Langton Capital – 2019-09-02 – PREMIUM – Cheating, discounts, Brown Forman, confidence etc.:
Cheating, discounts, Brown Forman, confidence etc.:
PREMIUM EMAIL – PLEASE DO NOT FORWARD:
A DAY IN THE LIFE:
Another sign that your daughter is growing up.
Daughter (on seeing flash car zip past): Dad, would you like a Ferrari?
Dad: Yes, but I couldn’t eat a whole one.
Daughter (after pause): But a Ferrari is a car.
Anyway, the passage of time (either that or the speed of light per Mr Einstein) is one of the few things we can rely on and, with the sun rising a little later & the temperature well into single digits overnight, we’ve got what looks suspiciously like an autumnal mist rolling over the grass at home as Langton prepares for its weekly trudge south. On to the news:
BOOK REVIEW: THE HONEST TRUTH ABOUT DISHONESTY contd – DAN ARIELY: Mr Ariely suggests people will be ‘dishonest’ to the point that they begin to feel negatively about themsleves. 2 Sept 2019:
• Israeli-American professor of psychology Dan Ariely suggests that everyone has the capacity to cheat.
• They will do so, not to the point that they think the financial penalties outweigh the potential benefits, but to the point that they begin to feel badly about themselves.
• Some people wouldn’t drop litter (for the above reason) whilst others are perfectly comfortable living out their lives as liars, cheats and thieves.
• Mr Ariely says we lie to ourselves as much as we do to other people. People will look ahead to the answers in tests & crosswords and tell themselves ‘I knew it all along’.
• People are influenced by the lies, that they know are lies, that they have told about themselves. This extends to fake war records & false diplomas on their walls as well as uniforms, heavy makeup and disguises.
• Incongruously, lying to oneself can spur one on to greater achievements. Being lied to about pain re operations in hospital can be a positive thing.
• People will bargain with themselves and change the question until they get the answer they want. Best of three? Best of five etc.
• One may ask advice from several people until one get the ‘correct’ advice.
Physical and other issues:
• ‘Liars’ have 14% less grey matter and 22% to 26% more white matter. The latter may be where excuses are fabricated.
• Liars are creative and can persuade themselves as to their actions. Intelligence is not correlated with cheating.
• We will cheat when annoyed. We see it as some sort of divine retribution. We may be more dishonest when we travel. New countries, experiences etc.
• There are more dishonest people in creative jobs. They see themselves as morally flexible. Accountants were the most honest group tested (or perhaps the least ‘creative’).
• Cheating is infectious. Word will spread that a vending machine is spewing out free bars of chocolate. People tend to take no more than three bars. That’s ‘fair’. It makes up for the times when machines have swallowed your cash.
• MP’s expense cheating spread via infection. It was socially acceptable, at least within the bubble that it took place.
• Cheating is socially corrosive. It is virus-like. It is better for society in this case that celebrities (and MPs) should be held to a higher standard.
• Loyalty can be punished. Dentists recommend more treatments to patients they have known longest.
Some counter-intuitive observations:
• Some things influence us less than might be thought – for example, the amount that could be gained by cheating, consideration of the risk of getting caught etc.
• Other factors influence us more – collaboration, distance from money, moral reminders etc.
• Society has a small number of big cheats and a big number of small cheats.
• There were few differences across countries.
• Pledge and reminders will reduce cheating. New Year’s Resolutions & visits to confession allow a ‘resetting to zero’.
• People rarely run away in restaurants without paying but they will download music. It’s about lack of direct contact.
• The odd lie can provide ‘social cushioning’ but public dishonesty will destroy trust.
• Some very interesting observations. The measure of ‘acceptability’ is set internally & then influenced by peers etc.
GENERAL NEWS – PUBS & RESTAURANTS:
• The MCA has reported that promotional activity in the UK Eating Out Market has reached a four-year high, with 14.4% of all visits involving a promotion.
