Langton Capital – 2017-11-03 – YUM, SBUX, Habit Burger, Pizza Union, interest rates etc.:
YUM, SBUX, Habit Burger, Pizza Union, interest rates etc.:
A DAY IN THE LIFE:
When going on holiday or even just away for a night or two, do you ever find yourself in a competition to be the last one to pack?
Because I sometimes do and, rather than have holiday bumph pre-packed in the spare bedroom a month before the visit, I often find myself packing the evening before or, if the flight is after about 12 noon or so, on the day of departure itself.
And if you’ve got your passport and credit cards with you, what can go wrong?
Well you can find yourself making emergency computer charger purchases at Leeds Bradford airport or panic underpants purchases in Corfu or Clacton or wherever, but we’ll gloss over those problems and say that nothing can really derail your plans when you got the right attitude. Where have I heard that going into life-changing negotiations before?
Anyway, it’s time to say have a good weekend and move on to the news but if you would like to come off this email list please simply hit the unsubscribe button above. Similarly, if you are getting it forwarded and would like to go on directly or if you would like to recommend it to one of your colleagues, please just hit the subscribe button and/or suggest that your colleague does too.
PUB, RESTAURANT & DRINK PRODUCERS:
• YUM Brands has reported Q3 numbers saying that improving results at Pizza Hut had driven its numbers. The group’s shares rose some 6%.
• YUM: Group reports same store sales flat in Q3. This was less good than rivals Papa John’s and Domino’s but better than its own recent performance. LfL sales in Q2 were down 1% and in Q1 they fell by 3%. CEO Greg Creed reported ‘we’re raising our performance’. He added that recent developments would ‘help keep us competitive in the marketplace.’
• YUM: Group says investments will take time to feed through. EPS +22% to 68c per share. Revenue $1.4 billion, a decline from $1.5 billion reported a year ago. This was largely due to refranchising previously company-managed locations. Now, franchisees now operate 95 percent of its 44,000 global locations.
• Starbucks has reported Q4 numbers saying EPS rose to 54c per share with global LfL sales +2% and China up 8%. Global traffic was +1%.
• SBUX Q4: Co raised dividend 20% and says US LfL sales were +3%. It reports consolidated net revenues of $5.7 billion versus $5.7 billion in the prior year. SBUX adds it ‘opened 603 net new stores globally, bringing total store count to 27,339 across 75 countries’.
• SBUX Q4: CEO Kevin Johnson reports ‘today, Starbucks reported another quarter – and year – of strong performance, with each of our business segments around the world contributing to record results.’ He adds ‘food, beverage and digital innovation are bringing customers into our stores at the same time as ongoing operational improvements are enabling us to drive increased throughput – particularly in our busiest stores at peak – and deliver a further elevated Starbucks Experience to our customers.’
• SBUX Q4: Going forward, the group is aiming for global LfL sales increases of 3% to 5% with revenue growth ‘in the high single digits’.
• Starbucks has announced that it is to Tazo tea brand to Unilever for $384m. The group will then focus on its Teavana brand. The transaction is expected to close in Q4.
• Habit Burger Grill has reported negative LfL sales for the first time in 54 consecutive quarters. The group is to examine more ‘value-based’ offerings. Shares in the company fell by 25% in US trading. CEO Russ Bendel comments that he restaurant market has been “challenging”. He says ‘we did not achieve a 55th consecutive quarter of positive comparable restaurant sales, falling just shy at a decrease of 0.2 percent for the quarter.’ He adds ‘we feel confident in our ability to navigate this choppy restaurant operating environment, which is focusing heavily on discounted price promotions.’
• ALMR CEO Kate Nicholls comments on Kingston’s decision not to introduce a late night levy saying ‘Kingston Council has acted with pragmatism and common sense.’ BBPA boss Brigid Simmonds comments ‘I welcome Kingston’s decision not to move towards a Late Night Levy. This is the second time this approach has been rejected by the council, which has recognised that with fewer licensed venues, there would be even less potential revenue from a levy, which acts as an additional, unwelcome tax on vital local businesses.’
• Commenting on higher interest rates, the BBPA says ‘higher borrowing costs will add to pressure on the bottom line, especially if we see the start of an upward trend. We invested close to £2 billion across the UK in 2016, from plant in breweries to the infrastructure of pub estates. As the rates rise is driven by inflation, it makes it even more vital that the Government does not follow up with more tax rises in beer duty in the Budget. In terms of costs for pubs, this would just be adding more fuel to the fire.’
