl Grey, 10% Darjeeling, 10% random fruit infusion and 10% environmental dust that somehow made it into the tin.
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• The Restaurant Group has announced that CFO Barry Nightingale is to step down from the Board and leave the Company with immediate effect.
• RTN Board. The group reports it ‘has commenced a search for a new Chief Financial Officer and will update the market in due course.’ Chairman Debbie Hewitt comments ‘on behalf of the Board, I would like to thank Barry for the valuable contribution that he has made over the past year, as we began the Company’s turnaround process, which continues to progress well. We wish him all the best for the future.’
• Trading presumably currently in line with expectations as RTN says it ‘will next provide a trading update on 26 May 2017, the date of the Company’s 2017 AGM.’
• RTN board. Group would appear still to be in a period of flux. Will shortly have 3rd FD in a year. Has also changed CEO (twice in 3yrs) and chairman.
PUB, RESTAURANT & DRINK PRODUCERS:
• Derby Brewing co has cut its pre-new money valuation on Crowdcube from £12.5m to £7.2m. The group is still looking for £500k but now says that this would represent 6.5% of the company, up from the previous 3.86%. The company reports on its Crowdcube platform ‘following feedback from potential investors, consultation with crowd cube, industry peers and discussing this together as a family, Derby Brewing has taken the steps to alter the level of equity on offer of the company to potential investors and as such the value of the company.’ Derby Brewing has thus far raised £116k of its intended £500k.
• Subway closed hundreds of locations in the US last year — the first time it has had a net reduction of shops in America. The sandwich chain’s US store count fell by 1.3% to 26,774.Subway is scrambling to hang onto its position at the front of the pack of the fast-evolving US fast-food industry, in the face of changing consumer tastes and rising competition from fast-casual chains with strengthened healthy offerings.
• Meatcure, the midlands based artisan burger chain, has announced the opening of a new site in Hinckley next week, reports the Hinckley Times. This will be the group’s fourth opening, however, Meatcure’s Leamington Spa site was closed on April 10, with Meatcure announcing the ‘difficult’ decision on the site’s Facebook page and saying: ‘It wasn’t an easy decision but with the odds stacked against us from the off.’
• A study published by the Harvard Business School has found that rising minimum wages do lead to more closures in the restaurant business. Every $1 increase in the minimum wage, the study found, leads to a 4 to 10 percent increase in restaurant closures. However, the study found that the lower the Yelp rating of the restaurant, the more likely it is to fail. The highest rated — for example, five-star restaurants are no more likely to close with a higher minimum wage.
• Consumers ask where has all the money gone. ABI reports car insurance premiums rose 8% in the last 12mths
• Online shoppers in the UK spend more per household than do consumers in any other country reports the UK Cards Association. Some 67% of concert ticket spending and 61% of cinema & theatre spending is now online. Pawn brokers, pubs & laundry companies have he lowest online penetration.
• Rémy Cointreau grew sales by 4.7% to €1,094.9m in 2016/17 thanks to a strong performance in the Asia Pacific region and Greater China and Australia in particular.
• UK Tequila sales have risen 37% in the last two years reaching £173m in 2016, reports the Wine and Spirit Trade Association (WSTA). Off-trade sales grew 7% to £13m, with on-trade climbing 6% to £160m last year.
• Carlsberg has launched a new integrated marketing campaign titled ‘The Danish Way’, aiming to revitalise the beer brands in the UK with a premium positioning, reflective of its rich history and Danish provenance.
• Japanese exports for beer and a ‘quasi-beer’ beverages have fallen by 0.7% in the first quarter, marking a record low for the third consecutive year. A report from Japan’s Jiji Press stated that the decreases are as a result of Japanese consumers’ growing preference for ‘chuhai’ spirits-based drinks and wine.
• AmazonFresh is 14% cheaper than its nearest supermarket (Asda) on brands and beats the rest of the big four by more than 20%, according to a Profitero study.
