Langton Capital – 2019-08-30 – PREMIUM – Book review, vegan sales, EZH, GOAL, G4M etc.:
Book review, vegan sales, EZH, GOAL, G4M etc.:
PREMIUM EMAIL – PLEASE DO NOT FORWARD:
A DAY IN THE LIFE:
Some changes take place slowly, but others seem to happen much more suddenly and, as my credit card statement has gone from perhaps two pages in a heavy month to six or seven, easily into three figures in terms of transaction numbers, I have to put the arrival of contactless payments into the latter category.
Because, whilst we used to just pay for petrol and groceries, perhaps the odd meal on plastic, now we pay for pretty much everything from the round in the pub (£8.50 for a pint and a half, over thirty quid to buy the whole team a beer) down to the 65p bottle of water in the convenience store and the TFL tubes – and that’s often what does the damage.
As there can be reams and reams of those pesky little £2.40 hits, two, three, four a day for the whole month and, as it’s a joint card, we can hit seven or eight when the gang are in London and who would have thought we spent that much on coffee?
Indeed, there’s nothing like a horror show of a credit card bill to focus the mind when it comes to frittering away one’s hard earned cash. It needs to be accompanied by the will to do something about it, of course, and that’s where we seem to be falling down.
Anyway, I hesitate to mention it but, in the wind and the damp yesterday, it felt a bit autumnal. Demos this weekend in most major cities, on to the news:
BOOK REVIEW: THE HONEST TRUTH ABOUT DISHONESTY – DAN ARIELY: Virtually everyone is capable of being dishonest. But what determines the level of dishonesty that we find acceptable? 30 Aug 2019:
• Dan Ariely is an Israeli-American professor of psychology. He has written a number of books on human behaviour and can be seen lecturing online on YouTube, Ted Talks etc. Here we look at his 2012 book on dishonesty.
What drives cheating?
• Cheats may not tell you why they did what they did. Observing them is a better way to get a grip on their thinking (or lack of it).
• Ariely says the idea of rational crime is that we weigh the benefits, the chance of getting caught and the punishment.
• The only problem is that this clearly isn’t true. There would be much more crime if this were the case. There would be no trust.
• The key, Ariely says, is that people want to have a positive view of themselves. Everyone likes to think that they are ‘more honest than average’.
Where are the ‘red lines’?
• Everyone will fudge. Most will fib. Some will lie. Others will steal.
• People stop largely because (fear of getting caught to one side) they don’t want to feel bad about themselves.
• Cheating goes up if there is no chance of being caught. But not by as much as you would expect. Taxi drivers do not tend to rip off blind people (any more than they do the general population)
• As always, where the lines are drawn is a grey area. People might take their colleague’s Coke from a communal fridge but they wouldn’t take their co-workers’ cash.
• They may take printer paper from their employer but similarly, not cash.
• They will lie more about ‘tokens’ than they will about cash. Cashless society may lead to more cheating. This may spill over to derivatives in the financial markets (rather than cash shares).
• Professionals fudge billable hours. It is a couple of steps removed from cash.
• Locks on doors keep honest people honest. Or poorly motivated dishonest people. If somebody wants to break in, then they will.
• The effects of ‘moral’ or criminal reminders are not long term. E.g. if people sign an honesty clause before they fill in a form (e.g. an insurance claim), they tend to be more honest. Ariely measures this at around 15%.
Incentives can create biasses.
• Charlie Munger says that, no matter how important you think incentives are, they are more important than that.
• Ariely quotes dentists who buy expensive machinery and then create unnecessary treatments in order to pay for it. To a hammer, everything is a nail.
Tiredness & stress:
• Not surprisingly, these can lead to more cheating. We may soften it by saying (to ourselves) that we were just cutting corners.
• Diets fail when people are tired (or stressed). They ‘thoughtlessly’ buy a massive cake and leave it in the fridge. Then they ‘accidentally’ eat it. All of it.
• People get ‘depleted’. Add in a temptation and people cheat. Best to face tough tasks early in the day.
• Fashion (including uniforms) are ‘self-signalling’. They are a disguise. Ditto make-up. People behave differently when they are behind a screen. Put a white coat on somebody and they may ‘fall into character’. Ditto fake glasses. Even sunglasses.
