Evictions, JDW, Tasty, Carnival, EOTHO, Diageo & other:

PREMIUM EMAIL – PLEASE DO NOT FORWARD:

A DAY IN THE LIFE:

As mentioned before, the quote ‘there is nothing new under the sun’ (Book of Ecclesiastes) is a) correct and b) 3,000 years old.

Hence, with the fact that people don’t really change in mind, I picked up Robert Hare’s 1993 book, Without Conscience, to remind myself what the eminent psychologist, the father of research into psychopaths, not just the nasty nutjobs with a maniacal grin and a blood-drenched hammer but also your everyday liars, cheats and swindlers, had had to say on the matter.

And Mr Hare’s observations remain pertinent today. His bottom line is basically, beware dishonest, superficial, twinkly-eyed, lying charmers, but one bit stood out.

He said that psychopaths’ brains don’t function like those of most people. They are bitty and incomplete. They have the Scrabble letters but find the words difficult.

If you mention something emotional like love, babies or Hull City, they will think in discrete segments and then try to cobble something together. They then lie without compunction but, because they aren’t as clever as they like to think they are, these bitty comments contradict each other, perhaps even in the same sentence.

And this leads them to overuse hand gestures, eye contact, facial movements, give meaningful stares etc because, think if you tried to give directions in schoolboy French, it’s tricky for them to pull everything together when they don’t really understand the ‘language’.

All of which was starting to remind me of someone. Inconsistencies, easily disprovable ‘facts’, repetition, denial, lots of gestures with his tiny, little hands etc.

Anyway, bit deep. On to the news & follow us on Twitter at @brumbymark.

ADVERTISE WITH US:

Langton’s free email now carries adverts. See front page of website for today’s copy & contact us for further details.

LANDLORDS, EVICTIONS & THE 30 SEPT END TO THE CURRENT MORATORIUM: Are landlords chomping at the bit to evict? No, we thought not. 18 Aug 2020:

Introduction:

• The current moratorium on evictions ends 30 September. There are calls to extend it. Others say, what’s the point?

• The landlord (usually) has the upper hand. There will be lease deposits, (usually) a period paid in advance and the operator has more often than not invested hundreds of thousands of pounds, sometimes millions, in its F&F.

• The operator (usually) wants to trade from the unit and (usually) will pay the rent, even if there is a bit of squealing involved, to do so.

But these are not usual times:

• Rents haven’t been paid, deposits have effectively been ‘used up’, landlords can’t evict and, though there may be cross guarantees or PGs (which we’ll consider later), the landlords teeth have been blunted – at least for he moment

• Indeed, feedback suggests that landlords have been relatively silent, even hard to contact.

• This may be due to a number of factors, not least that the landlords don’t want to be inundated with demands for concessions, in which case they may consider no news to be good news

• And they don’t really want keys back at this stage though, if Hugh Osmond and others are successful in raising blind money to invest in opportunities as they become available, that may change

• Other, would be investors, may not be able to raise money if they have had their reputations tarnished or their competence called into question

• Any shortage of capital for would-be bottom feeders / vulture funds could be deemed good news for incumbents

Reader comment on landlord behaviour

• A couple of points. CVAs scare landlords and make them want to be more pliable but their own debt and other commitments may limit their ability to be so.

• Some have given three months free. Others have moved to monthly payments or turnover rents whilst some have stuck to the letter of agreements and are demanding payment.

• There’s not much they can do to enforce these demands but that will change in due course.

• Institutional landlords have ‘been by far the most supportive, all have offered rent deferrals and rent free periods in exchange for 5 year terms added to the end of the leases, a couple have also just given rent free and part rent payments with no conditions.’

• Smaller landlords, who may have been hoping their bigger brethren would fight their battles for them have been ‘less helpful, or less able to be helpful. Just rent deferrals, a move to monthly rents and the threat to issue winding up orders order if we were late with payments.’

• Some landlords are trying to push through rent increases or extensions in exchange for softened terms elsewhere. They may be focusing on whatever would increase their asset value in the eyes of surveyors

• Some landlords have been slow to (or unwilling to) focus. Not many, if any, want the keys back

• Landlords may be ‘dragging their feet in the hope of getting government support.’

CURRENT TRADING INCLUSIVE OF THE EAT OUT TO HELP OUT SCHEME: The scheme, sadly, is now more than halfway through. 18 Aug 20:

Overall:

• There is a chance that it will be extended by government.

• There is a greater chance that some, strongly-positioned, operators will extend it in order to take market share and squeeze out marginal operators.

• Some trends (such as suburbs better than City & West End) have been magnified whilst others (wet was outperforming food) have been blunted.

Other developments:

• Trade is up.