HOLIDAYS, LEISURE TRAVEL & HOTEL
• Cosmos Tours & Cruises has announced the launch of a new logo, website and price promise as the group rebrands into, Cosmos. The company’s new strapline will be ‘Adventures Made Easy’.
• Overall flight prices have fallen by at least 10% in the past year with long-haul fares leading the way, according to analysis by travel search engine Skyscanner.
• The late Easter this year meant Eurotunnel Le Shuttle car carryings slumped by 7% in the first quarter to 466,562. However, the Le Shuttle cross channel car market share grew to 62.4% in the first three months of the year, following a record in February of more than 64%. Eurostar carryings grew by 2% in the January to March period to 2.27 million passengers over the same period in 2016.
• Weaker demand in flights from Dubai to the US has seen Emirates cutting flights bound for the States over the last 3 months. The airline will reduce its US destination cities from 12 to 5, and said the weakened demand is directly linked to recent US security policies over visas, heightened vetting and restrictions on electronic equipment.
• The Guild of Travel Management Companies (GTMC) fears that political uncertainty from the June snap election could damage the fragile post-Brexit UK economy. Chief executive at GTMC, Paul Wait, said ‘Business around the world need to see our leaders looking outwards to a stable future, and not repeating internal squabbles on a public stage.’
• Chinese tech giant Baidu plans to make its platform for self-driving cars freely available for the car industry.
• Uber could face an increase in operator licence fees in London under proposed changes by the city’s transport authority.
• The TfL is taking consultation over its plans to make private hire operators pay higher license fees to account for the higher cost of regulating the sector. Uber, who has more than 30,000 drivers in London, said it supported the principle.
• Tatts Group, an Australian lottery operator, is under bid for US$4.65bn by a consortium backed by KKR.
• Sportech has announced that chairman Roger Withers is to retire and will be stepping down from his position as Chairman and from the Board on 24 May 2017. The company reports that Richard McGuire, who is currently a Non-Executive Director, will be appointed Chairman at the AGM. CEO Ian Penrose comments ‘I would like to take this opportunity to thank Roger Withers for his tremendous contribution to Sportech over the last six years. Throughout his tenure as Chairman he has provided the Board with fine leadership and wise counsel. On behalf of the Board, I would like to wish him well for his retirement.’
FINANCE & MARKETS:
• UK housing market is in “neutral gear” per the Council of Mortgage Lenders. The CML believes that he upcoming General Election will do little to change this. Stamp duty is now 3% on second homes. The CML says ‘there has been a shift towards first-time buyer and remortgage customers, away from home movers and buy-to-let landlords.’
• Eurozone construction output up a seasonally adjusted 6.9% m-o-m in February
• Flash measure shows Eurozone consumer confidence rose in April
• IMF reports it can work with Trump administration to improve system of global trading
• Oil down a fraction at $53.02
• Sterling a shade weaker against US$ at 1.2795
• Sterling little changed vs Euro at €1.1935
• UK 10yr gilts up 1bp at 1.07%
• World markets: UK mixed yesterday but Europe up. US also higher & Far East up in Friday trade
YESTERDAY’S LATER TWEETS:
• Later tweets: Debenhams gets the ‘experiential’ bug – see Langton emails. Says it will become more of a destination, offer more
• MCA reports lower restaurant demand in March. Will be an Easter effect. Need to see March plus April y-o-y to draw conclusions
• Caffe Nero & Yoyo Wallet. Mobile seems to be a thing & it will only ever get bigger. Some 7% of Starbucks’ US sales now pre-ordered
• Ikea free-standing restaurants & cafes to further blur the lines. Stripped pine etc. They may even do rather well…
• Holidays & the election. Will it boost hols as people try to get away? A bit but overwhelming impact likely to be to delay bookings
RETAIL NEWS WITH NICK BUBB:
