Langton Capital – 2018-06-21 – Saga, High St., World Cup, over-building, tea sales etc.:
Saga, High St., World Cup, over-building, tea sales etc.:A DAY IN THE LIFE: I’m in the middle of trying to persuade my family, at least the 100% female bit that still lives at home, that we should be celebrating Fathers’ Week rather than just getting it all out of the way on one day because, I mean, it’s so shoddy to relegate the thing to a single 24hr slot, isn’t it? And, with it being Fathers’ Week and with me having three football matches a day to watch, beers to sample to write about them knowledgeably at some unspecified time in the future and then music to listen to between 3pm and 4pm, 6pm and 7pm etc. in order to keep my song selection fresh, there won’t be any time for me to do anything else. I mean how can anyone be expected to put the bins out during the World Cup? The grass can wait, the creaky gate likewise and mornings are out because, though I may be physically out of bed and moving around, might even get the train down to London and attend meetings etc., over-analysis of the products mentioned above can lead to things moving rather slowly until around 12 noon and then it’s time for the football again. So far, unfortunately, my arguments have fallen on deaf ears. In fact, my passionate outburst that the Iranian equaliser had been disallowed yesterday evening was met with such a series of blank looks that I may as well have kept my mouth shut. On to the news: CHANGING NATURE OF THE HIGH STREET Internet driven changes roll on… • The rising tide of Internet sales is impacting more & more industries • Books, CDs, DVDs etc. suffered early on but Banks are quitting the High Street and, in the wake of FOBT changes, the bookies say that they will too • If they weren’t there already, would you build them? • On a number of occasions, we have questioned whether, if department stores, HiFi shops etc. were not already on the High Street, would you build them now? • The answer is often no and, with that in mind, when leases expire (or CVAs are enacted), we will see these operators leaving Who’s leaving & who’s opening new shops? • The Local Data Company reports that, in 2017, pubs, banks, travel agents, post offices, newsagents, estate agents & clothing & shoe shops left the High Street • Bookies were not amongst the Top 10 leavers but that could change in 2019 • Incomers included barbers, nail salons, vaping shops, some restaurants, coffee shops & grab n go food shops, tattoo parlours and funeral directors Discernible trends: • Fewer goods, more services • Incomers are offering something not readily provided by the Internet (though Dignity is currently having to cut its prices) and this looks set to continue • With costs rising, rent, rates, labour etc., we will get the High Street that we are prepared to pay for QUESTIONS, QUESTIONS (13): Is the World Cup a potential magic bullet? • Question: Does the World Cup create money or just displace spending? England looked good in their opening game but, even if the home team won the contest, would any new money be created? Will people work harder, produce more goods & services and boost GDP? No, they won’t. Drink spend will rise (in the short term) but this will be at the cost of either a) reduced spending elsewhere or b) lower spending in the future. Conclusion: There is no magic bullet. A feel-good factor is better than a feel-bad factor, but it doesn’t create wealth. More hours at work and / or increased productivity are the only long term answers. QUESTIONS, QUESTIONS (14): Has too much money been spent on adding casual dining capacity? • Question: Is there simply too much choice in F&B? Whoever said ‘build it and they will come’ has a lot to answer for. For every speculative builder who made money, there may be 100 who lost out but, optimism lives eternal and, with the cost of money so low, it is not surprising that there are 8, 10 or 12 food outlets being built on new retail parks. But who in his right mind sanctioned the retail park in the first place? Conclusion: There is no guarantee that the ‘market’ will get it right. There may be no ‘braking’ mechanism. The only way to slow down might be to crash. PUB, RESTAURANT & DRINK PRODUCERS: • Greene King has appointed PwC to oversee the sale of the bulk of its Loch Fyne restaurant business, the MCA has reported. • More than 40% of people 16 or older in major population centers around the world consider themselves interested or very interested in following football, significantly more than any other sport. Research from Nielsen has indicated that the sport is growing in popularity in the US, India and China. • Kerb has announced it will launch its sixth market in central London, at St Katherine Docks. The lunch time food market will open next month and will boast a line-up of 18 traders, including Asian bbq