• Failing in one area can open the floodgates. People may go on cheating sprees. They have something to blame it on.
• Mr Ariely does go on a bit so we might finish this off on Monday.
GENERAL NEWS – PUBS & RESTAURANTS:
• MEATliquor has updated on trading saying that ‘over the last two years the business has grown and, with a focussed team, prospered where other operators have struggled.’
• The company says ‘LfL revenue for existing MEATliquor restaurants have increased over the last 6 months.’ The company recently closed its flagship W1 store on Welbeck Street due to a redevelopment of the site and says ‘the new replacement MEATliquor site in Margaret St W1 has grown sales over the first 12 weeks of trading from £33,000 a week to over £70,000 a week.’
• The company suggests that, though the market can be challenging, there is still room for innovative operators to succeed.
• MEATliquor reports that it ‘now operates 11 successful restaurants with over £14m turnover.’ It adds ‘despite a difficult economic and political backdrop, it is now a great time to expand. Landlords are being very helpful with rents and cash contributions towards fit outs. Following the successful relocation of MEATliquor W1, the team is looking forward to expanding the business initially at a measured two restaurants per year.’
• The Resolution Foundation has reported that young adults in the east Midlands have seen their living standards fall the furthest behind their parents’ generation than anywhere else in the UK. Young adults in the area are 2.7% worse off in real terms than their parents were at the same age.
• Seedrs has announced that it has agreed terms for a £4.5m funding round ‘led by two of our major institutional shareholders.’ It says this convertible equity round ‘precedes what is expected to be a substantially larger, priced round next year.’
• Seedrs says that it hopes to achieve profitability sometime in 2020 with 2021 targeted to be its first wholly profitable year.
• Sir Ian Boyd, chief scientific adviser at the Department for Environment, Food and Rural Affairs, has stated that there is no ‘scientific’ reason to ban chlorinated chicken or hormone beef in a post-Brexit trade deal with America.
• Research conducted by the British Takeaway Campaign has found that vegan takeaway orders have increased 388% since 2016. During the same time period vegetarian orders were shown to have risen 136%, with customers increasingly moving towards healthier and more sustainable options.
• Alexandre Ricard, the chairman and chief executive of Pernod Ricard has stated he is ‘very proud’ of the group’s strong full year results to the end of June. The results were in line with analysts expectations but sent the company’s shares up 1%.
• PizzaExpress has stated that it will scale back its expansion plans and is instead going to focus on its existing UK restaurants in the face of ‘intense competition’ in the casual dining market.
• Chopstix, the Asian QSR brand, has secured a new £5m debt facility from Metro Bank as the group looks to push further expansion plans across the UK.
• Coca-Cola Beverages Africa acquires a 60% share in Eswatini Beverages, with sovereign wealth fund Tibiyo TakaNgwane owning the remaining 40%.
• Premier Foods has announced the appointment of Colin Day as chairman and Alex Whitehouse, currently UK Managing Director, as Chief Executive Officer. CFO Alastair Murray, who has been acting CEO for most of this year ‘has agreed with the Board to leave the business and step down from the Board, also with effect from today. Duncan Leggett, Group Director of Financial Control and Corporate Development, will become acting Chief Financial Officer pending a permanent appointment.’
• Premier Foods has been without a chairman since Keith Hamill stepped down earlier this year. Former CEO Gavin Darby left in January. The group has been working on a strategic review of its business for some time. New CEO Alex Whitehouse says ‘I’m delighted to become Premier Foods’ CEO and look forward to working with Colin and the board to drive further value from our great portfolio of brands. I’m very encouraged by the improved performance of the business over the last couple of years and see this as something we can build on further.’
HOLIDAYS & LEISURE TRAVEL:
• easyGroup’s Sir Stelios Haji-Ioannou has purchased an additional c60k shares in easyHotel at 95p per share. His share of the company has risen to 27.8%. Sir Stelios, who is opposing the takeover of easyHotel by existing shareholder ICAMAP says ‘I am delighted that ICAMAP and Ivanhoe Cambridge think that easyHotel.com is such a great business that they want to invest big money to build more great value easyHotels! Nobody would be happier when this brand goes from 50 hotels in operation and under construction now – to say 150 in a few years!’
