Discounts, startups, CAKE, confidence, retailers, tourism (& Brexit) etc.

A DAY IN THE LIFE:

Because time is linear – at least to the non-quantum physicists amongst us – we can’t help factoring it into our thinking.

Hence, when we know the outcome of something, an event, an election, a football tournament, we can’t view the progress dispassionately thereafter because we know the result.

However, at the time, the outcome will have been very, very uncertain.

The ultimate winners could have lost a war, an election, a football tournament but we can’t see it that way as we know they didn’t. But they could have done, and it feels quite a lot like that now.

Because, once 29 March is in the rearview mirror, it will be obvious what happened. The government caved on a delay, it resigned, the EU blinked, the DUP gave in or whatever but, looking forward to that event, it’s unclear what on earth will happen and, as business works in the here and now (factoring in its best understanding of the future), that has certain implications for all of us.

Anyway, enough of that. It’ll all unfold one way or the other. On to the news:

PUBS & RESTAURANTS:

• Plenty of discounts still on offer with Prezzo & Giraffe at half price, Pizza Express 25% off, Toby two main meals for a tenner & Domino’s 35% off orders over £30.

• Online customer feedback company Trurating has reported numbers to 31 Dec 2018 to Companies House showing that accumulated losses for the year increased by £3.3m to £14.5m.

• Trurating has shareholders’ funds of £9.6m. Included in debtors (and in net assets) is around £9.9m ‘owed by group undertakings and undertakings in which the company has a participating interest’. These assets comprise amounts owing from Trurating operations in Australia, the US and Canada. Trurating reports its ‘members have not required the company to obtain an audit of its financial statements for the year in question in accordance with section 476’.

• Whitbread yesterday bought back £5m worth of shares at £49.09.

• CAKE. KPMG says it has received “a number of offers” for the business. The deadline was noon last Friday. KPMG has admitted that the group’s numbers for the 2014-2018 period are unreliable. Any buyer taking on the whole company would be buying these as-yet unquantified potential problems.

• Pat Val collapsed last month after revealing in October that its sales, EBITDA and profits had been fabricated for a number of years. The group’s CFO and its auditors, Grant Thornton, remain under investigation by the police and by the accountancy watchdog respectively.

• KPMG says ‘we are encouraged by the scope of offers received from trade and finance buyers for all and for parts of the business. We will now be taking a number of these offers forward, and hope to be able to make progress in short order.’

• Any listed company would find it hard to persuade shareholders that buying CAKE as a company was a risk worth taking. PE houses are another matter. They have money to spend but the risks remain substantial.

• The ICAEW has reported that business confidence further weakened in the last quarter to minus 16.4, from minus 12.3 last quarter. The ICAEW says the slowdown in sales is translating into a sharper easing in profits growth.

• The E&Y Item Club says that UK growth could pick up to 1.5% this year in the event of a satisfactory Brexit deal. It is predicting 0.7% growth in the event of no-deal. Business confidence drives investment, investment drives job growth (or contraction) & the latter influences consumer spending.

• UK retail sales growth in the three months to January 2019 was weaker than last year despite a stronger January performance. Paul Martin, UK head of retail at KPMG, said there was little reason to cheer however: ‘This increase points more to British shoppers’ obsession with bagging a bargain and price inflation, rather than any real improvement, and these peaks and troughs continue to leave retailers feeling increasingly anxious’.

• A YouGov survey has found that 27% of Brits have lied about their alcohol consumption to their GPs. 

• Byron burgers has received a £10m investment after having closed nearly a third of its restaurants last year.

• Papa John’s shares fell 9% on Friday to $38.51 after Reuters reported the group had received disappointing valuation results from several interested parties.

• Papa John’s International has received an investment of $200m from the investment hedge fund Starboard Value LP, with an option for a further $50m until March 29.

• Gordon Ramsay Restaurants has announced that Lucky Cat, an Asian-inspired restaurant, is set to open this summer.

• A report be Opinium and Red Brick Road finds nearly half of bar managers have seen a increase in demand for non-alcoholic cocktails. The study links the increase to ‘Generation Z’ wanting ‘more control’ when they go out.

• Permira acquires Hana Group, a France-based sushi company, from TA Associates. 

HOLIDAYS & LEISURE TRAVEL:

• The World Travel & Tourism Council reports more than 300,000 UK travel and tourism jobs could be at risk in the event of a no-deal Brexit. The WTTC also said the UK economy would experience a loss of £18.6 billion in GDP.

• HotStats reports European hotel profit per room down 2.7% yoy in December but annual GOPPAR up 9.2%. 

• Thomas Cook announces its hotel fund joint venture with LMEY investments secures €51m in second round debt funding from CaixaBank. The fund aims to comprise 10-15 hotels within the next two years.

• Managing director of Atlas Leisure Homes, Andrew Innes, announces the sales of Atlas to a management buyout team. The business will continue to trade as Atlas Leisure Homes, managed by Steven McGawin, Colin Jeffery and Philip Spark. 

OTHER LEISURE:

• William will compulsorily purchase the remaining shares in MRG, with the last day of trading in MRG shares on Nasdaq Stockholm coming on 15 February 2019.

• The parent company to Google, Alphabet has seen Q4 sales increase 22% to $39.2bn.

