Langton Capital – 2021-05-28 – PREMIUM – More on trading, Bank Hols, R-rate, AG Barr, Fulham Shore, staffing etc.:
More on trading, Bank Hols, R-rate, AG Barr, Fulham Shore, staffing etc.:
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A DAY IN THE LIFE:
Langton is off on half-term hols next week and we’ve organised the weather nicely.
Just Yorkshire but hey, that’ll do. Pubs, walks and more pubs, what’s not to like?
We’ll try to get a stub of an email out and intend to be active on Twitter. Back properly on 7 June.
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• These are good when they work and bad when they don’t.
Dis-functional feedback loops:
• Presumably Pat Val chairman Luke Johnson believed that his company had tens of millions of pounds in the bank because that’s what he was told
• He was, allegedly, fed incorrect information by his finance team.
• The latter didn’t apparently make money from the deception. They presumably either feared giving bad news or craved the praise associated with good news
• Enter Matt Hancock.
• Dominic Cummings alleges he is a liar. It is possible that this is both true and unfair at the same time but, if he misled his bosses, he did them a disservice
Making useful things useful:
• Feedback needs to be timely, accurate and relevant.
• Underlings (be they civil servants, the finance team or the internal auditors), need to be able to speak truth to power
• Incorrect (or incompetent) inputs lead to suboptimal outputs.
• Allowing this to happen, although it is associated with some tyrannical or dysfunctional success stories as well as many failures, is a grievous management failure
• This is Business 1.01 but views are polarised and we’d better leave it there.
PUBS & RESTAURANTS:
• ONS data shows that the number of seated diners in the first week of indoor trading was 32% above the same week in 2019. Website OpenTable has sourced the data. The ONS says that the number of employees on furlough fell to 8% of the workforce for the period from 3 May to 16 May (the week before indoor dining was allowed). The ONS says ‘this latest week’s substantial increase follows the reopening of indoor dining in England, Wales and Scotland on 17 May and continues the rise in seated diner estimates observed since the first reopening of pubs and restaurants in England on 12 April 2021.’ The ONS says that London bookings are only at 84% of 2019 levels but those in Manchester are 190%.
• Meanwhile, the BBPA estimates that ‘42 million pints of beer will be sold in Britain’s pubs over the Spring bank holiday weekend – 21 million fewer pints than normal.’ It says ‘despite a positive looking first week of indoor and outdoor trading, the restrictions currently placed on pubs including table service only are significantly reducing the number of customers they can host and thus the number of pints they are selling’ and adds that ‘this bank holiday weekend alone pubs will lose out on £80 million in revenue from pint sales – down 34% on revenue for a normal spring bank holiday weekend and crucially revenue that could be the difference between survival and closure for so many pubs.’
• The BBPA says ‘approximately 95% of the UK’s 47,000 pubs have re-opened. However, they face significant restrictions that greatly limit their ability to trade as viable businesses. These restrictions include table service only, 1 metre plus social distancing, table sizes of up to 6 indoors and no bar service.’ Around 2,000 pubs are still closed. CEO Emma McClarkin reiterates the above and says ‘despite 95% of pubs being open, they cannot stay open and survive under the current restrictions they face. Upwards of 2,000 pubs in the UK still aren’t able to reopen at all because they are too small for social distancing or table service only.’ She adds ‘as more and more people get their vaccine…all restrictions must be removed in pubs on June 21st as per the Government’s own roadmap.’ Ms McClarkin concludes ‘pubs only have a fighting chance of recovering from more than a year of lockdowns
• UKH comments that a lot of cumulative damage has been done. CEO Kate Nicholls says ‘at this point, any delay to the removal of restrictions on 21 June will be nothing short of catastrophic for a sector that has already lost £80bn in sales – two-thirds of its pre-pandemic revenue – over the past year.’ Ms Nicholls says that, ‘should there be one [a delay to the dropping of all restrictions], it needs to be communicated well in advance and come with further support.’
