Xmas, Whitbread, RTN, CAKE, discounts, holidays & other:

A DAY IN THE LIFE:

So, now’s the time that we consider whether we have been either collectively overindulging over the festive period or whether our belts and trousers have shrunk nationwide.

And, as it may be the former, we might consider reducing consumption for a while but all things should perhaps be taken in moderation…even moderation.

Hence, for many, the idea of a dry January may have fallen at the first hurdle, but this month is a dog for the trade and it’s unlikely to be any different this year.

Spare a thought for the general retailers. At least food and drink products are rarely taken back in January for a refund.

Anyway, no New Year’s commentary would be complete if we failed to mention that the Mighty Hull City have now won their last five games & that they beat Bolton 6-0 yesterday. And that’s something that you don’t see very often.

A Happy and prosperous New Year to all. On to the somewhat shortened news:

CHRISTMAS & NEW YEAR 2018:

• We would welcome feedback as to how the Festive Period traded out.

• Our understanding is that Christmas happened but, as has been the refrain for some years, it came late.

• It may have come at the expense of 1) Nov, Jan & Feb and 2) spending on big ticket items.

• Discounting continued up to and in some cases over the Christmas period.

• HMV has called in administrators.

• If banks were to pull the plug, they may be incentivised to do so after Xmas cash has come in but before the VAT and Q1 rent payments have gone out. That is around now.

• Drop us a line & we’ll comment further when we’ve gathered some feedback.

PUBS & RESTAURANTS:

• Whitbread has announced that the EU has cleared Coca Cola’s purchase of its Costa subsidiary. It says completion, when WTB will receive the proceeds of £3.9bn in cash, should occur this month.

• Whitbread has also announced that it remains its intention to ‘return a significant majority of the net proceeds [of the Costa sale] to shareholders.’ It says ‘in line with this commitment, Whitbread today announces that following Completion, it will commence a share buyback programme…using its existing authority granted by shareholders at the AGM on 27 June 2018. The Programme will commence shortly after completion of the Costa sale and conclude prior to Whitbread’s full-year results announcement on 30 April 2019.’ It will buy back a maximum of around £500m worth of shares prior to its full year numbers.

• Whitbread will update further on its Capital Markets day on 13 February 2019.

• Competitive Socialising Ltd has reported results for the year to 29 April to Companies House saying that revenues rose to £9.8m (from £8.5m) and losses rose to £2.4m from a profit of £1.4m.

• Competitive Socialising, which operates the Swingers concept, says ‘the group remains focussed on developing and opening concepts in the emerging experiential leisure sector of the hospitality market’.

• Prezzo 30% off mains over Xmas holidays & New Year.

• The Restaurant Group announced on Christmas Eve that it had completed the purchase of Mabel Topco, the owner of Wagamama.

• RTN says ‘Allan Leighton has joined the board of directors of TRG as a Non-Executive Director with effect from Completion.’ Chair Debbie Hewitt comments ‘we’d like to thank all shareholders for their engagement in this process and we look forward to delivering the benefits of the acquisition. We welcome all Wagamama colleagues and thank them and all of our colleagues at the Restaurant Group for their continued focus on our customers during this busy period.’

• Times reports that at least three members of the Patisserie Holdings finance team have left the company since it discovered financial irregularities in its accounts in October last year.

• Times reports that Patisserie Holdings’ executive chairman Luke Johnson was warned about late payments on several occasions last year. The cash balances at the group proved to be illusory. The Times reports that at least one landlord wrote to Mr Johnson about late payments after seeing the CAKE chairman write in his Sunday Times column that business owners should pay their bills in good time. The Times says ‘in recent weeks Patisserie Valerie is understood to have begun clearing debts to suppliers. A spokesman for Patisserie Valerie declined to comment.’

• The BBPA has estimated that UK pubs will have served 10 million pints and 3 million traditional dinners on Christmas Day. BBPA Chief Executive Brigid Simmonds comments: ‘The role of the pub at Christmas is far greater than a place to eat and drink though. In many ways, the pub is the original social network and Christmas is a great chance to use it to reconnect with friends and family’.