operator Smokin Lotus, vegan Vietnamese from Eat Chay and salads and pittas from Cyprus Kitchen. • Marcus East, the former digital boss at Marks & Spencer has told BBC Radio 5 Live that the retail chain should ‘seriously’ consider a tie-up with Amazon. Mr. East continued with: ‘I would agree that for a lot of retailers, whilst they’ve put up a great fight, ultimately working with the likes of Amazon is probably a good way to tackle the digital space’. • Allegra’s Tea Out of Home 2018 report suggests that ‘tea out-of-home consumption remained healthy in 2017’. Allegra says that the UK saw ‘total tea sales of £283m within the £6.4bn specialised coffee shop sector, comprising independent and branded coffee shops – up from £256m in 2016.’ • Allegra says it ‘expects continued growth over the next five years, with total sector value expected to reach £439m by 2022, representing 9.2% CAGR growth for the period.’ It adds that ‘specialty teas take share from traditional black.’ • Allegra points to growth in fruit, herbal and green tea compared to traditional black tea ‘with 58% of operators adding more specialty teas to their menus in the last three years.’ It points out that ‘aside from smaller branded independent tea rooms, the UK still lacks any nationally scaled tea chains.’ Allegra’s Bradley Journeaux says ‘specialty teas that tap into current premiumisation and wellness trends are providing a significant boost to out-of-home tea sales, with matcha, kombucha and other functional teas at the forefront.’ Mr Journeaux adds ‘those operators moving beyond the basic tea offer and providing a better value proposition are gaining traction with consumers.’ • Big Bear Cider Mill, which is shortly to begin crowdfunding, has said that it is now open to pre-registered investors. • Zonal’s Go Technology report has suggested that voice-based ordering and food tracking devices will be the next big things to influence UK delivery. Zonal’s Clive Consterdine says ‘with people leading busier and more hectic lives, the convenience of getting a delivery straight to the home, office or even hotel has become part of everyday life.’ Mr Consterdine says ‘branded restaurants are understandably keen to get in on the action by extending their loyalty beyond the high street and onto people’s tables.’ • Starbucks has announced plans to shut 150 stores next year, three times its normal rate, as the group looks to maximise shareholder value. • Sainsbury’s chief executive has said that the UK’s competition watchdog is likely to demand store disposals in order for the supermarket’s merger with Asda to be approved. • Discount retailer Poundworld has told staff that ‘closing down’ sales will begin today, however, administrators, Deloitte, have stressed that no stores were ‘definitely’ closing. • Wagamama yesterday opened its first site in Norway, a 210 seater unit at Oslo airport. HOLIDAYS & LEISURE TRAVEL: • Saga has updated on trading for the first 4mths of its financial year saying ‘we have traded in line with our expectations’ • Saga says ‘the Group’s targeted investment in customer growth is driving both our Saga branded policy count and cruise bookings.’ Insurance sales were +1% & tour bookings for 2019/20 were flat on last year ‘with recent positive momentum’. • Saga says ‘bookings for our new cruise ship, Spirit of Discovery, are now over 55% of our sales target for the first 9 months from June 2019, at attractive yields.’ CEO Lance Batchelor comments ‘we have seen good momentum this year across our travel and insurance businesses, particularly in new motor and home insurance policies, underwriting performance and bookings for our new cruise ship, Spirit of Discovery. All of this underpins our confidence that we have put in place the right investment to drive the Saga business forward.’ • Spain has been named the best value destination for fly-and-flop, sun and sand getaways. On The Beach, the OTA, has found Spain to have everything you could want from a beach break, taking the top three spots in its top 10. • STR data has shown US hotels reported occupancy up 0.7% to 68.2% in May, with ADR rising 2.6% to $129.90 and RevPAR climbing 3.3% to $88.59. OTHER LEISURE: • 32Red has been fined £2m by the gambling watchdog for failing to protect a vulnerable customer and carry out proper money laundering checks. The watchdog said there were ‘at least 22 incidents which indicated the customer was a problem gambler – but instead of checking if they needed help, 32Red gave them free bonuses’. • Disney ups its offer for 21st Century Fox to $71.3bn in cash and shares, valuing the company at $38 a share. The previous offer valued the company at $52bn. ‘The acquisition of 21st Century Fox will bring significant financial value to the shareholders of both companies,’ said Disney boss Robert Iger. • PayPal acquires Hyperwallet for $400m. Hyperwallet helps people and small businesses receive payments for services and products that they offer. • Facebook Inc-owned social network Instagram launched an app dedicated to user-generated videos up to an hour long. The App is called IGTV and will bring the social media group in direct rivalry with YouTube. Instagram Chief Executive Kevin Systrom said: ‘Teens are now watching 40 percent less TV than they did five years ago.It’s time for video to move forward and evolve’. FINANCE & MARKETS: • MPC announces today whether it will hike UK interest rates. Long odds against a rise. • CBI reports UK manufacturing orders grew in June after a sluggish start to the year. The CBI says ‘the recovery in orders and a return to bumper growth in production suggests the lull in manufacturing activity may be over.’ • EU to impose retaliatory tariffs on he US tomorrow. Duties of 25% will be added to €2.8bn of US goods including bourbon and motorbikes. • Pope Francis has criticised the Trump administration’s immigration policy. Mr Trump has done a 180. • Sterling little changed at $1.3152 and €1.1373 • Oil down a dollar or so at $74.33 • UK 10yr gilt yield up 1bp at 1.29% • World markets: UK & Europe up yesterday with US down. Far East mixed in Thursday trade • Brexit etc.: o Drama over for the time being as government wins vote to give it the powers, rather than parliament, in the final stages of Brexit negotiations. o Michel Barnier has said that cooperation on security and other issues after Brexit ‘will be weaker’ o Former leader of the City of London Mark Boleat says unrestricted access to European markets after Brexit is unlikely. Says 75k jobs could be lost with a shortfall in revenue to the treasury of £10bn p.a. o Siemens UK boss Juergen Maier has said the UK needs to urgently clarify how trade with the European Union will work after Brexit. He has suggested that Britain should remain in the customs union unless there is a workable alternative. PRIOR DAY TWEETS: • Later tweets: Minimum alcohol pricing gaining traction. Exists in Scotland, now expected in Wales & Greene King calling for introduction in England • Veganism a growing thing. Seems to be everywhere but why be a fan boy & bleat on about it? Surely just live the life? • Colliers says rents falling in UK ex-London. About time. Upward only terms means probably only for new leases (and CVAs) • Waitrose’s halo still slipping, sales last week (despite BBQ weather etc.) down 1% LfL. There’s only so much money to go around • H of Fraser CVA terms deal & details expected Friday. High St continues to evolve from shops & restaurants to, well, not shops & restaurants START THE DAY WITH A SONG: Yesterday’s song was ‘Heads will Roll’ by Yeah Yeah Yeahs. Today who sang: There’s something you’ve forgotten, And that’s to laugh and smile and dance and sing When you’re feeling in the dumps Don’t be silly chumps RETAIL NEWS WITH NICK BUBB:
Dixons Carphone: Having flagged 3 weeks ago, with the profit warning, that today’s finals for y/e would show adjusted PBT coming in at c£385m and that the new-year would fall to only £300m, Dixons Carphone hasn’t come up with any new surprises today. Despite all the problems he claims to have inherited from the previous management, the new CEO Alex Baldock is bullish about the future (“I’m even more confident than the day I took the job in our long-term prospects”) and promises more detail in his strategic review planned for December. At the 9am analysts meeting he will no doubt be pressed on the statement that “In mobile, we are making progress in our contract discussions with the networks with the aim of improving our business model” and the FD Humphrey Singer will, in his valedictory appearance, will be under pressure to provide a clear explanation of the all the one-off and
House of Fraser: It was reported yesterday that the banks have given House of Fraser more time to repay its loans and House of Fraser have already claimed to have “extraordinary support and will to win from brands in all categories”, but its beleaguered landlords will doubtless be taking a more hard-nosed view of its recent record and survival prospects…Whether the landlords have enough votes to block the other creditors at tomorrow’s CVA vote is still unclear, yet the key issue is whether even the proposed rump of 28 stores is too many for the current marketplace to support. House of Fraser say that they plan to retain as much as 70% of the current turnover of the business on a pro forma basis after the 31 store closures (and improve profitability through cost savings), but that looks very optimistic to our eyes in the current retail climate, given the sheer weight of competition. The News Flow This Week: Tomorrow brings the Boohoo.com AGM, as well as the much-awaited House of Fraser CVA vote… |
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