Langton Capital – 2020-10-26 – Social Media, the tier system, WFH, Caffe Nero, Jet2 & other:
Social Media, the tier system, WFH, Caffe Nero, Jet2 & other:
A DAY IN THE LIFE:
It’s half-term this week and, in an attempt at normality, Langton is going to throw itself once again at UK hospitality and at the staycation / daytrip industry.
Undeterred by the fact that last time we let our hair down, EOTHO and the first week of September, we caught Covid-19 and spent a fortnight wishing we had stayed in our bunker, we’ll be out and about.
We’ll put that earlier experience down to bad luck and, though there may be a bit more walking and sightseeing and a little less indoor socialising than would normally be the case, we’ll try to do our bit to maintain our sanity and to keep various wheels turning and tills ringing across the industry.
Anyway, with the moors and the coast on our doorstep, we won’t be going too far. On to the news:
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BOOK REVIEW – Part 1 (of 2). TEN ARGUMENTS FOR DELETING YOUR SOCIAL MEDIA ACCOUNTS. By Jaron Lanier, 2018: Silicon Valley insider Lanier makes some important points. 26 Oct 2020:
• Lanier was a contributor to the 2020 Netflix film, The Social Dilemma.
• He says that Social Media (SM) encourages, without consciously trying to do so, paranoia, bad behaviour, depression, extremism and a host of other ills. See Premium Email
PUBS & RESTAURANTS:
Polarisation of views on Tier system:
• With more areas moving from I to II and from II to III, iNews reports that ‘civil servants are reportedly drawing up plans for an extra-tough fourth tier of Covid restrictions in England in case the current system fails to make a dent in the coming weeks.’
• Some observers have pointed out that, with Manchester in a stricter version of Tier II before the term Tier II was invented and infections still rising there over that period, there may not be enough oomph, for better or worse, in current regulations. If the virus calls the government’s bluff, the latter may need to have something in reserve (so the thinking may be going).
• Tier IV, if introduced, would broadly mirror the March to July lockdown with restaurants, food led pubs and non-essential retailers such as clothes shops forced to close. This isn’t yet legislation. It may be another instance of policy being flagged in the Press to see how popular or unpopular it may be.
• iNews says it has been told by ‘Whitehall sources’ that a decision will be made in the next three weeks. Never say never but, for the moment, a nationwide lockdown has been ruled out by the government.
The culpability or otherwise of hospitality:
• PHE’s pie chart has regularly reported that only 3% to 5% of infections have been traced back to hospitality venues. However, if schools, universities, care homes, workplaces, hospitals and ‘other’ are not going to be shut down, then there is precious little that is.
• The Times reports that ‘check-in data from tens of millions of people who visited pubs, cafés and restaurants has barely been used by the government’s official contact-tracing programme.’ Venues are required by law to record customer details to ensure “Covid security” but the allegation is that nothing is being done with this data.
• UK Hospitality reports that a survey of 568 businesses, covering 12,500 venues and 250 million customer visits, found that they had been informed of only 104 cases by Test and Trace since the summer reopening. Wireless Social has recorded more than three million customers’ details on behalf of clients and it has received no requests for data.
• UKH says ‘despite the claims that transmission is occurring within hospitality, industry bosses are unanimous in their view that this is not the case, and anecdotally have reported very low numbers of either customer or staff infections.’ It says its members have seen an infection rate of 0.48% of employees over the entire period. This number of infections covers approximately 20 million work shifts.’
• UKH concludes ‘there is an extremely low level of transmission in the hospitality sector, confirming the view that measures specifically targeting the hospitality sector are unjustified and should be reconsidered.’
Working from home:
• Staff are once again being asked to work from home if they can but The Telegraph reports senior Government ministers as becoming increasingly concerned that this is less productive and will depress GDP. It says a quarter of companies have reported productivity declines since Covid restrictions began.
• The Telegraph quotes a ‘senior minister;’ as saying ‘at the start of lockdown, firms were saying they were coping well and productivity wasn’t being affected. But there has been a notable change in the last couple of months or so. They are reporting that productivity is going down, they can’t bring in new clients because it’s not something you can really do over Zoom, and people aren’t sparking off each other and having ideas because they’re all stuck at home.’
• Lloyds Banking Group is to ask staff currently working from home to continue doing so until at least next spring. The majority of its 65,000 staff are currently working remotely.
Companies & other news:
• The Telegraph reports that researchers at the London School for Hygiene and Tropical Medicine have said that the rule of six and the 10pm curfew have had “zero effect” in reducing contacts. The study says that the rule of six had not materially stopped people from meeting and the 10pm curfew had not reduced the number of contacts either. The survey says ‘there was a strong suggestion that local restrictions reduced the number of contacts individuals make outside of work and school, though again, this effect was small in comparison to the national lockdown.’
• The Deloitte Consumer Tracker for Q3 reports that ‘in the third quarter of 2020 we continue to see the negative impact of the COVID-19 pandemic on consumer sentiment: despite a glimmer of optimism fuelled by a timid return to social gatherings and summer holidays, scores for all measures of confidence except personal finances remain well below the same time last year.’