• The Health secretary Matt Hancock says it is ‘too early’ to know what impact the Indian variant will have on the proposed easing of restrictions on 21 June. He says the variant is spreading fast but said yesterday evening ‘my assessment is that it is too early now to say yet whether we can take the full step on 21 June,.’ He says ‘we will make a formal assessment ahead of 14 June as to what step we can take on 21 and in that we will be both driven by the data, advised on and guided by the science and we will be fully transparent both with this House and with the public in those decisions.’ He denied multiple allegations of incompetence and dishonesty made by Dominic Cummings.
• The NIESR says that it estimates the R number in England is between 1.00 and 1.15. This is consistent with a slowly rising number of people infected. These individuals should be younger than would have been the case prior to the rollout of the vaccines. Northern Ireland and Wales are similar but Scotland is a little higher at between 1.10 and 1.25. In England, R rates seem to be highest in Bolton, Bedford and Blackburn. The NIESR says ‘localised outbreaks have the potential to seed a new wave. The extent to which flare ups are contained will be key in the weeks ahead.’
• Langton comment: The R rate, though it needs watching, is an indicator rather than an absolute target. It is perhaps less important than it was given that the most vulnerable in society (right down to c45yr olds) have had two jabs and over-30s have had one. Serious illness, hospitalisations and deaths should remain modest – although there are some signs that, with infections rising slightly, these indicators are flat-lining. Given the political imperative that the un-lockdown should be ‘irreversible’, it is unlikely that news of the above sort will knock 21 June off track.
• The CBI has reported a jump in demand for staff across consumer-facing sectors.
• Langton comment: This is unsurprising in one sense (shops, pubs and restaurants are open again) but a little unexpected in another (most staff were never let go, they were on furlough, and capacity in pubs & restaurants (due to social distancing and the collapse of some operators) remains depressed). A CBI poll shows a positive balance of +38% of employers have taken on more staff over the three months to May. The number was negative 47% in the three months to Feb.
Company and other news:
• AG Barr has updated on trading saying trading is currently in line with expectations. It says ‘despite lockdown restrictions being in place across much of the first quarter, Barr Soft Drinks trading has been relatively strong since the start of the new financial year.’ It comments ‘as lockdown restrictions have eased we have seen a positive impact on both our sales volume and mix, with a shift back towards ‘drink now’, hospitality and leisure.’ The company adds ‘current trading is encouraging and we have clear plans to further invest in our brands, with exciting consumer engagement and marketing activity planned across the year.’ AG Barr concludes ‘whilst there remains some uncertainty in the short term as pandemic related restrictions ease, we believe we are well placed to drive the growth of the business and remain confident in the Company’s prospects for the full year.’
• Franco Manca and The Real Greek owner Fulham Shore updates on trading this morning saying it is seeing a ‘very encouraging sales performance.’ The company says 71 of its 73 units are trading and adds ‘since the start of the current financial year beginning 29 March 2021, we have opened a Franco Manca on High Holborn in London and are due to open a further Franco Manca on Mitchell Street in Glasgow next week.’ The company says ‘group revenues in the first full week since reopening for indoor dining, being 17 to 23 May 2021 inclusive, were circa 103% of the Group revenues recorded in the similar week in calendar year 2019 (the Company had 61 restaurants open at that time) and 92% on a like for like basis for the same time frame. This recent sales performance is very encouraging despite the restaurants having restricted capacity due to social distancing.’
• Fulham Shore adds ‘as a result of this trading performance, the Group continues to plan the opening pipeline for the next three years. Our property team is travelling around the UK looking for new properties and we have a number of sites that are currently in legal negotiations.’ It says ‘we look forward to fully opening our remaining two restaurants (in the Covent Garden area of London) at the beginning of June and welcoming enthusiastic customers on their return, both to our existing locations and the restaurants we will open in the future.’
• Marston’s has announced that its Revere Pub Company, its premium arm, is to reopen The Hartford Hall, after a half million pound refurbishment, in Northwich, Cheshire next month. The site will include 20 boutique hotel rooms.
• Ahead of the Euros, Wireless Social has launched a ‘gamification programme’ Predictor, with Budweiser, which it announces gives guests ‘the chance to guess the outcome of specific football matches when they log in to a venue’s Wireless Social Wi-Fi network.’
