Return of Song Lyrics, Diageo, Shepherd Neame etc.:

A DAY IN THE LIFE:

A month ago, we had what looked like a healthy crop of hazel nuts.

The trees are about a decade old, a couple of dozen of them, big shrubs, really & tucked away where we don’t often see them and I logged the information away meaning to pick them, well, about now.

Only there’s not a single nut left.

Yes, there are a lot of shells and many, many happy looking squirrels trying not to look guiltily at various small holes that they’ve dug in the ground but their actions mean that the furry rats have shot up the long, long list of undesirable vermin that lives in our garden.

I mean haven’t they ever heard of sharing? Anyway, we’re reintroducing our Song for the Day, today. At least for a little while. On to the news:

PUB, RESTAURANT & DRINK PRODUCERS:

• Diageo has updated on trading ahead of its AGM today saying ‘our business continues to strengthen through improved marketing, innovation, and commercial execution, and we are well set up to deliver in line with our expectations.’

• Diageo continues ‘we expect the H1 organic net sales growth rate will be impacted by the later timing of Chinese New Year and by the expected impact of the highway ban in India. Our productivity work continues to move at pace. As previously announced, we are up-weighting our investment behind US Spirits and scotch, and as a result we expect our organic operating margin expansion will be weighted towards H2. Our expectations on overall performance for the year remain unchanged.’

• Diageo concludes ‘underlying momentum and progress in implementing productivity gives us continued confidence in our ability to deliver sustainable growth. We re-affirm our expectation of mid-single digit top line growth and 175bps of organic operating margin improvement over the three years ending 30 June 2019.’

• Shepherd Neame reports underlying profit to have increased 7.2% to £15.3m, with LfL sales growth of 8.1%, in the year ended 24 June. The group reports it has made steady trade since June 24, with the ten weeks to 2 September, like-for-like managed sales were up 1.5% and total beer volume increasing 4.4%. Jonathan Neame, chief executive of the group stated ‘We are mindful of the political and economic backdrop, but our strategic focus on investing for the long term, innovating and consistently delivering great pub environments and outstanding service for our customers will stand us in good stead’.

• DP Eurasia’s yesterday reported H1 numbers saying that the number of stores that it operated rose from 514 to 593 with total group sales rising from 308.8m TRY to 398.5m TRY.

• DP Eurasia reports LfL system sales up 6.9% in Turkey and up by 31.3% in Russia. Adjusted EBITDA was +26.4% at 39.4m TRY though adjusted net income fell to a loss from 11m TRY to a loss of 0.8m TRY in 2017. The group says its ‘Russian commissary expansion programme [is] on track and expected to be completed by the end of 2017.’ The group says its ‘performance remains in line with management’s expectations for the full year.’

• DP Eurasia CEO Aslan Saranga reports ‘we have recently announced the openings of our 600th store as a Company and our 100th store in Russia.’ He says ‘online ordering continues to be the main driver behind our like-for-like growth in both markets and the business has reached the 50% threshold for online delivery system sales.’ Mr Saranga concludes ‘we confirm that group performance remains in line with the board’s expectations for the full year and we look forward to our traditionally stronger second half with confidence as we continue to focus on growth by utilising our proven business model to drive value for our customers and shareholders.’

• Total rum sales fell in the US last year but Nielsen reports that sales of ultra-premium rum rose by 15.8%. it says this is signalling ‘a new wave of premiumisation’.

• Byron has lodged the notice that it has appointed ex-Morrison’s CEO Dalton Phillips as a director with Companies’ House

• Prezzo is offering 50% off main courses today.

• Bella Italia is offering 50% off mains until 2 October.

• Revolution Bar Group has today announced the posting of the scheme documents whereby it will be purchased by Stonegate. The groups announce that the court meeting will take place on 15 October with trading in Revolution shares set to end on 20 October. Money should change hands 14dys thereafter.