• Drinkaware the alcohol education charity has launched the next phase of its Drink Free Days campaign, designed to help mid-life drinkers to reduce their alcohol consumption. Elaine Hindal, Drinkaware Chief Executive, said: ‘We’re delighted to be launching this new phase in our Drink Free Days campaign, which was hugely successful last year in its reach and its ability to inspire target drinkers to review their drinking and take steps to reduce it’.
• Brown Forman has reported flat earnings in its quarter one to end-June. The group is still forecasting between 5% and 7% topline growth in fiscal-2020 and remains relatively upbeat.
• Brown-Forman Corporation reports Q1 net sales of $766m, flat yoy, with operating income down 6% yoy to $248m. President and CEO Lawson Whiting said ‘We believe we remain on track to deliver another year of solid underlying net sales and underlying operating income growth driven by the Jack Daniel’s family of brands. This includes the benefit we expect from the launch of Jack Daniel’s Tennessee Apple beginning in October, as well as the continued strength of our portfolio of premium bourbons and tequilas.’
• Brown Forman reports ‘while revenue growth this quarter was disappointing, in sifting through the puts and takes of top-line performance, we come away with a far less dire view of business trends than results on paper would suggest.’
• Christie & Co says it ‘is delighted to bring to market an established retail brand, including two online sales platforms and a range of seasonal pop-up shops’ namely Hawkin’s Bazaar. The chain has £15.3m in revenue from 23 retail shops with another 14 pop up units.
• The GfK consumer confidence indicator fell three points to minus 14 in August, its lowest point since January. GfK says ‘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.’ It continues by warning that ‘if there is a continuation of that dip in our feelings about our ‘future wallets’, we’d quickly see a headline score…crash to a level that approaches the worrying figures seen in the worst days of the 2008/2009 financial crisis.’
• UK households are expecting inflation to rise to 3.2% over the next 12 months reports YouGov.
• UK minister Michael Gove has said that some food prices would rise in the event of a no-deal Brexit. He says some prices will fall. To the extent that these lower prices damage UK farming interests, subsidies may have to be paid.
• Michael Gove has been called out by the BRC for his claim that there will be no shortages post a hard Brexit. The British Retail Consortium says ‘it is categorically untrue that the supply of fresh food will be unaffected under a no-deal Brexit. The retail industry has been crystal clear in its communications with government over the past 36 months that the availability of fresh foods will be hit as a result of checks and delays at the border.’
• Mr Gove & PM Boris Johnson have also said that the proroguing of Parliament has nothing to do with Brexit. The latter maintains that he will leave the EU on 31 October ‘come what may’ and says he is not about to call a General Election.
• Pub group Whiting & Hammond is to remove 10,000 single use water bottles from its supply chain this year after it installed a Mr Fitz Aqua Spritz dispense system across its eight sites.
• Research from King’s College London has found red wine drinkers had greater diversity in their gut microbiome compared to those who drank white wine, beer or spirits.
• Costa Coffee has launched its first ‘commuter-focused’ concept store in Lewisham, London. Connie Emerson, head of global store propositions & design at Costa Coffee, said: ‘We understand that in today’s busy, fast paced world, our customers want to ensure they can get their Costa Coffee fix, even if they are hurrying to work, so naturally, the next evolution of a store concept had to centre on meeting the needs of busy, on-the-go commuters’.
• The US incorporated plant-based egg alternative brand, Just Egg is set to launch its concept in Europe in 2020.
• The Mail on Sunday has reported that Pizza Hut has cut its losses and ‘put in place ambitious plans to grow.’ Sales slipped from £225m to £214m in the year to December 2, 2018 ‘partly due to the record warm weather’ but pre-tax losses fell from £7.5m to £6.2m.
• Britain’s National Farmers Union wrote to Prime Minister Boris Johnson on Friday calling for import tariffs on eggs, some dairy products, horticultural products and grains in the event of a no deal Brexit.
• Puttshack appoints Roberto Moretti as Chief Operating Officer, Logan Powell as Chief Financial Officer and Sophie Evans as Marketing Director.