• Deloitte says that Q3 saw a bounce-back in economic activity but it says ‘the recovery is losing momentum. Reduced government stimulus, rising insolvencies, unemployment, Brexit uncertainty and stricter social distancing requirements will hamper activity, with the UK economy expected to grow by 1.0% in Q4, which would mean a full-year contraction of -10.6%.’
• Caffe Nero is reported to be considering a CVA in order to cut its costs. Sky News says that the group is working with KPMG on its options. Caffe Nero has 660 stores across the UK with over 90% currently open.
• Coca-Cola Co exceeded revenue and profit expectations for Q3 trading last week. It’s CEO James Quincey says ‘while many challenges still lie ahead, our progress in the quarter gives me confidence we are on the right path.’
• Coca Cola reported sales down 6% in the quarter to 25 September, markedly better than the 26% fall recorded in Q2.
• Gap has said that it may shut all of its stores in the UK permanently. It is reported to be looking at ‘alternative ways to operate the European e-commerce business.’
• The ban on Welsh supermarkets selling non-essential products during the principality’s 15dy lockdown is to be reviewed.
• The BBC’s Panorama programme has reported that young people, particularly those from deprived backgrounds, have had their earnings and job prospects hit hardest by the coronavirus pandemic. The study’s authors warn it could lead to poorer pupils suffering “permanent ‘educational scarring.'”
HOTELS & LEISURE TRAVEL:
• Jet2holidays reports that bookings leapt when the Canary Islands were awarded a travel corridor on Thursday. It says ‘as soon as we put the availability on last night, consumers responded to it. To back up the other destinations like Madeira, Cyprus, Greece and Turkey that we’re offering, the Canaries burst into life and we’ve seen over 5,500 holidays booked for the Canaries alone.’
• IATA reports that airlines could be burning cash next year and into 2022 as well. It says ‘airlines are expected to continue to burn cash through 2022 as revenues are likely to remain soft. Passenger demand continues to lag the rise in seat capacity [and] passenger yields declined in August as airlines sought to improve weak travel demand with price stimulation.’
• Accor has reported Q3 numbers saying revenues were €329m, down 64% on last year. But it says that it has ‘the worst of the crisis behind us.’ Some 90% of its units are now open. CEO Sébastien Bazin says ‘our performances during the third quarter point to a marked recovery of business during the summer season. The worst of the crisis is now behind us, but our main markets are still substantially affected by the measures rolled out to combat the health crisis. Only China reports solid performances and should swiftly recover its activity level pre-crisis.’
• Cosmos CEO Giles Hawke has told Travel Weekly that demand for holidays will bounce back and ‘there will be a time when this nightmare ends.’
• Thailand is now insisting that visitors to the country have travel insurance including Covid-19 cover.
• Virgin Holidays has been told that it must agree to pay refunds for all holidays cancelled before September or face legal action. The CMA has had ‘hundreds of complaints’ from customers not receiving refunds
• STR reports that occupancy across Europe’s hotels was down by 52% year on year in September with room rate down 27%. REVPAR was 65% lower than in the same month last year.
FINANCE & MARKETS:
• The ONS reported last week that retail sales volumes rose by 1.5% between August and September. Sales are 5.5% up on pre-pandemic levels in February.
• The UK and Japan have signed a trade agreement, the first major post-Brexit announcement
• Logistics UK has reported that the cost of some everyday items could rise by up to 33% in the event of a no-deal Brexit
• Sterling lower at $1.3022 and €1.0999. Oil down at $40.86. UK 10yr gilt yield down 1bp at 0.28%. World markets broadly higher on Friday. London set to open down around 40pts.
RETAIL WITH NICK BUBB:
• Saturday’s Press and News (1): The front page headlines of the Saturday papers were pretty mixed: the Guardian went with the continuing row about free school meals (“Councils step in to feed children as anger grows”), whilst the Daily Mail highlighted that Welsh supermarkets have been banned from selling non-essential items like socks, in a rant about “It’s COVID hysteria”. Rather randomly, the Telegraph flagged that “National Trust faces inquiry into its “purpose”” and the Times noted that “UK targets Putin allies”. The FT highlighted the post-lockdown boom in the housing market, helped by the stamp duty holiday: “Banks act to stifle home loan boom”.
• Saturday’s Press and News (2): In terms of Retailing stories, the big focus was on Friday’s stronger than expected ONS Retail Sales figures for September, amidst many worries about the economic outlook, eg for the self-employed: the Telegraph headline was “Retail sales smash forecasts as shoppers flock Online”, whilst the Times went with “Retail sales warm up before winter chill”. The Times also had a big two-page spread on the uncertain outlook for Christmas/Black Friday, despite the “shop early” rush: “Retailers fear being left out in the cold by Covid Christmas”.
