Langton Capital – 2018-04-27 – Merlin, Chipotle, Pepsi, RCL, Domino’s US & other:
Merlin, Chipotle, Pepsi, RCL, Domino’s US & other:
A DAY IN THE LIFE:
Interesting to note (see below) that parking management companies have issued a record number of fines last year, many of these at shopping centres struggling to attract visitors.
Which seems a little counter-productive and brings to mind our own latest tussle with parking officials who, during the recent snow, tried to sting us with a £70 bill for staying more than three hours in an otherwise virtually empty shopping centre car park where there are a dozen restaurants, two large supermarkets, several coffee shops and heaven knows how many shops in total.
Of course, we were told, if you want to have a coffee or whatever, you should go back to your car and move it as different bits of the car park are owned by different people (as the miniscule writing on the signs tells you).
And they had photographed us looking dashing with the car on two wheels as we drove over the top of a mini roundabout invisible in the snow to prove our crime but, after a few conversations with an almost tearful (‘these people are making my life a misery’) supermarket manager, we got the bill torn up. On to the news:
PUB, RESTAURANT & DRINK PRODUCERS:
• Domino’s in the US has beaten first quarter expectations with same store sales up 8.3% in the period.
• A modest Domino’s US tells investors ‘to summarize the quarter, we delivered, and we delivered in every way.’ The group reported net income of $88.8m or $2 per share, up by 42.2% on last year.
• Chipotle shares in the US reported their best ever single day performance on the back of Q1 earnings beat. Chipotle told investors ‘we expect the recent change in leadership will bring some fresh perspective, generate efficiencies within the restaurants and drive much needed innovation.’ It reported ‘given the earnings potential from a stronger sales and margin recovery, we are inclined to get ahead of this prospect rather than wait and are upgrading shares accordingly.’
• Pepsi has beaten Q1 estimates. Sales were up 4.3% in the quarter against the same period in 2017. The company reports ‘we generated solid overall results in the first quarter.’ CEO Indra Nooyi told investors ‘the majority of our businesses performed very well, including particularly strong performances in our international divisions propelled by accelerated net revenue growth in developing and emerging markets.’ The group’s shares were little changed on the news and remain down 15% or so on the year to date.
• The number of parking tickets issued by car park management firms in Britain hit a record 5.65m last year, many of them issued at shopping centres that are struggling to attract visitors.
• Waterstones has been purchased by Elliott Advisors, James Daunt the bookshop chain’s UK chief executive will stay on at the business following the acquisition.
• Hundreds of jobs are at risk at discount retailer Poundworld, as the group draw up plans to close a quarter of its 355 stores.
• UKHospitality has reaffirmed its commitment to reducing packaging waste by signing the Plastic Act, which has so far been signed by 42 businesses responsible for over 80% of plastic packaging sold on products through UK supermarkets. The Act’s aims are to: eliminate unnecessary single-use plastic packaging; make all plastic packaging reusable, recyclable or compostable, and make 70% of plastic packaging effectively recyclable or composted. UKHospitality Chief Executive Kate Nicholls said: ‘Our commitment to the Plastic Pact highlights our ambition to spearhead the hospitality sector’s efforts to address packaging waste and ensure the sector plays a valuable role in helping develop sustainable and green practices and alternatives to disposable packaging.’
HOLIDAYS & LEISURE TRAVEL:
• Royal Caribbean has reported Q1 numbers saying GAAP earnings were $1.09 when adjusted for one-off items. The group says ‘overall, the company’s booked position remains at a record level, better than last year in both rate and volume.’
• RCL CEO Richard Fain comments ‘this year is proving to be another strong year with all our brands firing on all cylinders.’ He continues ‘the market continues to support our growth as our people keep focused on delivering our targets and goals.’
• Regarding FY18, RCL has increased its forecast of full year Adjusted EPS to a range of $8.70 to $8.90 per share, $0.15 above the previous guidance.