• The Cheesecake Factory has reported negative LfL sales for the second consecutive quarter. Comps fell by 2.3% in Q3. Shares fell by 7%.
• Accolade Wines has launched a flavoured vodka under its Echo Falls brand.
• Michael Gove has said that he sees no issue with the British public consuming chlorinated chicken post the UK’s exit from the EU
• The Ei Managed Operations brand, Bermondsey Pub co. looks to respond to demand for experiential events among customers by launching its first interactive escape room. The escape game, designed by Handmade Mysteries, will challenge pub-goers to attempt to escape a themed room under an hour of theatrical clue-solving. Openings and Pipeline Director at Bermondsey Pub co, Henry Fairbanks said: ‘We aim to create fantastic pub experiences across the Bermondsey Pub Company estate, and working with Handmade Mysteries allows our customers to enjoy something unique, that will enhance their view of the pub and the role it plays’.
• Wayne’s Coffee, the Scandinavian coffee chain, has announced its intentions to make its UK debut next month in central London, per the MCA. The group currently operates 140 sites globally, and looks to open six sites in London and the South East before further UK expansion.
• Molson Coors has matched market expectation in its Q3 earnings, announcing adjusted earnings of $1.34 per share, with total revenue down 2.1% to $2.9bn.
• Chapel Down has recorded its second highest harvest by volume ever, with an increase of 10% on last year. Chief executive Frazer Thompson said: ‘Following a challenging start to the season, we enjoyed an excellent flowering season in June and a decent English summer in our vineyards. With an early harvest in good weather we were able to record our second highest ever harvest by volume – some 10% greater than last year’.
• Pizza Union, the London based pizza bar concept, has signed for its fourth site, the MCA has reported. The concept has proven popular with students and more, by selling artisan pizzas for between £3.95 and £6.50.
• The burrito and taco chain, Tortilla, has secured its first site for a new concept that will focus on residential areas, the MCA has reported. The chain will focus this concept on smaller stores, and looks to profit from the growth of delivery.
• Sainsbury’s has announced that it will launch its own record label. The group looks to produce its own vinyls and capitalise on the recent vinyl resurgence.
HOLIDAYS & LEISURE TRAVEL:
• BA cabin staff have voted to accept a pay deal. This ends a long-running dispute with the airline that has previously led to industrial action
• Marriott CEO Arne Sorenson has said that President Trump’s belligerent attitude towards some foreigners has driven a larger number of visitors to Canada. Sorenson says ‘at the moment there’s a perception around the world that the U.S. is a little less welcoming than it was in the past.’
• Hotel News Now reports that hoteliers are pushing corporate rates in the US for 2018
• US hotel industry reports REVPAR +6.7% in week to 28 Oct.
• Rising prices are beginning to damage customers’ perceptions of value for money, with First Rate’s Holiday Confidence Index stating ‘a sharp fall in the number who view overseas holidays as good value’. The number of UK adults agreeing that overseas holidays are good value decreased 8% to 43% (compared to 51% at the same time last year).
• The same First Rate survey also shows, however, that UK consumers’ confidence to book overseas holidays is at its highest in three years. The survey found that 54% of respondents declared their intention of holidaying abroad, with 18% still to decide.
• The UK has been named the world’s most important source market for Hotelbeds Group, with Spain the top destination for British travellers this year.
• Hays Travel has stated that it expects to be on course to achieve more than £1bn worth of holiday bookings in the financial year ending in 2018.
• The Chinese based, Ctrip group has acquired the travel search startup Trip.com for an undisclosed fee. Ctrip also purchased Skyscanner for £1.4bn last year.
• Ladbrokes Coral has announced that ‘following completion of his one year fixed term of appointment, Carl Leaver stepped down as a Director of Ladbrokes Coral Group plc on 31 October 2017, and ceased to be employed by the Group on this date.’ The company’s chairman, John Kelly, reports ‘over a period of 6 years, Carl led a major turnaround of the Gala Coral Group, culminating in the deal to merge with Ladbrokes to create Ladbrokes Coral Group plc.’
• Alibaba beats forecasts. Operating profit +83% in Q3. Shares have more than doubled this year alone
• Apple predicts that it will have a strong holiday season
• Apollo and Cerberus have sold down their 2.6% stake in Ladbrokes Coral, this takes Apollo completely out of the group, whereas, Cerberus Capital will still hold about 1.8%.