• Domino’s Pizza Group has announced that its share repurchase scheme will continue during its closed period

• Research from the Cask Report shows that 37% of lager drinkers now drink craft beer. This & many other industry stats form part of The Cask Report 2017. Cask Marque will present its report on at 10.30am on the 27 September at the Lyric Theatre, Hammersmith.

• Per MCA, more restaurants and pubs are starting to differentiate prices between regions. The MCA found that Londoners pay most at branded operators with JD Wetherspoon meals being on average 20% more expensive in the capital compared to the Midlands.

• Pubs and restaurants have been urged by the ALMR to appeal against new rateable values before the deadline of 30 September. CEO of the ALMR, Kate Nichols, said ‘With so many rising costs burdening operators, it is crucial that they seriously consider an appeal if they feel that they have any case regarding over-valuation of their venue. Failure to do so could result in unfairly high costs for the next five years, a period during which many other cost factors may come into play.’

• BDO research shows that 66% of medium sized business are less confident about growth 100 days on from the general election. Just 4% said they were more confident. A majority 83% said there was no clear picture of the UK’s future trading relationship with the EU.

• The upcoming sugar levy has resulted in a clear move towards low/diet sugar soft drinks which have expanded market share by 1.2% to 28.7%. However, full sugar soft drinks still represent around 70% of the market with the levy being expected to raise £385m in tax.

• Per MCA, Lisa Loebenberg’s The Exhibit is looking to reach five sites in the next two years. The bar-restaurant concept has just opened its second site in Streatham.

• Wetherspoons has announced that it intends to cut prices of its food and drink by 7.5% in all 900 of its pubs today in protest over VAT. Wetherspoon chairman, Tim Martin said ‘customers in our pubs will find the price of their drinks and food to be lower than normal. We are keen to highlight the amount which customers would save, if VAT in pubs were lowered permanently.’

• Young people in the UK are spending three times more on a house than their grandparents did, research from the Resolution Foundation has shown. They are also dealing with less space and a longer commute to work, with many young people having to wait until their 40’s before they can buy a house.

• Toys ‘R’ Us has filed for bankruptcy in the US and Canada as it restructures its debts, with operations in Australia, Europe and Asia not part of the bankruptcy proceedings. GlobalData Retail estimates that in 2016 about 13.7% of all toy sales were made online, up from 6.5% five years ago.

• Toys R Us blames discounting & online retailers, ahem, Amazon, for its decline. It says ‘during the 2016 holiday season, big box retailers slashed prices on toys and flooded marketing channels’. It adds ‘online retailers such as Amazon are not concerned with making a profit at this juncture, rendering their pricing model impossible to compete with for a company such as Toys ‘R’ Us. To compete, Toys ‘R’ Us would have needed to slash prices on the same toys to keep traffic coming into its stores, decreasing its revenue and cash flows in an unrelenting race to the bottom. But Toys did not engage in this race to the bottom.’

• The latest figures from the ONS show a 2.2% fall year on year in the number of people on zero-hour contracts in their main job. Between April and June 2017 883,000 people were on zero-hours contracts, however the proportion of the British workforce on zero-hours contracts remained broadly flat at 2.8%.

• Kantar Worldpanel figures reveal Lidl leads growth in the supermarket sector in the 12 weeks to 10 September 2017. The discounter grew by 19.2% boosting market share to 5.3% bringing it level with Waitrose. Frasier McKevitt, head of retail and consumer insight at Kantar Worldpanel, said ‘In the past three months almost 63% of shoppers visited one of the two [discounters], up from a level of 58.5% last year’.

HOLIDAYS, LEISURE TRAVEL & HOTEL:

• Peel Hotels has announced that it has entered into a £9,900,000 5-year term loan facility with Allied Irish Bank. Chairman Robert Peel reports ‘I am delighted that we have closed our new financing arrangements with Allied Irish Bank. We expect this new facility to provide significant savings in the costs of finance and to improve our cash flow and reduce our net debt.’