• Saturday’s Press and News (3): In other news, the FT went big on the news that Jupiter, the biggest institutional shareholder in Boohoo, has rejected the calls for management changes at the group, despite corporate governance concerns, as also noted by the Daily Mail. The FT also had an interesting column on its Markets page about the two-way pull on the Boohoo share price, headlined “Boohoo becomes a battleground between the bulls and the bears”. The FT (and others) noted that the embattled Edinburgh Woollen Mill Group has been given 2 more weeks to find buyers for the different parts of the group, with Torque Brands said to be interested in Jaeger. Finally, the Times had a feature interview with Mark Allan, the new boss of the shopping centre and London office landlord Landsecs, headlined “Covid has changed lie of the land: it’s time for risk without being reckless”.
• Sunday’s Press and News (1): The headlines on the front pages of the Sunday papers were mostly about the COVID pandemic, but the Observer flagged that “Top children’s doctors attack Tories over free school meals” and also noted that “PM “waiting for US poll result before Brexit move””. The Sunday Times ran with an exclusive investigation into the Government’s handling of the first wave of the crisis (“Revealed: how elderly paid price of protecting NHS from Covid”), whilst the Sunday Telegraph went with “Isolation for test and trace could be halved” and the Mail on Sunday trumpeted “NHS staff set to get a vaccine “in weeks””.
• Sunday’s Press and News (2): In terms of Retail stories, the main Business story in the Sunday Times was that the FD of the fast-growing EG garages group, Michael Hughes, recently considered quitting his job, amidst concern about the ability of the group to handle the planned acquisition of Asda by the owners, the Issa brothers. The Sunday Times also had a detailed follow-up article about the debt-ridden story of the growth of EG under the Issa brothers: “The brothers pumping debt- and doubts”. The Mail on Sunday also had an Asda story, noting that Walmart is already quietly embarking on the Issa brothers’ plan to sub-let more Asda supermarket space to concession partners. The Sunday Times also flagged that Mike Ashley is eyeing a swoop on the upmarket bits of the embattled Edinburgh Woollen Mill Group (namely Jaeger, Jacques Vert and Austin Reed). The Sunday Times also noted
• Sunday’s Press and News (3): In terms of all the Economics and comment columns in the Sunday papers, we would, as usual, highlight the thoughtful column by the Sunday Times Economics correspondent David Smith (“Consumers will stay wary while the virus stalks us”), in which he noted that “Confidence is key to economic recovery, but it has taken a battering”. We would also flag the column by the veteran City commentator Jeremy Warner in the Sunday Telegraph (“Sorry to say, but I’ve never been more worried about Britain’s future”), in which he noted that “Once an economy has got used to income support, it becomes virtually impossible to take it away again”. There was also an interesting article in the Sunday Times Business section about the surprising disconnect between rising unemployment amongst the young and the boom in the housing market driven by people with secure jobs (“Final
• Today’s News: After a near 7% jump in the share price on Friday, the recently floated The Hut Group (which now calls itself “the global technology platform specialising in taking brands direct to consumers”) is now capitalised at as much as £6.5bn and investors are unlikely to be disappointed with the strong trading update today for Q3 (to the end of Sept). Revenue growth picked up from the c36% in H1 to nearly 39% and management have upgraded their full year growth guidance from a cautious c25% to 30%-33%, “following the group’s strong Q3 performance and continued momentum so far in Q4”. There is no sign of an independent non-exec Director being appointed to The Hut, but 3 “independent special advisors” (all former senior accountants) have been appointed to the Audit & Risk and Sustainability committees.
• News Flow This Week: Tomorrow brings the QUIZ finals and the Shoe Zone pre-close update, whilst over in the US the supermarket chain Kroger (Ocado’s key partner) is issuing an investor update. On Wednesday we get the much-awaited Next Q3 update. The rest of the week looks quiet in the UK, but, in the US, the tech giants Amazon and Apple both announce their latest quarterly results after the close on Thursday evening.
TRADING STATEMENTS & EVENTS:
Upcoming results are set out below:
• 27 Oct 20 Whitbread H1 numbers
• 28 Oct 20 Texas Roadhouse Q3 numbers
• 29 Oct 20 YUM Q3 earnings update
• 29 Oct 20 Starbucks Q4 results
• 29 Oct 20 Royal Caribbean Q3 numbers
• By 31 Oct 20 DP Poland H1 numbers
• 3 Nov 20 DART Group AGM
• 4 Nov 20 Shepherd Neame FY numbers
• 6 Nov 20 Marriott Q3 numbers
• 10 Nov 20 Premier Foods H1 numbers
• 11 Nov 20 JD Wetherspoon Q1 update
• 12 Nov 20 Young & Co H1 numbers
• 17 Nov 20 Gear 4 Music H1 numbers
• 19 Nov 20 Dart Group H1 numbers
• 24 Nov 20 Compass Group FY numbers
• 26 Nov 20 Britvic FY numbers
• 2 Dec 20 Shepherd Neame AGM
• 2 Dec 20 Stock Spirits FY numbers
• 8 Dec 20 Vianet H1 numbers
• 10 Dec 20 Marston’s FY results
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