• Palma is to become the first city in Spain to ban flat owners from renting their flats to tourists, following complaints from residents of rising rates. The ban, to be introduced in July, will be a model for cities suffering with mass tourism, according to Palma’s mayor, Antoni Noguera, who commented: ‘Palma is a determined and courageous city. We agreed on this [ban] based on the general interest [of the city] and we believe it will set the trend for other cities when they see that finding a balance is key.’
• An Austrian court has issued a temporary injunction against Uber, meaning the ride-hailing app will suspend operations in the city of Vienna. An Uber spokeswoman issued a statement saying: ‘We respect the court’s decision and are working hard to change our operating model within the next few days.’ She added that the company expects to resume services later this week.
• ForwardKeys claims travel to the US has seen ‘substantial underperformance’ following Trump’s travel ban on mainly Muslim countries. ForwardKeys chief executive Olivier Jager said ‘In the 15-month period between that first announcement and now, inbound travel to the USA was 1.4% down while global international travel grew 5% on the equivalent period a year earlier.’
• STR records US hotel occupancy up 3.1% to 70.1%, ADR up 5.4% to $131.15 and RevPar up 8.7% to $91.89 for the week ending 21 April.
• Merlin has updated on trading in a statement that will be made to its AGM later today. It reports that trading across its divisions is in line with expectations.
• MERL says ‘group trading at this seasonally quiet point of the year has been in line with expectations and consistent with the guidance provided on 1 March.’
• MERL continues ‘in Midway, visitation in our London Division remains down year on year reflecting the strong trading in the comparative period and continued impact from the 2017 terror attacks. We remain confident of a recovery over time.’
• MERL reports ‘while an earlier Easter period and poor weather affected a number of our parks, overall trading within the Theme Parks Operating Groups was in line with expectations.’
• It says ‘our 2018 New Business Development programme is on track, with all 644 accommodation rooms and one of the nine planned new Midway attractions, now open.’
• MERL adds ‘as announced on 19 April we have successfully refinanced certain of our banking facilities, extending the size and maturity of our revolving credit facility, and repaying £377 million equivalent of Sterling and US Dollar-denominated term loans.’
• Amazon shares rose in after-hours trading after it reported a Q1 beat with sales up 43% to $51bn. Amazon more than doubled its profits in the quarter from $724m to $1.6bn.
• Nintendo reports annual profits up 36% yoy to $1.28bn due to the popularity of its Switch console. The Switch has become the fastest-selling games console in the company’s history, leading to profits ahead of its own guidance. Nintendo forecasts this year’s net profit to be 18% above this year’s and annual sales to rise 13.7%.
• PayPal reports Q1 net income of $511m as the company processed $132bn in payments, up 32% yoy.
• Samsung reports January to March profits up 52% yoy to £7.7bn markings its fourth quarter in a row of record profits.
FINANCE & MARKETS:
• Sterling little changed vs dollar or Euro at $1.3927 and €1.1497 respectivley.
• Oil steady at $74.54
• UK 10yr gilt yield down 3bps at 1.51%
• World markets: UK & Europe up with US also higher. Far East up in Friday trade.
o A group of pro-Brexit MPs have told Mrs May that she must not cross her red line on leaving the customs union
o No10 now fears it will lose a vote in the Commons on the issue
o Michel Barnier has said the EU does not need the City quite as much as the City thinks it does
PRIOR DAY LATER TWEETS:
• Later tweets: Some sympathy for Whitbread. But, with a 2yr timetable, it will be a struggle to give everybody what they want
• Whitbread to bet large in Germany. Execution is not without risk. Prize is large but market is not unduly immature
• Overseas holiday bookings have increased 6% in March compared to last year in the UK, according to research from GfK
• David Davis has said that the Brexit timetable could slip. But says it would be a personal failure if UK stays in the Customs’ Union
• GfK says overseas holidays up. Travelodge says UK holidays up. Consumers poorer. What gives? Maybe poor weather driving desire to get away?