• It has been flattened with some operators saying that M, T, W are now in line with Friday and Saturday in terms of revenue contribution

• Revenues on M, T, W are running double or better than this month last year

• Week Two of the Scheme appears to have been stronger than Week One

• But, as the customer’s money is finite, there may have been a little more cannibalisation than there was in Week One

• However, the takeaway, delivery and wet-led industries may have suffered from the cannibalisation, rather than the operators taking part in the Scheme themselves

Other, other thoughts:

• It wouldn’t do to be too upbeat here as 1) the industry would like an extension, 2) it would like government help elsewhere and 3) there are discussions with landlords to be had

• Shift management has been a challenge

• There are some horrible hurdles upcoming (end of EOTHO, end of furlough, end of the eviction moratorium, rise in VAT to 20% again, bad winter weather, further customer redundancies etc) but, nonetheless, the industry is making hay while the sun shines

West End footfall:

• New West End reports that footfall in London’s West End was lower week-on-week. The dog days of August are upon us but, at this early stage in the recovery, it would be nice to see more sequential increases. See Premium Email.

• It says ‘West End footfall was down 6% week-on-week in Week 33 as a whole’ adding ‘footfall in the West End & Mayfair has grown by 44% since non-essential retail stores have reopened in Week 25 (w/c 15 June).’

• But it says ‘compared to the same week last year, footfall was down 64%.’

• For the whole of the year-to-date, footfall is down 57% compared to the same period last year

• This isn’t exactly as it was meant to be. Consumers have shown that, whilst they are willing to leave their houses, they are less likely to be visiting Central London, the City, the West End and Canary Wharf

• For companies with a diversified estate of F&B units, the above sites could be amongst the last to reopen. Some may not reopen at all

PUB & RESTAURANT NEWS:

Footfall – West End.

• New West End reports that footfall in London’s West End was lower week-on-week. The dog days of August are upon us but, at this early stage in the recovery, it would be nice to see more sequential increases. See Premium Email.

Eat out to help out:

• The Centre for Economic & Business Research has said that ‘the number of people dining out during the week has surged this month since the introduction of Eat Out to Help Out, bringing in hundreds of millions of pounds for Britain’s suffering hospitality sector.’

• The CEBR says ‘the scheme has given the country “a much-needed boost towards normality”. It estimates that shops, pubs and restaurants in London missed out on £600 million of sales each month as people stayed at home because of the pandemic. However, it expects that figure to drop to £178 million this month, with Eat Out to Help Out “partially responsible” for the improvement.

• The CEBR adds ‘the goal [of the scheme] isn’t just for people to eat in restaurants, but also to get back into the habit of socialising, making non-essential journeys and being surrounded — albeit not too closely — by groups of strangers. It is arguably this push towards normality that will prove the biggest benefit of the scheme.’

Overcrowding, Track & Trace, JDW etc.

• The Guardian reported on ‘concerns that JD Wetherspoon is failing to prevent overcrowding in pubs in its 900-strong chain.’ It says ‘concerns about poor social distancing by customers in Wetherspoon pubs followed a surge in visitors during recent hot weather.’

• The paper quotes staff as saying that units were ‘rammed’ and cites customers standing within one metre of each other at the bar. Last week, chairman Tim Martin called on scientists to produce any evidence that they may have that the virus spreads in pubs.

• The Daily Record in Scotland has reported that some of JD Wetherspoon’s pubs were failing to take details from customer for Track & Trace purposes. Taking details is not mandatory in England, though Scotland’s First Minister, Nicola Sturgeon, is making it compulsory north of the border.

• The Guardian quotes JDW as saying ‘the absence of music, for example, and high food sales attract all age groups. In the good weather of recent weeks, there may have been a higher than usual number of young people in pubs generally.’ It adds ‘the company is making strenuous efforts to comply with the regulations around social distancing. Whereas it is not possible to create an entirely risk-free environment, the company will continue to modify and improve its systems in response to Covid-19 and will review the procedures at any individual pub which is the subject of complaint.’

• Separately, JDW Chairman Tim Martin has said that the UK should have followed the same approach taken by Sweden and should not have entered lockdown. Some others have pointed out that Sweden has one of the highest Covid-19 death rates in Europe. Martin suggests that the policies implemented by the UK government have damaged the economy, caused mental health problems, disrupted education and stopped people from being treated for other serious illnesses such as cancer.

• Martin says ‘following the science has been particularly hazardous in the pseudo-medical area of dietary advice, for the last half century at least. The main advice since the 1970s has been to avoid or minimise consumption of butter, cheese, eggs and full fat milk – unfortunately, it would seem, that advice has turned out to be utter cobblers too.’

Overseas visitors vs staycations:

• Foodservice analyst Peter Backman comments that ‘of all the issues arising out of Covid, one of the most critical for the foodservice sector has been restrictions on travel. This has massively affected the numbers of visitors from overseas. But it hasn’t stopped there. Travel on London’s underground is down to 24% of pre-covid levels because “locals” (otherwise known as commuters and shoppers) are less likely to travel by tube.’

