Langton Capital – 2019-11-26 – PREMIUM – Tipping Point, Compass, Xmas costs, Wagamama etc.:
Tipping Point, Compass, Xmas costs, Wagamama etc.:PREMIUM EMAIL – PLEASE DO NOT FORWARD: A DAY IN THE LIFE: So, how do you know when you’re contributing to the problem rather than the solution? That’s a question that could be levelled at some of our politicians but it’s also an everyday issue, especially as technology and social behaviours change, and the advice that could have seen you through in the 80s or 90s no longer remains valid. Or indeed it could be positively negative. With its accountancy background, Langton’s only too aware that tax advice that would have been appropriate a couple of decades ago could see you in the poorhouse today and that goes for advice regarding careers and the rest as well. Because who would have known that stockbroking would cease to be a thing and that it’s now better to aim to be a YouTube ‘influencer’ or a rather undefined ‘celebrity’ in order to get along? Anyway, that’s something to be thinking about over your cornflakes (if they’re still around). On to the news: ADVERTISE WITH US: Langton’s free email now carries adverts. See front page of website for today’s copy & contact us for further details. BOOK REVIEW – TIPPING POINT – MALCOLM GLADWELL: Journalist Malcolm Gladwell published Tipping Point in 2000. In it, he maintains that moves are rarely smooth. 26 Nov 2019: Introduction: • Gladwell maintains that things, trends, products, fashions etc., tend to ‘burst onto the scene’. But they may have been in the background for years. • Similar to the dismissive ‘he took 20yrs to become an overnight success’, this holds to the idea that there is an inflexion point. Like an earthquake, the pressures may have been there for some time. Setting the scene: • Gladwell points to Hush Puppy shoes. They had been around decades, since the 50s in fact but, between 1994 and 1995 they increased the numbers of pairs of shoes that they sold from 30k to 1.2m. • Similarly, The Beatles had been honing their craft for years when they ‘took the world by storm’ in 1963. A few pointers: • Gladwell points to a few common themes. He says there must be dedicated missionaries for the brand, product or whatever. This is as true for diseases as it is for fashion. • The missionary (or ‘maven’) will do the work of thousands of more passive supporters. Gladwell says there are only six degrees of separation from any two people on the planet. Word can spread quickly. • These ‘connectors’ act via a social pyramid. The individuals will have a foot in different worlds. They can spread news, products, ideas or diseases. They are people, people. • FOMO (fear of missing out) can be a thing. Less so with a fatal disease than with a teenage hairstyle. • Maven => salesmen => connectors => you and me. There may be need for a ‘translator’ between one and two or between two and three. • Ideas should be ‘sticky’ but many marketing people agree that an advert needs to be seen six times for it to stick. There is a tipping point. • News and ideas must ‘rise above the clutter’. A good narrative (think parable in the religious sense) helps to get a message across. • Even crime comes in ‘waves.’ Can it really be an epidemic? Certainly, it shares some features. Murders in New York doubled and halved in the twenty years to 2000. Suicide rates can also double and halve in short order. The power of context: • The ground must be fertile to give an idea, trend, fashion etc the chance to bloom. • An authoritarian regime can bring out the worst in people. Being a prison guard may reinforce authoritarian behaviours in an otherwise mild(er) person. • Individual people vary over time and they vary depending upon the context in which they are place. • There can be a ‘fundamental attribution error’. That is a person may be blamed rather than the context in which they found themselves. Or vice versa. • More ‘consistent’ people may simply be better at controlling the environment in which they have to live. We are most of us only ever three meals from a riot. • On a more benign level, people will be less helpful when they are in a rush. People are different when they are in a crowd. They can behave badly. • We are, at core, animals. Our ‘sympathy group’ will average 12 people. We operate in ‘mental villages’ of around 150. We can only hold 6-7 things in our heads at once. Chicken and the egg: • Smokers are more likely to be extroverts than non-smokers. But is smoking cool or are smokers cool? Some 80% of alcoholics are said to smoke and 90% of schizophrenics. But did the one cause the other or are they both symptoms of something else? The above in context: • Mr Gladwell is a journalist & he rambles around talking about things the interest him. There is no real conclusion, as such. • But producers, naturally, would like to find ‘mavens.’ They have focus groups and the rest to root them out. Mavens are great people to have on board. PUBS & RESTAURANTS: • Compass reports ‘strong’ numbers but is cutting costs in Europe as it perceives trading will become tougher. • Contract caterer Compass Group has today reported full year numbers saying that revenues rose 6.4% to £25.15bn, operating profit is up by 4.7% to £1.88bn and EPS is up by 6.0% at 85.2p. It says these are ‘strong results.’ • Compass reports an ‘excellent performance in North America with broad based organic revenue growth of 7.7%.’ It says growth in Europe was 4.1% ‘with strong performances in UK Defence and Sports & Leisure offsetting Business & Industry volume weakness.’ Growth in the rest of the world was +4.3%. • Compass says ‘the outlook for the Group remains strong.’ CEO Dominic Blakemore says ‘Compass has had another strong year.’ He says ‘the Group margin during 2019 was maintained despite this more challenging trading environment in Europe.’ Mr Blakemore adds ‘despite this good performance, we are not immune to the macro environment. Deteriorating business and consumer confidence in Europe has impacted our Business & Industry volumes, new business activity and margin. Given these trends, we are taking prompt action in Europe and certain Rest of World markets to adjust our cost base. As well as offsetting short-term margin pressures, by taking this action from a position of strength, we will be better placed to capitalise on future growth opportunities.’ • Compass concludes ‘our expectations for the Group in 2020 are positive although we remain cautious on the macro environment in Europe.’ It says ‘in the longer term, we remain excited about the significant structural growth opportunities globally, the potential for further revenue and profit growth, combined with further returns to shareholders.’ • CGA and Prestige report that the price of Christmas may be going up. • They say that their Foodservice Price Index ‘has tracked steady price rises in key food and drink items for several years now—and problems with production this year have accelerated inflation in the turkey market in particular.’ • CGA & Prestige say ‘supply issues are driving up the wholesale prices of Christmas dinner essentials, leaving operators and consumers facing higher costs over the festive period.’ They says that turkey suppliers have been under financial pressure & conclude that they have begun to pass these cost increases on. • African Swine Fever has pushed up the price of pork and this in turn will have dragged up the price of substitutions. CGA and Prestige suggest that a quarter of all pigs worldwide could be culled as a result of the outbreak. The price of veg has been impacted by wet weather and flooding. • On a brighter note, CGA says that ‘to avoid the stresses of the big festive food shop and cooking, a growing proportion of people are heading out for their Christmas dinners.’ It says that ‘70% of consumers visit a restaurant over December, with nearly as many (64%) using pubs and one in five (23%) visiting bars.’ • London law firm RPC has said that the number of beer names trademarked in the UK reached a record high last year, as the number of brands and products continued to mushroom. The total number of protected names rose by 6% last year to some 2,519 brands. Many operators have attempted to corner the market in puns and smart names with BrewDog, for example, owning c130 trademarks in the UK. • Part of the increased number of protected names has come from the growth in low and no-alcohol products. RPC says ‘relentless demand for new niche beer products and flavours is driving the number of beer trademark registrations to record highs. The industry used to focus on consistency of product, now the focus is on variety.’ • Wagamama yesterday said that its ‘strategy under TRG ownership [is enabling] accelerated but selective estate expansion.’ • It says it opened two units in Q3 and completed the conversion of six other TRG sites. There should be four conversions in the quarter to end-December. • Wagamama says that it opened a delivery kitchen in Hackney in Q2 and says that its first Mamago site will open late Nov 2019. It describes Mamago as ‘Wagamama’s little sister, more upstart, less sit-down.’ It says ‘we want you to notice – and taste – your lunch again, to pause for a couple of minutes or so, and to eat well.’ It says the grab n go offer is servicing ‘lunch hour, not rush hour.’ • Wagamama says that it achieved its first £1m week for delivery sales in its financial Q2 this year and adds that ‘36 restaurants achieved record sales weeks in Q2 2019 with a number of sites achieving multiple records.’ • The BII has commented on the three national parties’ manifestos saying ‘we hope that any future Government will acknowledge and appreciate the good pubs do within their communities and pledge to carry out a total reform of the business rate system. The present system is broken with pubs paying nearly 3% of the countries rates bill whilst only representing 0.5% of business turnover.’ • The BBPA and SIBA have commented on the Tory Party manifesto with the former saying that ‘pubs are the heart of our communities, so the commitment to ease their tax burden is welcome. Three pubs a day close their doors for good due to the tax pressures they face.’ It says ‘a freeze or cut in beer tax at the next budget is the most direct way of helping pubs stay viable.’ • SIBA says ‘it is vital that the Conservative Party’s proposed review of alcohol duty does not negatively impact the nation’s small independent brewers – one of the UK’s most important manufacturing industries.’ It does not want to ‘undo the benefits that small breweries’ relief has brought to our British beer industry.’ It says, nonetheless, that it ‘is welcome that the Conservatives recognise the contribution pubs make in our communities and have promised to extend business rate relief to pubs.’ • The Wine & Spirits Trade Association says gin is still king when it comes to innovation but that sales of dark and golden rums are on the rise as in the 12 months to June 2019. • It says that the former category is worth £127m and golden rums £383m. WSTA CEO Miles Beale comments ‘our latest Market Report numbers show gin is still king of the spirits category, in terms of growth and innovation. However, there are signs consumers are starting to become more adventurous when it comes to trying new rums.’ Mr Beale says ‘it’s hard to make a case for anything other than 2019 as another year of gin but, maybe in 2020, we will see rum pulling out all the punches as the new rising star of spirits.’ • Loch Fyne is offering 50% off mains for five days covering the Black Friday jamboree. M&B brands Harvester & Toby are also offering 50% off mains. Pizza Express is 25% off food. • Car maker BMW is reported to be experimenting with in-car food ordering. • Salcombe Brewery Co has reported that its Island Street Porter won a Silver European Beer Challenge Medal at the prestigious beer competition held in Knightsbridge. • Ginspiredscotland.com is an independent website that showcases all of the gins produced in Scotland in one place. It recommends gin tours north of the border and suggests itineraries. • High St woes continue as TSB reports it is to shut 82 branches in order to cut costs. • Which magazine has suggested that only 5% of deals on Black Friday will actually offer the cheapest prices available. Which urges shoppers to do their research before buying any products which appear to be on sale. • Shares in Alibaba jumped over 6% on their Hong Kong debut. HOLIDAYS & LEISURE TRAVEL: • ABTA boss Noel Josephides has said that the price of airline seats could rise rapidly in the wake of the Thomas Cook collapse. Mr Josephides suggested that TUI and Jet2 were attempting to ‘dominate’ the market and, in so doing, they were bagging capacity and pushing up prices for other parties. He says ‘in the short term there will certainly be a lack of capacity. We have all got to get used to paying more for what we are buying.’ • AITO has reported that Brexit and the demise of Thomas Cook have not put holidaymakers off from taking an overseas holiday. Whilst actions speak louder than words, the conclusion is based on responses from 26,400 of their members’ customers. AITO says 79% of respondents maintained that Brexit had not influenced their decision making and only 16% said that they had made alterations to their plans. Of those that said Brexit was influencing their decisions, 73% said they were less likely to travel to Europe and 52% were more likely to take a UK break. • Abercrombie & Kent is reported to be in advanced discussions to acquire the UK arm of Cox & Kings. A&K said that the two brands would ‘complement each other’. A&K founder Geoffrey Kent comments ‘I am excited at the prospect of adding the Cox & Kings UK business to the Abercrombie & Kent family.’ • Online travel agent eDreams ODIGEO suggests that, boosted by the Rugby World Cup, UK tourist numbers to Japan are running 90% ahead of last year’s levels. Numbers were over double in October and November. Tokyo will host the Olympics next summer. • STR reports that occupancy across the European hotel industry rose by 0.2% in October versus the same month a year ago. It says average rates rose by 0.8% and that REVPAR was up by 1.1%. Barcelona and Prague were notable bright spots with REVPAR up 6.9% and 4.6% respectively. • Barrhead Travel plans to open 20 new stores by the end of March next year. • British Airways looks to have headed off the threat of pilots’ strikes ahead of Christmas. • Brittany Ferries says it has eliminated 5.7m items of plastic across its fleet. • Uber’s license to operate taxis in London has not been renewed. TfL cited a ‘pattern of failures’ by the app which, it says, could put passengers’ safety at risk. Uber says it will challenge the ‘extraordinary and wrong’ decision. It has 21 days to appeal. OTHER LEISURE: • Ticket retailing website Viagogo is to buy StubHub from eBay for $4bn. FINANCE & ECONOMICS: • The NIESR reports that the decision to leave the European Union will lead to a shortfall in government tax revenues compared to remaining in of almost £40 billion a year. It says the shortfall would average up to £10bn per year in the next parliament and could rise to £40bn by 2030 in the event of a no-deal Brexit. The NIESR says ‘because of the impact on economic growth, lower tax receipts will leave the next government having to find up to £12bn (slightly over 0.5% of GDP) in higher borrowing or taxes increases in each year of the next parliament.’ • Sterling higher at $1.2894 and €1.1706. Oil little changed at $63.60. UK 10yr gilt yield down 1bp at 0.70%. World markets higher yesterday with Far East mixed in Tuesday trade. • Brexit & politics: o FT suggests that it’s safety first for the Tories as they strip manifesto promises to the bone in an attempt not to repeat the dementia tax gaffes of the 2017 campaign. o An ICM poll for Reuters suggests that the Tory lead over Labour has narrowed to 7pps. It has the Tories, Labour & the Liberals at 41%, 34% and 13% respectively. Polls recently have shown a Tory lead anywhere up to 19%. The rush of younger voters registering could move the numbers further. o Former PM Tony Blair said yesterday that the UK is in a dangerous mess. He said neither the Tories nor the Labour Party deserved on 12 December. START THE DAY WITH A SONG: • Taking a break due to exam commitments. Back later in the week. RETAIL WITH NICK BUBB: • Pets at Home: The bears of Pets at Home doubt that the Vet business will ever make money and worry that Online competition will overwhelm the Retail operations, but they may have to think again today, as the interims (for the 28 weeks to Oct 10th) are notably strong, with Retail LFL sales up by 7.8%, Vet LFL sales up by 6.4% and overall underlying PBT up by 19%, to £45m. And on the back of that outcome, the Board expects full year profit to be towards the top end of the current market consensus of £87m to £93m, “despite continued consumer uncertainty”. • Topps Tiles: Today’s finals are the swan-song for the retiring CEO Matt Williams and it’s a shame that he has to report on a dull year, with sales and pre-tax profits flat at £214m and £16m respectively in the year to Sept 28th. More alarmingly Topps have seen a “challenging” start to the new-year, with LFL sales down by as much as 7.2% in the last 8 weeks…You wouldn’t call Topps a “big ticket” retailer, but it is tied to housing market sentiment, so the fact that they blame the uncertainty created by the Election will get a few headlines today…
• Sports Direct: Last Tuesday Sports Direct announced that they had moved their interim results date from Dec 12th to avoid the clash with the Election, which seemed surprisingly sensible, even though it was a bit odd that the date was moved back, to Monday Dec 16th, rather than forward to say Dec 10th or 11th. It now turns out that the reason for the choice of Dec 16th is that is also the date for the EGM that was announced out of the blue yesterday afternoon to approve the bizarre name change to Frasers Group…All the hapless Chairman could say on the subject in the shareholder circular published at the same time was “The Board believes that the change of name of the company from Sports Direct International to Frasers Group is reflective of the business strategy of the company to elevate its retail proposition across all channels and demonstrates the transformation of the company over |
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