Langton Capital – 2020-12-09 – PREMIUM – Outdoor space, delivery, job losses, footfall, overseas hols etc.:
Outdoor space, delivery, job losses, footfall, overseas hols etc.:
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A DAY IN THE LIFE:
Given how long our telly takes to change channels and the like when I’m jabbing its buttons, I think the speed of light has come down somewhat and, far from being one of the constants, perhaps the only single constant, in the universe, it’s adversely impacted whenever next door put their kettle on.
Pondering this led me to Wiki and the reassurance that ‘energy travels as electromagnetic waves at about the speed of light’. That’s 300m meters a second. But, non-sequitur alert here, Wiki, pull your socks up, electrical impulses in the body travel at a rather tardy 120 meters per second, or four one hundred thousandths of a percent of the speed of light.
Which, though it does go some way to explain why my body won’t get out of bed in the morning, even when I’m ordering it to, it does also suggest that the telly might be made of flesh and blood because why else would it take ten minutes to twiddle its volume?
So, move over Mr Einstein, the competition’s catching up. On to the news:
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CHANGES ACCELERATED BY THE NOVEL CORONAVIRUS #2:
• The is obviously a huge topic. Deciding what is permanent & what is transitory will influence business models for decades.
• Here we just look at three issues. We’d love to call them The Good, The Bad and The Ugly, but that doesn’t quite work.
• Much of the below will abate as vaccines are rolled out. But this will take time and, for a little while, changed behaviour may be expected
The Good – The Great Outdoors:
• Not a secret, but good outdoor space has been at a premium.
• It’s impacted by the weather but we would expect to see (even in the winter) more use of:
o Outdoor space in the good weather.
o Pergolas, three or even four-walled structures with a bit of a roof that needn’t be classed as ‘indoors’ etc.
o Space heaters.
o Outdoor cooking grills, outdoor furniture, BBQ’s, mobile bars, sheltered, outdoor fridges etc.
The Bad – Stranger Danger (fewer large gatherings):
• Much will revert to ‘normal’ but some things will take time.
• The over-80s were never ones for mosh pits but older consumers may steer clear of larger gatherings
• Any general move away from larger groups could impact forward bookings and reduce certainty for venues
• Even the most bearish commentators would never suggest that wedding receptions, birthday parties and the like will not remain popular but, on the margin, there may be fewer of them
The Ugly – Delivery and changed restaurant formats (not really ‘ugly’ but different):
• It’s to be hoped that social distancing rules are gradually relaxed and capacity in pubs and restaurants will rise back to previous levels if this occurs
• At that point, operators will attempt to capture some of the ‘upside’.
• That is either the outside space that they have utilised or, perhaps even more pervasively, delivery.
• The trick here could be to keep delivery customers with minimal cannibalisation to your sit-down trade and with as little disturbance as possible for your seated customers
• It may be hard to control the former. But a usable second entrance with vehicle access would help a lot with the latter
• This may be a non-starter for lockup units but, on the margin, it could influence operators when they are deciding which units to take
• That could be another problem for landlords over the medium term
BARCLAYS COMMENTS ON CONSUMER SPENDING:
• Perhaps unsurprisingly, essential retail fared better in the latest lockdown than did discretionary spend.
• Being in the right place at the right time. Always useful. And being allowed to open your doors likewise.
• Non-essential spending fell 4.6% in comparison to the 1.7% drop last month, this on the back of stricter restrictions.
• Barclays says, ‘despite the ongoing impact of Covid-related restrictions, some sectors did very well as consumers switched to spending online.’ It says the rise in spending on essentials ‘was in part due to people staying at home and shifting their spending to more essential items when ‘circuit breaker’ restrictions were introduced.’
• This will boost food suppliers selling into the eat-at-home market as restaurants were largely shut last month.
• Barclays reports that ‘spending in food and drink specialist stores –including greengrocers, butchers and bakeries –rose 54.3%, reflecting consumers’ ongoing commitment to local businesses.’
• It adds ‘general retailers enjoyed a 33.0% uplift, while discount stores benefited from being able to stay open when non-essential shops were closed in England, recording a 37.8% rise in spending.’
• Hospitality, not so much. Barclays says ‘new restrictions saw eating and drinking spend decline by 24.4%. This reflects a significant 56.7% fall for restaurants and a 56.3% plunge for pubs & bars, both experiencing steeper falls than October, which were 32.7% and 13.5% respectively.’ Not surprising since pubs were shut in November and open in October.
• The question, as always, is how much of the above will reverse when the vaccine has been rolled out and consumer behaviour reverts to ‘normal’.
PUBS & RESTAURANTS:
Employment in hospitality:
• Fourth has updated on the ‘devastating impact COVID-19 continues to have on the hospitality workforce, where there is now a quarter fewer sector jobs compared to a year ago.’