• Backman says ‘fewer travellers have impacted a multitude of places, from restaurants Wetherspoons chairman Tim Martin today launched a blistering attack on the government over its handling of coronavirus, saying the UK should have followed the Swedish model.

• The absence of travellers has certainly influenced the decisions of F&B companies as to which units to reopen and when. Units at travel hubs may be amongst the last to reopen.

• On the plus side, Backman says that staycations are on the up. This is no doubt the case, but the beneficiaries from more staycations, Aldi and local pubs, may not be the same as the losers from a lack of overseas visitors and reduced travel by Brits overseas (the West End, London in general and the outbound travel industry in general). Some sectors of the economy

• Business in these areas will remain dismal until travel reaches its former levels. Meanwhile, theatres have only just been allowed to reopen and both demand and the supply of reopened venues may remain depressed over the medium term.

Strange shape, this V.

• ‘A V-shaped recovery’ paints a picture in people’s minds.

• But that doesn’t have to be an accurate picture. A V-shaped recession implies downward and upward moves of similar lengths and gradients. This does not look to be the case. Stock market moves tend to be sharper on the way down than the way up and the same may be (and often is) the case when it comes to recessions.

• The Observer reported over the weekend that 7m people in the UK remain on furlough. It’s looking as though one side of the V-shaped recover could be flatter than the other. Tick-shaped? Or Victorian bath shaped? At least it’s not L-shaped.

Other news:

• Tasty has updated on trading saying that ‘the process of significantly reducing the workforce by more than 30% is substantially complete.’ It adds ‘the phased reopening schedule has continued, principally to take advantage of the Government’s ‘Eat Out to Help Out’ scheme and reduced VAT.’

• Tasty adds ‘the Board expects to have up to 48 sites trading in August, which will represent approximately 86% of the estate. Most of the remaining restaurants are not planned to re-open for the foreseeable future and some of the restaurants which are currently open may need to close again should they not reach expected trading levels.’

• Tasty says ‘the Company has experienced a positive level of sales this month to date, temporarily supported by the increase in people staying in the UK this summer, Government initiatives and pent up demand following the relaxation of lockdown restrictions since March, however, the Board expects future trading to remain challenging.’

• It concludes that it ‘remains extremely cautious regarding trading in September and is continuing to explore ways to minimise costs and to strengthen the balance sheet including the possibility of new debt and/or equity capital. Discussions are also continuing with landlords and trade creditors to reduce current and future liabilities.’

• Compass Group has announced the appointment of Ian Meakins as non-executive Chairman and a Director of the Company. It says ‘Ian will join the Board on 1 September 2020 and will take over as Chairman on 1 December 2020 when Paul Walsh steps down from the Board.’

• Diageo is to acquire Aviation Gin and Davos Brands for up to $610m. It says ‘Aviation American Gin is an American style gin crafted with a blend of botanicals, with subtle juniper notes, delivering a smooth balanced flavour profile.’ It adds ‘the brand has thrived under the leadership of its majority owner, Davos Brands, and the creative direction of co-owner Ryan Reynolds, who will retain an ongoing ownership interest in Aviation American Gin. Through this acquisition, Diageo is also acquiring the other brands in the Davos Brands’ portfolio consisting of Astral Tequila, Sombra Mezcal and TYKU Sake.’

• Diageo CEO Ivan Menezes says ‘we are delighted to announce this transaction, which supports our participation in the super premium gin segment in the United States. The acquisition of Aviation American Gin and the Davos Brands portfolio is in line with our strategy to acquire high growth brands with attractive margins that support premiumisation. We are confident that Aviation American Gin will continue to shape and drive the growth of super premium gin in North America and we are looking forward to working with Ryan Reynolds and the Davos Brands team to accelerate future growth.’

• Domino’s perhaps feeling the strain in missing out on EOTHO. Co offering 25% off orders over £25. Back to ‘normal’?

• Dominos in the US is hiring 20,000 new workers

• US Pizza Hut franchisee NPC International, which filed for Ch11 bankruptcy protection last month, has said that it could dispose of a quarter of its c1,200 Pizza Hut restaurants.

• Redefining failure as success? NPC says ‘this deal provides tremendous benefits to NPC and its stakeholders by positioning the NPC Pizza Hut business to drive operational excellence through a streamlined portfolio and allowing for new development to rebuild and modernize Pizza Hut assets in viable trade areas, which will strengthen and benefit the broader Pizza Hut system and its loyal customers.’

• Former McDonald’s CEO Steve Easterbrook has denied allegations of lying and inappropriate workplace romances. Mr Easterbrook is being sued by his former employer, which is seeking to recover millions that it paid him in compensation and severance.