• The Resort Group, a Cape Verde resort specialist, saw profits soar by more than 200% last year. Overall group revenue was €136m with EBITDA of €8.6m. The company said it was committed to reinvesting all profits into the construction and development of additional resorts and infrastructure in Cape Verde.

• Wendy Wu Tours has awarded each of its 64 member of its staff with £50 to celebrate a second year of ‘outstanding growth’. Forward sales for the group increased 47%.

• The British Virgin Island inhabitants have been warned that the islands are at ‘high risk’ of further damage as hurricane Maria has strengthened into a potential category 5 storm with winds of up to 160mph.

• Thomas Cook Airlines has altered the scheduling of more than 40 flights this weekend due to a second strike by pilots this month. Members of the British Airline Pilots Association plan to halt work for 24 hours from 3am on Saturday morning, in a dispute over pay.

• Monarch airlines has confirmed a ‘comprehensive review’ following speculation that the group may sell-off its short-haul division, in order to focus on more profitable long-haul flights.

• A weak pound has attracted overseas visitors to the UK, helping the UK hotel industry. Research conducted by PwC has found that revenue per available room will increase 6% this year compared to a 3% fall in 2017.

• STR data shows positive results for the US hotel sector, with occupancy climbing 0.9% to 70.7%, average daily rate up 1.6% to $127.69 and revenue per available room increasing 2.5% to $90.31.

OTHER LEISURE:

• Wendy Media has put Rolling Stone magazine up for sale after 50 year of owning the iconic paper. 

• Cyber-bullying and monopolistic business practices have damaged trust in the internet, according to lastminute.com founder Baroness Lane-Fox. The entrepreneur also called for a ‘shared set of principles’ to make the web a safer and happier place.

• Smartphone are increasing in popularity amongst older customers, with 71% of 55-75 year olds now owning an app-capable phone.

FINANCE & MARKETS:

• US current account deficit up in Q2. Eurozone surplus rose in July.

• Oil down 5c at $55.33

• Sterling down vs dollar at $1.351

• Pound down vs Euro at €1.1251

• UK 10yr gilt yield up 2bps at 1.33%

• World markets: UK, Europe & US up yesterday. Asia mostly lower in Wednesday trade.

• Brexit:

o Speculation is building that the Department for Exiting the EU fails to serve any purpose. The FT reports staff are leaving and that Downing St is pulling the strings.

o Mrs May is to speak in Florence on Friday

o Boris Johnson denied to ITV reporters that he is to resign.

o The National Union of Farmers Scotland has said that farmers should be allowed to use more pesticides once the UK leaves the EU

YESTERDAY’S LATER TWEETS:

• Later tweets: Delivery. You could write a book. But we won’t. Still, we’re questioning why customers, and more so restaurateurs, use it. See email

• Delivery. There’s a place for it but rationale needs to be robust as correlation of food quality & delivery time is inversely related

• Price check. 300ml bottle of Black Sheep. Sainsbury 180p. ASDA 150p (as a part of 4 for £6 multibuy). Meanwhile Aldi has the beer at 129p.

• B o E: Rate rise(s) will be “gradual” & “limited”. Still shock after 10yrs. Pound down, markets up. Betting on 1 rise Nov & 1 more in 2018

• Debenhams searching for ‘store of future’ & Game Group same w. interactive seating. Leaves a lot of residual issues to sort out…

• Advantage of new entrants. They can go straight to ‘store of the future’. Or the internet. Or deliver or whatever

START THE DAY WITH A SONG:

• Fancy a break from the profit warnings? We’ve brought back the lyrics quiz (at least for now!). To kick it back off, who sang the following:

• But I’m ready, yes, I’m ready for you,

• I’m standing on my own two feet,

• Out of the doorway the bullets rip,

• Repeating to the sound of the beat.