• Sports Direct: Belatedly, today’s Sports Direct 7am RNS announcement confirms the recent press reports of the acquisition of the bankrupt US sports retailer Eastern Outfitters. And the deal is more significant than expected: they end up with approximately 50 retail stores in the US under the Bob’s Stores and Eastern Mountain Stores fascias (selling predominantly sports and casual wear, outdoor and camping equipment and clothing) after shelling out $101m to buy up the company’s debt. The brief statement says that the acquisition will provide Sports Direct with “a footprint in US bricks-and-mortar retail and a platform from which to grow US Online sales”, but there is no guidance on how much of a drag the loss-making business will be to the P&L account in the short-term…
• Planet ONS Watch: In the real world, March (the 5 weeks to April 1st) was nothing to write home about, given the adverse impact of the delayed Easter this year, as per the BRC-KPMG Retail Sales survey last week. But we will find out at 9.30am this morning how life was like last month on that bizarre parallel world, the Planet ONS, via the Office of National Statistics Retail Sales figures for March. For what it’s worth, our friends at Capital Economics note that, in theory, the ONS should account for shifts in the timing of Easter through its infamous “seasonal adjustments”, but have still pencilled in a 0.5% month-on-month dip in “seasonally adjusted sales volume” (although this would still leave annual growth at 3.3%). We will, as usual, be focusing on the year-on-year movement in “non-seasonally adjusted sales value” (and the “Big Retailer” versus “Small Retailer” ONS sales split,
• Debenhams: As we noted yesterday after the announcement of the much-awaited Debenhams strategic update, new CEO Sergio Bucher is confident that Debenhams has “a successful and profitable future”, but there was no focus in the analyst presentation on whether the redesigned business be more or less profitable. The Chairman Ian Cheshire gave the game away in his introduction by muttering that they wouldn’t be able to help fill in the holes in analyst’s spreadsheet models. When pressed, management said that they will provide more detail on financial targets in October, with the final results, and that they expect profits to increase over the 5 years of the new plan, but to a cynical City that hardly sounded like a ringing endorsement. The share price reaction, down 5% to 52p/53p, reflected the air of disappointment and, needless to say, Debenhams has been a very poor investment in recent
• Today’s Press and News: The big focus in today’s papers is on Debenhams after yesterday’s strategy review, although Marks & Spencer also chose yesterday to announce the details of its store closure programme…). The latter is actually the main Business story in the Times (“M&S plan to shut stores sparks High Street anger”) and it also has a follow-up article about “M&S’s hunger for convenience”, although it also notes the job losses likely at Debenhams from the planned warehouse and store closures.
• BDO High Street Sales Tracker: We flagged yesterday that trading at John Lewis last week was boosted by the Easter calendar shift and today’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains flags that w/e April 16th saw Fashion Store LFL sales jump by 11.6% against last year, although the comp was very weak. Including Homewares and Lifestyle chains, total Store LFL sales were up by 9.4%. However, overall Online sales were only up by 8.5% (despite relatively weak 13.3% growth a year ago).
• Trade Press: It’s the turn of Drapers magazine not to be published this week, but Retail Week is back in the game today and the front page headline is “Retail heavyweights go head-to-head for brands”, flagging up a big article on how Philip Day and Mike Ashley are “slugging it out” to buy up struggling Retail brands and build “department stores”. RW also have features on the turnaround of Tesco and the under-the-radar Inditex chain Lefties, as well as a profile of John Colley, the Majestic Retail boss who’s leaving to run Hobbycraft. In terms of News stories, RW focus on the report that House of Fraser will reveal its new chief executive by the end of this month (following the resignation of Nigel Oddy last October) and that Sainsbury’s is ramping up its efforts to integrate the Argos and Habitat businesses, as well as the news that the B&Q chief executive Michael Loeve is to
• News Flow Next Week: The Carpetright pre-close update is on Tuesday and the Boohoo finals are on Wednesday. Thursday then brings the N Brown finals, the Howden trading update ad the McColl’s AGM.