• It says its latest study indicates that the number of job leavers continues to outweigh the number of new starters, a consistent trend since before the outbreak of the pandemic in March.
• The furlough scheme has ‘softened the blow’ but, in some cases, this may be redundancy deferred rather than prevented.
• Fourth says ‘there have been an estimated 650,000 sector job losses since January…there has been a 26% drop in overall staff headcount compared to November 2019 [and] the hospitality workforce shrunk by 4% in November, compared to 7% in October.’
• Recruitment, perhaps unsurprisingly, is down by more than half but the rate of job losses has slowed in November (to 4% of the employed workforce). Fourth says ‘while these figures continue to make for bleak reading, it is encouraging to see that hospitality businesses are continuing to battle on through the pandemic, with the data suggesting that the sector was perhaps better prepared for the second national lockdown.’
• There isn’t the normal ‘mammoth recruitment drive’ that hospitality features normally in the runup to Christmas. Fourth says ‘as we approach the new year, the coming months are going to remain tough, but there is light at the end of the proverbial tunnel and, with effective planning, coupled with a suitable level of top-line support and appropriate compensation for restrictions that are harming operators’ ability to trade, the sector can and will bounce back.’
• Wireless Social comments on footfall last weekend, the first post the lifting of the second lockdown in England.
• It says ‘in the UK the footfall on Saturday (5 Dec) jumped 23% compared to the previous Saturday (28 Nov) and on the Sunday (6 Dec) the footfall increased 20% from the previous Sunday (29 Nov.)’ Saturday footfall was still some 45% below levels seen in February, and this in the run-up to Christmas.
• Moves were specific to regions. Saturday was up 46% week-on-week in Liverpool but only up 23% in London. Manchester, currently in Tier Three, was up 19%.
• New rules in Wales, which came into force on Friday 4th December, forcing pubs and restaurants to close at 6pm banning the sale of alcohol, has impacted footfall. Wireless Social says Cardiff was down 25% week-on-week on Saturday and down 56% on the level seen in February. Scotland, where there have been no changes to restrictions, was flat year on year.
• Barclaycard reports that consumer spending fell 1.9% in November. Essential spending was up 4.9% but some other areas, such as fuel, were strongly down (by 23.8% in the case of fuel expenditure). See Premium Email
• Kantar reports that supermarket sales of alcohol were up by 33% in November against the same month last year. The month in total was saw the biggest monthly spend ever in UK supermarkets.
• Kantar expects to see an even bigger spend this month. It says ‘we expect spend to be close to £12 billion in the month ahead, around £1.5 billion more than last year.’ There could be some stocking up ahead of the end of the Brexit transition period.
• Despite Kantar’s comments above, drinks market analysis from IWSR suggests that global alcohol sales by volume are set to fall by 8% in 2020 across the 19 countries assessed.
• Demand for warehouse space is reported to have rocketed as a result of the large increase in online sales.
• The Scottish Beer & Pub Association has commented on the decision by the Scottish government to offer more support saying ‘this announcement today is bittersweet for Scotland’s pubs and bars. Whilst the news that further economic support for the sector will be outlined tomorrow is hugely welcome and long overdue, the unwillingness of the Government to review the time restrictions on hospitality and lack of progress on the Levels in certain areas like Edinburgh, is hugely disappointing.’
• The SBPA says ‘only 42% of Scotland’s pubs and bars will be able open under these restrictions, leaving the majority on life-support.’ It adds ‘the Christmas and New Year period is critically important to businesses in the hospitality sector and the news today that many will be unable to trade as they had hoped and expected will sadly mean some tough business decisions being made over the next few days.’
• The SBPA concludes ‘in order to save jobs and hundreds of Scottish businesses, the Scottish Government must now ensure that the financial support package at least matches those on offer to pubs, bars and their supply chains in Wales. Currently, the average Welsh pub will receive four times more in financial support than the average Scottish pub over the Christmas period.’
• The Food & Drink Federation has warned that its traders cannot plan as they do not know yet whether there will be a Brexit deal or not.
• Stonegate Pub Company has announced that its Ei Publican Partnerships will provide further support for tenants in response to the Government’s new restrictive COVID-19 tier system. It will credit back 90% of rent in Tier 3 in England and between 50% and 65% in Tier Two. In Tier One, the credit is 20%.
• EI Publican Partnerships’ MD Nick Light says ‘despite the growing concerns across hospitality that our sector continues to be subject to disproportionate Government restrictions, we remain immensely proud of our publicans’ efforts to quickly adapt their businesses in order to provide a safe and welcoming environment for their customers.’ He says ‘standing by our publicans, securing and protecting their futures, therefore remains our main priority which is demonstrated by the continuous financial support we have provided since the first lockdown in March.’
• IMM, which holds the all-India master franchise for Wendy’s burgers, has announced plans to expand the Wendy’s brand in India.