• All change on the High Street. Debenhams is reported to have brought in advisers from accountancy firm Deloitte in case a legal challenge derails its rescue plan and it has to go into administration. Elsewhere, the Sunday Times reports that Philip Green is preparing to break up his Topshop-to-Dorothy Perkins fashion empire.
HOLIDAYS & LEISURE TRAVEL:
• Virgin Holidays will open four new concessions in Next over the next month, taking the number of Virgin Holidays branches in Next stores across the UK to 31, in addition to its 15 concessions within Debenhams department stores and 14 standalone v-rooms.
• Travelodge has invested nearly £12m in 28 hotel refits in the first six months of 2019.
• A computer failure affecting French airspace led to the cancellation of hundreds of flights to the UK yesterday.
FINANCE & ECONOMICS:
• The Nationwide reports that UK house prices rose by 0.6% over the last 12mths. It says that Brexit uncertainty is weighing the market down despite healthy economic signals. It says ‘while house price growth has remained fairly stable, there have been mixed signals from the property market in recent months.’
• PM Boris Johnson says that he will cut borrowing and cut taxes. He will give more money to health, education & the police and prison services. Unless GDP growth picks up sharply, this may not all be possible.
• Johnson says ‘we will continue to keep debt coming down. That is my pledge.’
• Sterling down a little at $1.216 and €1.1062. Oil down a couple of dollars at $59.01 and UK 10yr gilt yield up 5bps at 0.48%. World markets higher on Friday but Far East lower in Monday trade.
• Politics, Brexit etc.:
o Demos across the country on Saturday. More on Tuesday to coincide with the reopening of Parliament. Anti-no-deal coalition to attempt to introduce legislation Wednesday & Thursday.
o EU numbers suggest that the Brexit process has reduced the productivity of British companies by between 2% and 5% since 2016
o IMF stats suggest that the UK is now the 6th largest economy in the world, having been recently overtaken by India. The CIA says it is 8th on purchasing parity (behind also Brazil, Russia and Indonesia but ahead of France).
o France is to run measures for a month to test its preparedness for a hard Brexit.
o The Boris & Dominic show? Sajid Javid said to be upset that Boris Johnson’s spads are sacking his spads. The ex-Deutsche Bank staffer, who took a 90% plus pay cut to enter politics, may be wondering what he’s let himself in for.
o Michael Gove repeats assertion that freedom of movement will end on 31 October.
o Toyota is planning to halt production at its factory in Burnaston on 1 November ahead of the possible disruption to the deliveries of parts
o The National Farmers Union has written to Boris Johnson calling for import tariffs on eggs, some dairy products, horticultural products and grains if Britain leaves the European Union without a trade deal.
o Sky, quoting Dept of Transport analysis, reports that vehicles could face a two-day delay at Dover in the event of a no-deal Brexit. The ‘best case’ scenario is a wait to 3hrs with 50% of vehicles waiting for 8hrs.
o The Road Haulage Association says ‘the sort of delays that Sky News is reporting at the moment would be crippling to many sections of the British industry and the supply chain on which we all depend. For example the things that we get in the shops, perishables, foods and so forth, we simply cannot afford to have them sitting in a traffic jam for 48 hours.’
START THE DAY WITH A SONG:
Last Friday’s song was Roxanne by The Police. Today who sang:
I tell my love to wreck it all,
Cut out all the ropes and let me fall
My, my, my, my, my, my, my, my
Right in the moment this order’s tall
RETAIL WITH NICK BUBB:
• Saturday’s Press and News (1): The big story in the Saturday papers was the profit warning from the footwear retailer Shoe Zone, as it generated lots of witty headlines after the 33% slump in the share price, eg the lead story in the Daily Mail market report (“Profit shock gives Shoe Zone’s shares a kicking”). And the Business editorial in the Times (“Brought to heel”) mocked the fact that the company claimed that Shoe Zone CEO Nick Davis had decided to step down voluntarily…
• Saturday’s Press and News (2): On a happier note, the Telegraph had a photo of the embattled Philip Green on holiday with his daughter Chloe on the Amalfi Coast and the WH Smith CEO Stephen Clarke, who is stepping down in October, was the Daily Mail’s “Hero of the Week” after the company reported another solid trading update. The Daily Mail also had a feature on the problems of Marks & Spencer ahead of its likely exit from the FTSE 100 next week, noting that Archie Norman has his work cut out (“Can turnaround king REALLY save M&S?”).