• The UK has achieved record breaking gin sales in the UK, boosted by last summer’s heatwave. The Wine and Spirit Trade Association found that UK gin sales reached £1.9bn, up 41% on last year.

• Flavoured gin sales have contributed to over 50% of the growth in gin sales for 2018.

• The Chairman of Diageo, Javier Ferran, has bought £1m worth of company shares.

• Peet’s Coffee, a subsidiary of JAB Holdings Co, has acquired a majority stake in the Northern California kombucha brewery, Revive.

• The Scottish University Environmental Research Centre has found that 21 out of 55 bottles of vintage scotch whisky are actually fake or not distilled in the year claimed. 

• The music retailer, HMV has called in administrators after disappointing Christmas sales.

• Springboard reports footfall on Boxing Day was down 3.1% yoy, making it the third yearly decline in a row.

HOLIDAYS & LEISURE TRAVEL:

• TUI reports full-year profit of €819m but describes trading from the current winter season as ‘a little problematic’. CEO Fritz Joussen also insisted he sees no problem with UK flights post-Brexit.

• French construction company Vinci acquires a majority stake in Gatwick for £2.9bn.

• Gatwick reports 3m passengers travelled through the airport in November, with overall traffic up 5.7% and long-haul passengers up 11.9%.

• Seasonal Business in Travel (SBIT) calls on MPs to back a new people’s vote on Brexit. A poll of operators suggest British package holidays to Europe could increase in cost by 31%.

• MarketsandMarkets reports the global ride-sharing market to grow from $61.3bn in 2018 to $218bn by 2025. Major drivers of growth are traffic congestion and the need for personal mobility.

• 2018 saw an increase in air crash deaths to 556 (from 44 in 2017). 2018 was still the 9th safest year on record.

• Rail fares have just gone up by an average of 3.1% in England & Wales.

FINANCE & ECONOMICS:

• ONS reports that business investment has now declined for three quarters in a row, its worst run since 2009.

• EY Item Club reports ‘this strongly suggests businesses were cautious over investment as doubts mounted as to whether a Brexit transition arrangement would come into being next March and companies looked for greater clarity over the UK’s likely long-term relationship with the EU.”

• Government borrowing fell in November to £7.2bn from £6.3bn a year earlier.

• UK Finance has suggested that the number of mortgages approved rose for the first time in over a year in November.

• Brexit etc.:

o UK government now says businesses need to prepare for a no-deal Brexit. The government has committed over £100m to ferry capacity including one contract with a company that has no assets or history of operating ferries.

o RICS reports its measure of UK house price growth hit a 6yr low in November.

o Guardian reports ‘the lack of clarity over Brexit has prompted consumers to rein in spending on bigger ticket items.’

o UK is to open two new military bases in the Caribbean & S/E Asia post Brexit reports Gavin Williamson. Hence on the doorstep of the US and China. The cost of maintaining bases in Germany and east of Aden led to a number of Balance of Payments crises in the period up to their prior closures.

PRIOR DAY LATER TWEETS:

• Later tweets: RSM says London restaurant market saturated. Retailer Sir John Timpson says UK got twice the shops it needs. Some structural change needed

• Trackers etc. tend to give sales & don’t comment on margin. Try not to be a very busy, loss-making fool. Easier said than done.

• Bank cautions due to ‘intensified’ Brexit uncertainty. Car production down 20%. Project Fear or is this getting real…?

• Ms May (do my deal), Ms Leadsom (no-deal) & Ms Rudd (2nd referendum) giving conflicting signals. Occam’s Razor. Perhaps nobody is in charge?

• Boots says LfL pharmacy sales down 3.5% but it is ‘taking market share’. Ouch. CBI says ‘retail sales darken in December’.