• Cask Marque says that this year’s Cask Ale Week, 23rd September to 3rd October, should be part of the industry’s comeback strategy. Paul Nunny says ‘it’s not enough for pubs to be the hot topic now as they re-open their doors. To survive, they – and breweries – need to stay right at the centre of the national conversation, and right at the heart of their communities. Cask Ale Week has an important role to play in this endeavour.’ CAMRA CEO Tom Stainer adds ‘CAMRA has long been a supporter of Cask Ale Week, and after an incredibly difficult year for the industry, we’re looking forward to joining forces to support and promote UK pubs and breweries.’
• Langton comment: CAMRA adds that ‘pubs matter and are a vital part of our communities up and down the country. What’s more, the pub is the only place you can get fresh cask ale from your local brewery.’ In an environment where many are asking for more financial support via lower VAT, abolished rates, continued furlough etc, t’s refreshing to hear a positive view as to just how much pubs can offer. The BBPA, UKH and SIBA add their voices to those in support of Cask Ale Week. SIBA says ‘the vast majority of the beer brewed by independent breweries is cask, so with pubs now reopen across the UK we are encouraging people to get out there and enjoy a pint of cask beer from a local independent brewery. Fresh cask beer is only available in pubs and taprooms.’
• IGD has commented on the food-to-go market in its quarterly Shopper Vista report. Introducing the idea of it being a ‘mission’ to find something to eat, Shopper Vista says ‘the third national lockdown resulted in a decrease in food-to-go missions, but not to the extent of the first, and interestingly, evening food-to-go missions became more common than lunch. There was a 3% increase in dedicated ‘food-to-go’ missions between February and March 2021 which is a reassuring indicator for the industry. But shopper behaviours have shifted significantly during the pandemic and as a result, we are seeing key trends emerge that operators, retailers and suppliers should consider.’
• Langton comment: IGD says keep an eye on food-to-go in the evenings. This is maybe a good idea but it will be driven by footfall and by the cost of staffing shops that might normally be shut. It says ‘demand for hot food-to-go options is increasing.’ These may be ready-meals as burgers, fish and chips and the like have been popular for quite some time. IGD adds that ‘convenience is influencing purchasing choices.’ True, but maybe not new news. It says ‘demand for convenience and new service expectations have been set, particularly amongst younger shoppers. 40% of 18-24 year-olds state that having the ability to pre-order is an important consideration in deciding where to purchase food-to-go.’
• Starbucks. The Guardian reports on workers at Starbucks complaining about ‘understaffing at stores, intense workloads, and customers who have changed their ordering habits and become increasingly aggressive and confrontational during the coronavirus pandemic.’
• Water & soft-drink co San Pellegrino has announced sales down 8.1% in the year to December to €893m. Exports to the Far East & the US were up but they fell overall.
• The Grocer reports that cider co Thatcher’s increased sales by 22% to £130m in the year ended 31 August 2021.
HOTELS & LEISURE TRAVEL:
• Transport Secretary Grant Shapps has confirmed a review of the traffic light constituents in June but he suggests that little may change. The Spanish islands have been rumoured as additions. They might join existing green islands such as The Falklands and South Georgia (which you can’t get to and where it is winter even if you could).
Other travel news:
• TUI has announced that it is to dispose its 49% stake in RIU Hotels S.A. Joint Venture to a part of the RUI Group. It says ‘the Enterprise Value totals around 1.5 billion euros, thereof around 670 million euros for TUI’s minority stake including an earn-out-element.’ TUI says ‘with the transaction TUI is sharpening its focus in its long-standing partnership with RIU: in the future, the cooperation will be even more clearly focused on brand, hotel management and distribution.’ It says ‘the proceeds will be used to reduce the Group’s debt which substantially increased during the Corona pandemic.’ The company adds ‘we are separating hotel management and the holiday experience from property ownership, in line with our strategy announced in 2019 pre-crisis, a business model that has proven successful in the international city hotel sector.’
• STR reports that UK weekly hotel occupancy ‘reached the 60% mark for the first time since the start of the pandemic.’ It says occupancy was 60.3%, room rate was down 13.6% on 2019 and REVOAR was down 26.6% on two years ago.
• VisitBritain says the recovery for the domestic tourism market will be ‘slow’.