• Sir Stelios says ‘as with every listed share in the world and as a rational investor, I believe that there is a price to buy and a price to sell easyHotel shares. At 95p I am a buyer of shares and not a seller. And easyGroup now has waiver from the Panel to take the holding above the 30% limit. So easyHotel PLC will, by 17 September, be settled into having one shareholder at fifty something percent and easyGroup at c30% with a free float of other investors in between.’ He says ‘now we will all have to work together to grow the number of easyHotels exponentially! So good news all round for the easy family of brands!’
• Quite a lot of exclamation points in the above announcement. ICAMAP has taken its holding up to 51.7%.
• STR reports the U.S. hotel industry experienced positive year-over-year results in the three key performance metrics during the week of 18-24 August 2019. Occupancy was up 0.8%, rate was up 0.5% and REVPAR was some 1.2% higher than the same week in 2018.
• CBRE expects a slowdown in the U.S. lodging industry over the next few years. It says demand growth will slow to 1.4% for the remainder of 2019. It has reduced its estimates for REVPAR for 2019 and 2020 but increased it for 2021.
• A splinter group from Extinction Rebellion is threatening to use drones to disrupt flights from and to London Heathrow.
• Hlton Grand Vacations Inc is to ‘explore strategic alternatives’ in a move that might see the group sold say ‘people familiar with the matter’ per Reuters. Shares in the US timeshare operator rose by 8% or so on the news.
• Ryanair pledges to run all UK flights as scheduled through a fresh round of strike action by some pilots next week. The airline said ‘All Ryanair flights to/from UK airports on Monday, Tuesday and Wednesday will operate as scheduled thanks to the efforts of over 95% of our UK pilots who have confirmed that they will work their rosters and will not support the failed third Balpa strike action’.
• Irish Ferries reports half-year earnings down to €19.2m, with car carryings falling by 5.7% to 161,200 and passenger numbers dropping by 4.7% to 648,000 despite the launch of new €155 million ferry W B Yeats in January. Irish Ferries parent company also warned over Brexit uncertainty.
• Amazon is in talks to buy a stake in Go-Jek Group, the Indonesian ride-hailing startup.
• Goals Soccer yesterday announced that it ‘confirms it has…commenced a process to invite offers for the business and assets of the Company. This process is being conducted by Deloitte LLP, and follows their previous appointment as advisors to assess future corporate options for the Company, announced on 18 June 2019.’
• Goals says ‘there is no certainty as to the timetable or outcome of this process. Shareholders will continue to be kept informed of developments as appropriate.’
• The process comes after Goals announced that it has unearthed accounting issues that go back almost a decade. Shares in the compnay have been suspended since March. Major shareholder Sports Direct has demanded a ‘root and branch investigation’ into what (and when) things went wrong.
• Gear4music has released the trading statement that will be read at its AGM later today saying that ‘the specific actions that we have undertaken to improve gross margins and ensure that the Group is operationally robust ahead of our peak trading period continue to yield positive results.’
• G4M says ‘we remain confident that the Group is well-positioned to grow revenue and improve profitability.’ CEO Andrew Wass says ‘consequently, I am pleased to report that the Group has continued to trade in line with the Board’s expectations for the full year.’
• Fitbit plans to release a new fitness subscription at $10 a month or $80 annually, giving subscribers bespoke health and sleep information with custom insights.
FINANCE & ECONOMICS:
• The European Commission’s Economic Sentiment Indicator for the UK has fallen to a seven-year low. Manufacturing is said to have ticked up slightly.
• The number of cars made in the UK this year is running 20% below the level of last year per the SMMT. A decline in export orders is said to be ‘primarily responsible’. The SMMT says ‘the sector is overwhelmingly reliant on exports and the global headwinds are strong, with escalating trade tensions, softening demand and significant technological change.’ The UK market is also weak.
• President Trump reports that the US economy is ‘doing GREAT’.
• Sterling down vs dollar at $1.2177 but up vs Euro at €1.1075. Oil up at $61.10. UK 10yr gilt yield down 1bp at 0.43%. World markets higher yesterday with Far East up today.