RETAIL NEWS WITH NICK BUBB:

• Kingfisher: It is only a little over a month since the Q2 update on Aug 17th, so there is no surprise in the sales figures in today’s Kingfisher interims, but the bottom-line performance remains disappointing, notwithstanding the headline “5 year transformation continues at pace”. Underlying PBT of £440m was only up 1% and that owed a lot to a c5% FX translation benefit…Self-inflicted business disruption knocked 2% off the top-line in H1, but Kingfisher insist that they have learnt from their mistakes and that “self-help” (ie cost-cutting) will support full year profit expectations, although “we remain cautious on the second half backdrop in the UK and France”. Véronique Laury, the embattled CEO, gushes that “We are on track to deliver our full year strategic milestones for the second year in a row. We understand the reality of our customers’ lives and are creating a unified and unique
offer based on their needs. We are buying as ONE and are starting to see the customer and financial benefits coming through”.

• Planet ONS Watch: In the real world, August (the 4 weeks to Aug 26th) was another reasonable month on the High Street overall, as per the recent BRC-KPMG Retail Sales survey, thanks to the rather autumnal weather. But we will find out at 9.30am what life was like last month on that bizarre parallel world, the Planet ONS, as per the Office of National Statistics Retail Sales figures for August, which have been delayed by unspecified IT problems…Our friends at Capital Economics have pencilled in another small 0.3% month-on-month rise seasonally adjusted sales volume, which would leave the year-on-year rate steady at 1.3% in August. We will obviously be focusing on the non-seasonally adjusted sales value figures and the volatile ONS figures for “Small Businesses”…

• French Connection: We flagged yesterday that activist investors in the embattled French Connection might have been looking for more of a shake-up of the management team than the replacement of two non-exec directors, but it has been pointed out that the activist investors like Gatemore sold out a few months ago to Mike Ashley and that he is presumably not too fussed about such things…

• Ocado: We also flagged yesterday that in the Q3 update from Ocado the lack of any mention of any new Overseas customers might disappoint the bulls, but it turns out that the main disappointment was that the ramp up of the capacity of the new Andover warehouse would require an extra £2m of operating costs…

• Grocery Market Share Watch: The latest Kantar and Nielsen monthly grocery sales data (for the 4 weeks/12 weeks to Sept 9/10th) was published at 8am yesterday morning. Nielsen ducked its usual  overview of total industry sales in the last 4 weeks, but said that all the “Big 4” saw sales growth in this period and otherwise focused on the fact that shoppers are increasingly turning to own-label products to combat higher food price inflation. The rival Kantar overview concentrated firmly on the 12 week cumulative outcome (sales up 3.6% for the industry, versus grocery inflation of 3.2%), but the survey headline was “Supermarket sales not dampened by summer showers”. City brokers, however, noted that all of the “Big 4” except Morrisons posted sales growth ahead of expectations and that the combined sales growth of Aldi/Lidl slipped slightly to 14.8% over the last 4 weeks, whilst
M&S Food appears to have done better.

• John Lewis Partnership Sales Watch: Yesterday’s sales figures for last week for JLP revealed that at John Lewis sales were up by as much as 7.6% in gross terms (c5.5 up LFL) in w/e Sept 16th, thanks to the autumnal weather, albeit the comp was very soft. Fashion sales boomed by 18.4% gross, Electricals were up 1.8% gross and Home was up by 5.8% gross. Over the 26 weeks of the first half, John Lewis overall was only up by 0.1% LFL, but over the last 7 weeks sales have been up by c2.5% LFL (up 4.7% gross). But at Waitrose sales were only up by 1.1% gross last week (c0.5% down LFL), despite the launch of the big Essentials own-label price promotion…Over the 26 weeks of the first half, to end July, Waitrose was up by 0.7% LFL, but over the last 7 weeks sales have been broadly flat LFL (up 1.8% gross), after a weak August.

• News Flow This Week: The House of Fraser interims and River Island’s full-year results are due to be announced today. Tomorrow brings the Pets at Home Capital Markets Day.