• Liz Truss has said she will get the US to bin its tariffs on Scottish whisky.

• Brewhouse & Kitchen has reported EOTHO sales growth of 115% over the first six days that the scheme has been in operation. See also Premium Email.

• Starbucks franchisee GK Coffee, which has eight units in the South East, has secured a CBIL loan.

• Italy has ordered the wearing of masks in public spaces between 6pm and 6am ‘in places where there is risk of assembly’.

• South Africa has lifted the ban on selling alcohol (for the second time) and said restaurants and bars could re-open.

• Tesco is to introduce free delivery.

• Reporting v analysis. Two different things. Reporting (of most stories) is here for free. Please consider subscribing to Premium Email for analysis.

• 72 workers have tested positive for Covid-19 at Bakkavor’s Nottinghamshire dessert factory.

• Morrison’s is to remove plastic bags in favour of paper alternatives.

HOLIDAYS & LEISURE TRAVEL:

• Carnival Corp has ‘detected a ransomware attack that accessed and encrypted a portion of one [of the company’s] brand’s information technology systems. The unauthorized access also included the download of certain of our data files.’

• The company says ‘promptly upon its detection of the security event, the Company launched an investigation and notified law enforcement, and engaged legal counsel and other incident response professionals. While the investigation of the incident is ongoing, the Company has implemented a series of containment and remediation measures to address this situation and reinforce the security of its information technology systems. The Company is working with industry-leading cybersecurity firms to immediately respond to the threat, defend the Company’s information technology systems, and conduct remediation.’

• Carnival says it ‘does not believe the incident will have a material impact on its business, operations or financial results.’

• Jet2.com is to make 102 pilots redundant

• Ryanair is to cut September & October capacity by 20%. It says bookings have ‘notably weakened’ in recent days.

• EasyJet is to close its bases at Stansted, Southend and Newcastle

• Club Med has said its all-inclusive ski resorts are in a “better position” financially than some other operations. They may be more ‘resilient’ but they will also be benefiting because the winter ski season is further away than is the summer 2020 season for other tour operators.

• Booking.com offering 10% off hotel bookings.

OTHER LEISURE:

• Gfinity has updated on the performance of Gfinity Digital Media. It says ‘Gfinity continues to grow its user base, whilst increasing its lucrative US audience and adding new partnerships including Steel Series and TopCashBack.’ It says ‘Gfinity Digital Media is one of the fastest-growing revenue streams for the Company’ adding ‘overall, Gfinity Digital Media is expected to generate revenues of £2 million in the financial year ending 30 June 2021, supporting the Company’s target of moving into profitability in Q1 of 2021.’

• Gfinity says ‘Gfinity Digital Media continues to go from strength-to-strength. Our sites have become popular destinations for the latest news on a number of games including FIFA, Fortnite, Call of Duty and Minecraft.’ It concludes ‘we are well positioned to leverage the opportunities that will come with the new console launches and AAA game releases towards the end of this year.’

• The Telegraph reports ‘Cineworld is facing a court battle after one of its landlords launched legal action against the cinema chain over unpaid rent.’

• Electronic Arts is to rebrand its subscription game services under the EA Play brand name.

• Angry Birds owner Rovio Entertainment has reported a 160% jump in Q2 adjusted operating profit over the period of the lockdown.

FINANCE & ECONOMICS:

• Auctioneers have reportedly seen a sharp rise in the sale of bankruptcy properties

• Sterling up against the dollar at $1.3136 but down fractionally versus the Euro at €1.1042. Oil higher at $45.27. UK 10yr gilt yield down 3bps at 0.22%. World markets better in the UK & Europe yesterday but mixed in the US. Far East lower today & London set to open down around 20pts.

START THE DAY WITH A SONG:

The song has been furloughed. See you on the other side.

RETAIL WITH NICK BUBB:

• Today’s News: A quiet day for company news has been enlivened by an unscheduled trading update from Marks & Spencer, flagging that recent business has been better than expected, but that it still wants to cut 7000 jobs in HQ and store management (hopefully on a voluntary redundancy basis). Food sales have been up 2.5% in the 13 weeks to Aug 8th (up 10.6% LFL, allowing for Travel closures etc), with Clothing and Home sales down 38.5%, despite 42% Online growth and solid trading in out-of-town stores.  

• News Flow This Week: The latest monthly Kantar/Nielsen grocery sales figures (for the 4 weeks to Aug 8th/9th) will be out at 8am today, followed at lunchtime by the Asda/Walmart Q2 results. The much-delayed final results from the hapless Frasers Group (aka Sports Direct) then come out on Thursday, along with the AO.com AGM. First thing on Friday we then get the widely followed GFK Consumer Confidence index for August, as well as the ONS Retail Sales figures for July…