START THE DAY WITH A SONG:
Yesterday’s song was, of course, The House of the Rising Sun by The Animals! Today, who sang:
a little bit softer now …,
a little bit softer now …,
a little bit louder now …,
RETAIL NEWS WITH NICK BUBB:
• Consumer Confidence Watch: The widely followed monthly GFK Consumer Confidence index came out overnight and it strikes a downbeat note, noting that “Consumer confidence is stuck in the doldrums” and that the overall index slipped two points to -9 in April with consumers becoming more pessimistic about their personal finances. The consensus forecast for the GfK survey in a Reuters poll of economists had pointed to another reading of -7. “Hope springs eternal for better numbers but the continued uncertain economic forecast means that the sun is not yet shining brightly for UK consumers,” Joe Staton, client strategy director at GfK, said. “As consumers, we need to see clear evidence with our own eyes – in our bank balances and pay packets – that balmier economic climes have returned. Yet our view of the UK’s general economic situation remains low.”
• Travis Perkins: The giant builder’s merchants chain Travis Perkins chain has reported a “solid start to 2018 given challenging market conditions”, but that is all down to a strong recovery in its Plumbing & Heating Division and its Consumer Division (principally Wickes DIY) struggled in Q1.
• Trade Press: Ahead of the “Drapers Digital Festival/Awards” yesterday, the focus in Drapers magazine today is on the evolution of Digital technology in fashion and the Editor thunders in her column that “Customer convenience is the way to drive sales” . In terms of News stories, Drapers concentrate on the reports that High Street sales were ‘on fire’ during the spring heatwave, the Chinese owner of House of Fraser is mulling a sale of a 51% stake to Hamleys’ owner and the East chain is about to close down. And Drapers have the third of its excellent sector-by-sector “Hit or Miss” store review series, based on a visit to the new Westgate Oxford shopping centre, testing the Menswear offers. Reiss comes top, scoring 22.5 marks out of 25, but Ted
• BDO High Street Sales Tracker: We flagged on Wednesday that John Lewis struggled with the unseasonably hot weather last week, against strong Easter comps, but their sales mix is unusual and today’s BDO High Street Sales Tracker for small/medium-sized Non-Food chains for last week, w/e Sunday April 22nd, makes better reading, reflecting BDO’s bigger Fashion weighting. BDO Fashion Store LFL sales were up by 6.1%. Including Homewares and Lifestyle chains, however, total Store LFL sales were down by 1.0%. But overall Online sales were up by 15.9%, with Online Fashion sales over 29% up.
• Sale Watch: We noticed yesterday that John Lewis was price-matching “a competitor’s promotional event” and this turned out to be yet another House of Fraser Sale…but a Sale with a twist, as it is called “The Blackout” Sale. It may yet turn out to be just a desperate attempt to get some cash in the bank at the end of a tough Q1, but the PR spin is that “The Blackout is an opportunity to change the House of Fraser Sales experience for our customers”, according to Paddy Earnshaw, the new Chief Marketing Officer at House of Fraser. “We are dropping the prices on new season trends and combining it with a line-up of in store events that embrace the pleasure you get from shopping for you. We’re basically hosting a party at our house and everyone is invited”.
• WH Smith Mockery Watch: We were quite enjoying the “Fat Fight” programme on BBC1 on Wednesday night, as the indomitable Hugh Fearnley-Whittingstall attacked the likes of Kellogg’s and Nestle for making overly sugary cereals. But then the great man turned his fire on poor old WH Smith, dubbing them WH Sugar for the way they push chocolate bars on consumers at the checkout. And he set up a stall in Slough High Street outside the WH Smith store to draw attention to their chocolate obsession. Embarrassingly, the official company response was that WH Smith only sells 2% of the chocolate confectionery in the UK and that they respond to customer wishes…
• News Flow Next Week: Next week kicks off with the Carpetright Q4 and EGM on Monday. Tuesday brings the latest monthly Kantar/Nielsen grocery sales figures, as well as the Apple Q2 out in the US. On Wednesday we get the Howden Q1 update, the Sainsbury finals and the DFS Capital Markets Day in sunny Croydon. Things then quieten down ahead of the Bank Holiday weekend (the Next Q1 update originally scheduled for Wednesday has been put back to May 10th).