• More than 5000 toys and movie props will go up for sale at an auction on the 21st and 22nd of February with Anderson and Garland in Newcastle, making it one of the largest and most diverse toy collections to do so.

FINANCE & ECONOMICS:

• Markit has reported that growth in Britain’s construction industry slowed to near-zero in January. It measured 50.6 after 52.8 in December. Markit says ‘delays to client decision-making on new projects in response to Brexit uncertainty was cited as a key source of anxiety at the start of 2019.’

• Sterling down at $1.3037 and €1.1403. Oil up a fraction at $62.81. UK 10yr gilt yield up 3bps at 1.28%. World markets mixed.

• Brexit etc.:

o Democracy is great. But it gave us Boaty McBoatface & the Birdie Song & now it’s given us Brexit.

o Churchill said Democracy is the worst form of government apart from every other form but he also said ‘the best argument against democracy is a five-minute conversation with the average voter’.

o Labour does nothing. Accidentally following Napoleon’s brief when he said ‘never interrupt your enemy when he [she] is making a mistake’.

o Mrs May back in Brussels. Angela Merkel said to be considering a ‘creative compromise’. Business Sec Greg Clark saying business needs certainty by the middle of this month. Liam Fox saying that a no-deal Brexit wouldn’t be all that bad. Peston suggesting that there could be mass walk-outs by Ministers if it gets to a no-deal.

o Nissan. Tis but a scratch say Brexiteers. There’ll be plenty of fruit to be picked. UK had pledged £80m to Nissan in 2016.

o Checks on EU goods may be dropped in order to keep trade flowing after 29 March.

PRIOR DAY LATER TWEETS:

• Later tweets: Sacked CAKE staff not paid for January. KPMG says it is ‘providing them [the staff it doesn’t want] with [government] support’ details

• Abta chief Mark Tanzer warns consumer confidence is ‘clouded by uncertainty’. There is a ‘real risk of disruption’ from a no-deal Brexit. 

• IoD says 1/3 of UK firms looking to relocate all / some of operations abroad in event of hard Brexit. Gov may claw cash back from Nissan

• Mad Hatters’ Tea Party ongoing as snap election talk swirls. Brexiters say Hard Brexit won’t totally destroy economy & Labour look on, witless

• ICAEW say business confidence fallen to minus 16.4 from minus 12.3. Investment dropping, job growth likely to follow

• EY Item Club says UK could grow at 1.5% this year if it gets an EU exit deal. No-deal would leave UK ‘flirting with recession’

• Construction PMI down to 50.5 from 52.8 in Dec. Slowest growth since July 2016 in an area pressed by government to spend more

START THE DAY WITH A SONG:

Yesterday’s song was Starman by David Bowie, today who sang:

He doesn’t look a thing like Jesus,

But he talks like a gentlemen

RETAIL NEWS WITH NICK BUBB:

Ocado; Today was one mini-deadline for Ocado to say something about its rumoured deal with M&S, on the back of the Ocado finals, but Ocado are used to missing such deadlines and, needless to say, there is no mention of M&S in the statement. CEO Tim Steiner merely says “Creating future value now will involve us continuing to scale the business, enhancing our platform, enabling our UK retail business to take advantage of all its opportunities for growth, and innovating for the future. We look forward to fulfilling these opportunities with excitement and determination”.

HMV Watch: We are indebted to the Cue Entertainment newsletter for the news that Canada’s Sunrise Records, the retailer led by Doug Putman, has been revealed as the new owner of HMV (rather than Mike Ashley) after a marathon all-night negotiation. In total 100 stores have been acquired via the administrator KPMG. While the price was not disclosed, former owner Hilco said almost 2,000 jobs have been saved and that it has agreed a brand licence with Sunrise. Hilco’s Paul McGowan said “As we have seen already in Canada, HMV is in good hands with Doug Putman and Sunrise Records and we wish him and all the HMV team continued success into the future

BRC-KPMG Retail Sales figures for January (the 4 weeks to Jan 26th): We have been flagging that High Street sales seemed to have improved in January and so we expected the BRC-KPMG outcome to be up a bit LFL, but the 1.8% growth (after -0.5% LFL in November and -0.7% LFL in December) was surprisingly good, although the survey headline was “Retailers Looking Nervously to the Future”. The all-important Food/Non-Food LFL sales split is, as usual, buried in the 3-month moving averages (of +1.3% and -0.8% respectively), but the way those averages have shifted from last month would imply that Food Retailers saw at least 2.5% LFL growth in January, which may explain why even Waitrose saw better trading last month. However, the BRC flags that there was a calendar benefit from the timing of New Year’s Eve, as well as some benefit from Brexit stockpiling, so the January outcome for Food feels a
bit too good to be true. Nevertheless, it looks as if Non-Food was also up LFL last month, perhaps by 1% or so overall. That better Non-Food performance last month was driven by strong Furniture sales, albeit the BRC also flags a calendar benefit to the first week of the month, on the back of the later school holidays. It was also a better month in Clothing, despite less discounting, helped by the cold snap at the end of the period.  Interestingly, Online Non-Food sales were only up by 5.3% last month, although this may be under-stating the growth in the overall Online market.

News Flow This Week: The latest Kantar and Nielsen grocery sales figures (for the 4/12 weeks to Jan 26th/27th) come out at 8am. Thursday brings the Superdry Q3 update and the latest MPC interest rate meeting/Bank of England Inflation Report.