• Google has launched new 3D objects software Poly, the move sees Google expand its presence in the game development industry.
FINANCE & MARKETS:
• UK interest rates up for the first time in 10yrs. The move, from 0.25% to 0.5%, had been widely expected
• Governor Carney says any future rate increases will be ‘gradual’. Bank is ‘easing our foot off the accelerator.’
• MPC vote was 7 to 2. It says ‘the MPC now judges it appropriate to tighten modestly the stance of monetary policy in order to return inflation sustainably to target. All members agree that any future increases in Bank Rate will be at a gradual pace and to a limited extent.’
• Bank of England raises forecast for growth this year to 1.5% from 1.3%
• NIESR says Bank has ‘signalled that it expects further increases of around 75-100 basis points in Bank Rate over the next three years for inflation to drop to its target rate of 2 per cent.’ It says ‘although better-than-expected, economic growth overall is subdued compared with history.’
• UK construction PMI rises to 50.8 from 48.1 in September. Services PMI later this morning.
• Oil up 30c or so to $60.82
• Sterling down vs dollar at $1.307
• Pound weaker vs Euro at €1.1206
• UK 10yr gilt yields down 9bps at 1.26%
• World markets: UK up sharply yesterday with Europe down and US higher. Far East mixed in Friday trade
PRIOR DAY’S LATER TWEETS:
• Wish you were younger? Perhaps, but things are tough out there. The young are poorer than their parents. See email
• Deltic reports on trading for period from Freshers’ Week (17 Sept) to Halloween. Total sales up 9.1% like-for-like to £16.4m.
• Begbies Traynor reports nearly 0.5m businesses across UK are in state of ‘significant’ financial distress. Some 0.25m have negative worth
• UK construction PMI slightly back above 50.0 at 50.8 in Oct (from 48.1 in Sept). Rate rise at 12.00 looks pretty much nailed on
• Upbeat comments from Howden (building) and Into (retail properties) today. Both shares rise. Construction PMI also good(ish)
START THE DAY WITH A SONG:
Yesterday’s song ‘Where the Streets have no Name’ by U2. Today who sang:
I can eat my dinner in a fancy restaurant,
I said nothing can take away these blues,
RETAIL NEWS WITH NICK BUBB:
Apple: The Q4 results released in the US last night were stronger than expected and in after-hours trading the shares were over 3% up. Revenue for the September quarter was a record $52.6bn, up 12% over last year, helped by a return to growth in China but with all regions and products doing well. On the analysts conference call the perpetually bullish CEO Tim Cook said “As we closed the books on a very successful fiscal 2017, I have to say I couldn’t be more excited about Apple’s future”.
Kingfisher: Today’s Capital Markets Day is being held in Farnborough, of all places, and will comprise “a series of presentations and demonstrations providing further insight on Kingfisher’s Unified & Unique Offer roll out plans for the next year alongside progress on its Digital plans”. But, in that deathless phrase, “no material new financial information will be disclosed” during this event and there will be no update on current trading, ahead of the Q3 sales update on 21 November.
BDO High Street Sales Tracker: As the debate continues about just how bad Retail Sales were in October and whether it was a blip or a trend, we flagged on Wednesday that John Lewis had another very tough time in Fashion last week, as the weather stayed unseasonably warm and discounting activity was restrained. And today’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains last week flags that w/e Oct 29th saw Fashion Store LFL sales slump by 7.1% (versus an easy comp of -5.2% LFL a year ago), which was the 5th negative week in a row. Including Homewares and Lifestyle chains, total Store LFL sales were down by 5.1% last week (versus -2.7% a year ago). However, overall Online sales were up by as much as 26.2% (against a relatively pedestrian +13.8% a year ago).
News Flow Next Week: A busy week kicks off with the SMMT New Car Sales figures for October on Monday morning. Then first thing on Tuesday we get the eagerly awaited BRC-KPMG Retail Sales for October, followed by the ABF (Primark) finals and the Conviviality pre-close update. Wednesday brings the Marks & Spencer interims. Then on Thursday we get the Sainsbury interims, the Burberry interims, the Halfords interims, the SuperGroup pre-close and the Lookers Q3 update. And one day soon the CMA will issue its delayed provisional findings on the Tesco bid for Booker. Finally, by tradition, the much-hyped Christmas TV ads (including the famous John Lewis ad) get going next week (with Sainsbury one of the few retailers to wait until after Remembrance Day).