• Saturday’s Press and News (3): The Times flagged that Mike Ashley is funding the High Court legal challenge by the private landlord CPC (which owns 6 small Debenhams stores) against the Debenhams CVA. The Times also had a feature interview with the new boss of Ikea UK, Peter Jelkeby, noting that Ikea is shifting its approach to attract more consumers (“Big stores are Ikea’s foundations, but we need to move into city centres”). The FT market report noted that the beleaguered Intu Properties share price perked up on Friday on talk of another recue bid from key shareholder John Whittaker. And the FT had an interesting feature on the problems of ASOS (“ASOS has its work cut out to patch up City relations”), noting that although the £40m refurb of the ASOS London HQ is just finishing, the job of rebuilding relations in the City is only just starting, after a string of profit warnings that
• Sunday’s Press and News (1): M&S was the main focus in the Sunday papers, ahead of the FTSE 100 index review, but there was another big article about the problems of ASOS, funnily enough, with the Sunday Times flagging that “the Online fashion giant is counting the cost of its rapid growth strategy” and that CEO Nick Beighton will be in trouble if ASOS flops again at Christmas. As for M&S, on the same page as the ASOS story the Sunday Times had a feature on the problems of M&S, noting that Archie Norman is said by friends to be “finding it tougher than he imagined” to revive M&S and that he is now thinking of reporting Food and Clothing profits separately for the first time, ahead of a possible split of the business into two. And the Mail on Sunday had a detailed look at why M&S in 99th place in the FTSE 100 is almost certain to be ejected from the index next
• Sunday’s Press and News (2): The main Business story in the Sunday Times, however, was that the embattled Philip Green is planning to slowly break up his struggling Arcadia empire, by separating off the various brands and untangling shared services. The Sunday Times also flagged that Dunelm will beat the High Street blues with its results next week and that the activist investor Gatemore is unhappy with the lacklustre performance of the Naked Wines share price. The Sunday Telegraph highlighted that Deloitte is standing ready to salvage Debenhams if the legal challenge to the CVA prevails (which would force it to repay rent cuts etc). The Sunday Telegraph also had a big feature on the lingerie market and how new players are putting pressure on M&S’s dominance. Finally, the Observer had a good summary of the mixed bag of retail news coming up this week, including the Dixons Carphone
Today’s Press and News: While the focus of most papers is on the planned purge of Tory rebels by Boris Johnson, the FT starts a five-day series on Labour’s economic plans, beginning with the bold front page headline “Labour would cost UK companies £300bn by shifting shares to staff”. In terms of Retail news, the Telegraph highlights that Deloitte is lined up to be the administrator to Debenhams if today’s High Court legal challenge to the CVA prevails, the Guardian that Oxfam is to open its first retail park superstore in Oxford and the FT has a big feature on the problems of Boots (“Boots prepares for makeover as tests mount”, noting that the Walgreens-owned retailer is looking to revamp its beauty business “during one of the most challenging times in its history”.
News Flow This Week: The House of Commons returns tomorrow and the rest of the week will be dominated by the efforts of the Opposition to stop the Government’s no-deal Brexit plans, which may disrupt the Chancellor’s planned pre-Election Spending Review on Wednesday. Fortunately, there is plenty going on in Retailing to divert us, beginning with the BRC-KPMG Retail Sales for August first thing tomorrow (with another flattish LFL outcome likely). 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.