• GfK says cons. confidence down to neg. 14 in Dec from neg. 13 in Nov. Lowest for >5yrs. Outlook for next 12mths at 7yr low.

• GfK says consumers in a ‘chilly mood of despondency’ due to Brexit, rising costs, threat of inflation etc. Not all fake news, surely?

START THE DAY WITH A SONG:

The last song of 2018 was Here Comes the Rain Again by Eurythmics. Today, who sang:

Messin with my mind, I wake up,

Chase down an empty street

Blindly snap the broken beats

RETAIL NEWS WITH NICK BUBB:

• Saturday Press and News (1): The main focus in Saturday’s papers was, inevitably, on Friday’s news that HMV has gone into administration again, just a day after the prestigious KPMG-Ipsos Retail Think-Tank predicted that there will be more Retail casualties. The demise of HMV was the main front page story in the FT (“HMV joins High Street casualty list”) and the Guardian devoted Pages 2 and 3 of its News section to HMV, including some useful charts of the decline in the physical entertainment market and a potted history of HMV. The Telegraph made the collapse of HMV its main Business story and it also had a separate background article (“Time to change the record as plug is finally pulled on HMV”) that quoted our view that it’s hard to see another scavenger/turnaround fund wanting to have a go at HMV after Hilco (which claims that the DVD market slumped by 30% at Christmas). HMV was
also the main Business story in the Daily Mail, although its City editorial argued that “a successful rescue is not impossible”. The one paper not to get carried away with HMV was the Times, with just one modestly sized News article on page 9.   

• Saturday Press and News (2): In other news, the reputation of the New Year’s Honours list is badly tarnished, but it was good to see Greggs’ CEO, Roger Whiteside, get an OBE for “services to women and equality”. And Games Workshop got a shout-out in the Money section in the Times for being one of the “stockmarket winners of 2018”, whilst three of the six Daily Mail’s “Heroes of the Year” were retailers; Tim Steiner, Judith McKenna and Simon Wolfson. 

• Saturday Press and News (3): On a less happy note, the FT’s Retail outlook for 2019 predicted that Debenhams would have to go down the CVA restructuring route early next year, although the rally in the embattled Debenhams share price on Friday was the main story in the Telegraph market report. Debenhams was also first on the list of “more stores facing a torrid 2019” in the Telegraph, along with Arcadia, Mothercare, Monsoon, French Connection, New Look, Harvey’s, Tapi/Carpetright and Paperchase. And the Daily Mail flagged up the warning from Jefferies that Next is likely to knock back full-year profit forecasts in Thursday’s update, whilst the FT had a big feature article on the growing pressure on property valuers to come up with more realistic downgrades of Retail property values. But we’ll give the final word to the veteran City commentator Neil Collins, who, having noted in his FT
column that Overseas investors must see Britain as “a place where the lunatics cannot decide who should run the asylum”, said that after the recent stockmarket slump in UK domestic sectors, “the turn could be as dramatic as the fall”. 

• Sunday Press and News (1): The collapse of HMV got more coverage in the Sunday papers, with the main Business story in the Sunday Times the revelation that the “vulture fund”, Hilco, took £48m in fees from HMV in its five years of ownership and that the business paid no corporation tax. And the Business editorial in the Sunday Telegraph flagged that the real mystery is how HMV limped on for 6 years after its previous collapse and thundered that “little of real cultural value is being lost with HMV this time around”.

• Sunday Press and News (2): The other big focus was on New Year share Tips, despite the lack of success of most 2018 Tips…Two of the Sunday Times’ ten 2019 Tips from their Business journalists were Retailers, in the form of Tesco and Games Workshop. And two of the Sunday Telegraph’s ten 2019 Tips were also Retailers, in the form of Majestic Wine and Joules. And one of the Mail on Sunday’s seven 2019 Tips was ASOS. On a different tack, the column by Oliver Shah of the Sunday Times was headlined “Tin hats on everybody, it’s going to get lively”, flagging that “predicting even worse times for Retail is the easiest call to make for 2019”, whilst the overview of his 2018 Tips by James Ashton of the Questor column in the Sunday Telegraph highlighted how disappointing Kingfisher had been and said that CEO Veronique Laury “is a prime candidate for the chop in 2019”.