• Brexit, politics etc.:
o Jacob Rees Mogg says that outrage over the suspension of Parliament is being fabricated and that it is no more than ‘candyfloss’. He says remainers are crying wolf.
o Demonstrations to be held at 12.00 tomorrow at Westminster and in a number of city centres across the country.
o Jeremy Corbyn says that Labour will trigger an emergency debate, likely Tuesday. Ruth Davidson confirms resignation. Government loses a Whip in the Lords.
o BBC’s ‘Brexitcast’ says it will need a bigger klaxon to call out unprecedented and abnormal moves that are fast becoming normal.
o Odds on a no deal Brexit? Boris one day ‘a million to one’ but on another ‘touch & go’. Deutsche Bank 50:50. JP Morgan now at 35%.
START THE DAY WITH A SONG:
Yesterday’s song was Why Can’t I Touch It? by Buzzcocks. Today, who sang:
“I know my mind is made up,
So, put away your make-up
Told you once, I won’t tell you again it’s a bad way”
RETAIL WITH NICK BUBB:
Consumer Confidence Watch: The widely followed GfK Consumer Confidence survey for August came out overnight and at -14, the overall GfK index was the weakest since January (before which it had been lower only in mid-2013). The City had pencilled in -12, versus -11 last month. All the survey’s components, including the outlook for personal finances and the economy, declined in August. Joe Staton, the client strategy director at GfK, said “Until Brexit leaves the front pages – whenever that will be consumers can be forgiven for feeling nervous not just about the wider economy but also about their financial situation”.
Shoe Zone; The discount High Street shoe retailer Shoe Zone has always seemed a likely candidate for a profit warning, but it has always found a way to deliver the goods in the past…Today, however, it has warned trading conditions since the group’s interims on 21 May have been challenging and that, as a result, the Board now expects to deliver a full year performance (y/e Sept) below its expectations, despite strong growth in its new “Big Box” stores and in Online. And the CEO Nick Davis has got the boot and there has been a huge freehold property write-down…
BDO High Street Sales Tracker: We highlighted yesterday that the John Lewis sales figures for last week were poor, because of the impact of the heatwave, but today’s BDO High Street Sales Tracker for medium-sized Non-Food chains (which is unweighted by company size) continues to report suspiciously good progress, implying that BDO are having sampling and methodological problems. In w/e Sunday Aug 25th, BDO Fashion sales were up by 2.9% LFL (including Online), which is, improbably, the fifteenth consecutive week of growth…And total BDO LFL sales (including Homewares and Lifestyle sales) were said to be up by 0.3% last week (down by 5.1% in Store sales and up by 14.6% in Online sales).
News Flow Next Week: The House of Commons returns on Tuesday and the rest of the week will be dominated by the efforts of the Opposition to stop the Government’s no-deal Brexit plans, but there is plenty going on in Retailing to divert us, beginning with the BRC-KPMG Retail Sales for August first thing on Tuesday. Wednesday then brings us the Halfords trading update, the Dunelm finals, the QUIZ AGM and, in the evening, the FTSE index quarterly review. On Thursday we get the Dixons Carphone Q1/AGM and the Carpetright AGM, whilst the Naked Wines EGM to approve the sale of Majestic Wine Retail is on Friday.
Trade Press: Drapers magazine has not been published today because of the Bank Holiday, although the website has some exclusive Online content, including features on “Four forces redefining the High Street” and “Top team-ups: the best fashion collaborations of 2019” (eg H&M and Giambattista Valli, Reebok and Victoria Beckham and ASOS and “The Lion King”). Retail Week magazine is out today, however, and the front cover is a striking photo of some largely empty fresh vegetable shelves in a supermarket, with the headline “Watch this space”, to flag up the main feature on whether grocers can avoid empty shelves after Brexit. Retail Week also has features on “Marketplace’s Fresh Face” (Meet the new boss of NotontheHighStreet, Claire Davenport), “China’s next Retail giants” (The businesses seeking to topple JD.com and Alibaba) and “Bringing AO’s spark back” (John Roberts on returning to