• Restaurant Roux at Parliament Square is to close permanently.
• Chef Gordon Ramsay has launched a range of hard seltzers in the US.
HOTELS & LEISURE TRAVEL:
• Hoseasons reports a sharp increase in bookings for 2021 in the wake of positive vaccine news. The company says ‘with the recent news of an imminent vaccine roll-out, and the easing of restrictions over the Christmas period, bookings have once again surged.’ Hoseasons says customers are typically booking close to their homes.
• Travel Weekly reports that UK consumers are signalling their willingness to travel internationally as vaccines are rolled out. It says there have been ‘booking spikes after announcements around efficacy of Covid-19 vaccines.’
• A study by data firm Adara reports that ‘customers are either booking and departing almost immediately or are looking at dates in the future when they perhaps believe there will be normality around travel.’ It says ‘booking-travel windows remain much shorter than in previous years with the 0-14 day window taking 30% share of the bookings for winter.’ It says that ‘pre-Covid, the last minute booking window accounted for just 18% of bookings. As we approach Christmas and rules are relaxed for the festive period, we can expect to see a last minute spike in booking activity as people travel home.’
• Sweden-based hotel group Scandic is negotiating with landlords in order to reduce its rent-roll. The company says that in November, Scandic’s average occupancy rate was approximately 20 percent, a decline compared with 36 percent during the third quarter and 33 percent in October.
• Airbnb has increased the price of its shares ahead of its IPO tomorrow. The expected range for its shares is between $56 and $60 each, up from a range of $44 to $50 earlier this month.
• Fleurets reports that the volume of hotel transactions across Europe for the first half of 2020 has fallen by around 50% on the same period last year. It says ‘profit multiples in the operational hotel sector have largely remained static although the rise in operating costs have impacted bottom line margins meaning pricing is sensitive and is considered against the ability to deliver pre-lockdown performance.’
• Fleurets says ‘certain sectors of the hotel market are under more pressure than others with the restrictions on the number of people that can gather together impacting conferencing, training and function orientated hotels, whilst those in leisure destinations have benefitted from people taking holidays in the UK as opposed to travelling overseas and experienced higher than usual occupancy.’
• The government it to raise the minimum age to play the National Lottery from 16 to 18, in a bid to protect young people from gambling related harm.
FINANCE & MARKETS:
• Manpower Group suggests that the chance of finding a job in retail & hospitality is worse than it was during the first national lockdown in Q1.
• An EU / UK trade deal still hangs in the balance. PM Johnson will travel to Brussels today to attempt to agree a deal.
• Barclaycard’s measure of consumer spending showed volumes lower by 1.9% year on year last month.
• The Halifax says that house prices rose at their fastest rate in over four years in the year to November. It says, however, ‘with unemployment predicted to peak around the middle of next year, and the UK’s economy not expected to fully recover the ground lost over 2020 for a number of years, a slowdown in activity is likely over the next 12 months.’
• Sterling higher at $1.3386 and €1.1029. Oil up at $48.65. UK 10yr gilt yield down 2bps at 0.26%. World markets higher yesterday and London set to open up around 30 points.
RETAIL WITH NICK BUBB:
• Today’s News: The share price of the trade kitchen joinery business Howden has not done investors any favours recently, but it should get a boost today from a surprise trading update, flagging that November trading was so strong (sales up 17% LFL) that full-year PBT is likely to be about 10% above the top end of analyst forecasts (the range is said to be £123m to £152m). But investors locked into the embattled Manchester-based Motor dealer Lookers will be disappointed to hear that the delayed interim results are now not going to be ready to be published this month, which means that the shares stay suspended…On a happier note, mighty Tesco has announced that all regulatory approvals have now been received for the sale of the businesses in Thailand and Malaysia and the disposal is expected to complete on or around 18 December, paving the way for a £5bn special dividend for shareholders
• Grocery Market Share Watch: The latest monthly Kantar and Nielsen grocery market share figures (for the 4 weeks to Nov 28th/Nov 29th) came out at c8am yesterday and covered the same period as the BRC-KPMG November survey. The Kantar overview was headlined “Deck the aisles: Grocery sales spike with early Christmas cheer”, flagging, inter alia, that take-home Grocery sales increased by a chunky 13.9% in the last 4 weeks (up from +9.4% in the previous 4 weeks) and that food price inflation rate had slipped to 1.4% (from a restated 1.6% in the previous survey). The rival Nielsen survey was headlined “UK shoppers ramp up online grocery shopping ahead of second lockdown, but Brits remain cautious around the Christmas food shop”, flagging that supermarket sales were “only” up by 10.1% over the last 4 weeks, with Online sales up 109%.
• News Flow This Week: Tomorrow brings the Ocado Q4 update and the Frasers interims.