• Sunday Press and News (3): Looking back at 2018, Tim Steiner of Ocado was the Sunday Times’ Business Person of the Year and he was interviewed on the ski slopes of Courcheval in a feature headlined “Steiner delivers the last laugh at Ocado”. Less happily, the list of Corporate Own-Goals of 2018 in the Observer awarded “The Fred Goodwin Cup for the UK’s most despised businessman” jointly to Philip Green and Ray Kelvin, whilst the “Devon Loch horseshoe for self-inflicted fall” went to Mike Coupe. More seriously, the Observer had a big feature on the problems of Fast fashion retailers (“Is fast fashion giving way to the sustainable wardrobe?”). The Business Leader column in the Observer also flagged that next month will bring plenty of profit warnings from Retailers and there was a similar piece in the Sunday Times (“New year brings scant cheer for battered retailers”), whilst the Mail on
Sunday had a prominent story about a forecast of 164,000 job losses in the High Street in 2019. In other news, the Sunday Times noted that TK Maxx is suing Sports Direct over its use of the Brand Max logo and the Sunday Telegraph highlighted that the Co-op is planning to open another 100 city centre stores in 2019.

• Today’s Press and News: The collapse of HMV continues to help fill a few column inches in today’s papers, with the Times flagging that the embattled Intu Properties is the shopping centre landlord worst hit by its fall into administration, whilst the FT, enterprisingly, gets James Daunt of Waterstones to voice his opinions, which are that the business was too focused on a narrow demographic and that “If Hilco couldn’t make it work I struggle to see who can”. Otherwise there’s plenty of Brexit no-deal previews and High Street job losses stuff and some previews of the Next trading update.

• News Flow This Week: On Wednesday morning the John Lewis Partnership will publish their sales figures for the last 2 weeks (which will help to fill in the Christmas trading jigsaw), but Next traditionally kick off the January company reporting season (focusing on full-price trading up to Christmas Eve) and there will be a lot of focus on what they say on Thursday about the rash of pre-Christmas discounting, The embattled Debenhams and Marks & Spencer are not due to report until Jan 10th, but it would come as no surprise if they had to slip out early profit warnings this week…

• New Year’s Day Press and News: Apart from the FT, all the papers were published yesterday, with many front pages carrying the obligatory photo of the Sydney Harbour Bridge fireworks…On the Business pages there were plenty of reviews of the winners and losers on the stockmarket in 2018: the Times overview highlighted Ocado as a “leader” and Kingfisher and Superdry as “laggards”. The Guardian (which had the wretched Footasylum as one of its 2018 Tips, unfortunately) came out with its 2019 Tips and Morrisons was one of its 10 selections. The Daily Mail highlighted that the 2 biggest shopping centre landlords, Intu and Hammerson, had nearly £4bn sliced off their stockmarket value last year. The Daily Mail also flagged that the MD of HMV, Ian Topping, quit at the end of September (to go and run another Hilco venture, Homebase) and that HMV also axed Deloitte as auditor in order to save some
money. Finally, the Telegraph noted the interesting news that the high profile Online slipper business, Mahabis, went into administration on Thursday night…

• News Flow This Week: At about 11am this morning the John Lewis Partnership will publish their sales figures for John Lewis and Waitrose for the last 2 weeks, which will help to fill in the Christmas trading jigsaw, although there will be no comment on profit margins until the full update on Jan 10th. Next kick off the January company reporting season tomorrow (focusing on full-price trading up to Christmas Eve) and there will be a lot of focus on what they say about the impact of High Street discounting. The embattled Debenhams and Marks & Spencer are not due to report until Jan 10th, but it would come as no surprise if they had to slip out early profit warnings this week…