• Langton comment: The impact will be uneven, we would imagine, as international arrivals will be well down but staycations will be up. The former impact will be negative for parts of London and a couple of other cities whilst the latter should be positive for most of the rest of the country (and for the majority of the UK’s pubs & restaurants).
• Online travel agency eDreams ODIGEO has reported results for the 12 months ended 31st March 2021. It says ‘after a challenging year we are now seeing improving trading conditions as pandemic restrictions are easing.’ The company says revenue was down by 79% with adjusted net income a loss of €86.8m against a profit of €34.7m in the prior year. The company says it is ‘we have seen volumes improve month on month: minus 62% in March, minus 51% in April and May minus 28% (up until the 22nd of the month) compared to FY19.’ The company says it is ‘structurally well positioned to maximise the post pandemic opportunity.’ eDreams CEO Dana Dunne says ‘we are coming out of the pandemic stronger with greater growth ahead of us.’ Dunne adds ‘I firmly believe that our business has never been stronger and I am incredibly excited by the opportunity that lies ahead.’
• Commenting on global hotel markets in April HotStats says that LfLs have become much easier but, when compared with 2019, a lot of ground remains to be made up. it says that, overall, ‘performance is improving, but it’s still ways away from the pre-pandemic era.’ In the US, ‘hotel profit has moved in the right direction since the beginning of the year, around the time when it first started to break even.’ It says ‘labour continues to be a struggle for hotels. More than 200,000 jobs were reportedly lost in the franchise lodging sector, representing a 33% drop in employment.’
• In Europe, HotStats says the performance ‘continues to lag other global regions, as COVID-19’s impact on the continental population has not yet fully loosened its grip.’ It says ‘occupancy remained below 20% in April, and with average rate only up $8 since the same time a year ago, RevPAR only hit $16, which, though 225% higher YOY, is still wildly off from its pre-pandemic level, down 85.5% from April 2019.’ It says ‘there is good news on the horizon for Europe: an agreement by the European Union to relax travel restrictions from those outside the bloc.’ In China, on the other hand, HotStats reports ‘April was another month of continued success for Asia-Pacific’s hotels, but an upsurge in COVID cases could dampen performance. Occupancy in the month remained above 50%, as RevPAR surged to a level 241% higher than at the same time last year.’
• Volume measurement co Bazaar Voice says that shopping revenue on Tik Tok’s platform increased by over 550% during the pandemic. Bazaar Voice says ‘video content is king in 2021. The inclusion of shoppable videos on social media now needs to be a key feature in brand and retailer marketing strategies.’ This may stick.
FINANCE & MARKETS:
• Sterling up at $1.4198 and €1.1646. Oil price higher at $69.78. UK 10yr gilt yield up 7bps at 0.82%. World markets heading better yesterday and London set to open up around 32pts.
• Bloomberg reports that ‘big international banks in the EU including Goldman Sachs, Citigroup and Barclays are facing a probe by the European Central Bank over whether they rely too much on London staff.’ Bank of England Deputy Governor Jon Cunliffe told MPs some financial services are moving to the eurozone and the U.S.
RETAIL WITH NICK BUBB:
Today’s News: There is little company news this morning, ahead of the Bank Holiday weekend, but the restaurant group Fulham Shore (which owns Franco Manca, inter alia) has put out a trading updater, to flag that group revenues in the first full week since reopening for indoor dining, ie 17 to 23 May inclusive, were c92% of the group revenues recorded in the similar week in 2019 on a like for like basis. The company says that “this recent sales performance is very encouraging despite the restaurants having restricted capacity due to social distancing”. Yesterday it was announced that the beds chain Dreams has been snapped up by the US mattress maker Tempur Sealy in a deal worth £340m, which is a good result both for the private equity business Sun European (which bought Dreams out of administration in 2013) and for the hard-working CEO Mike Logue (who will stay on with the business). And
Trade Press: The new monthly edition of Retail Week magazine is out in Digital form and the front cover flags that the main feature is about the “Future of the flagship” (“Has Covid changed the flagship store forever? Retail Week considers its role in the retail landscape of tomorrow”). RW also have feature articles on “Made.com boss on why the etailer is sitting comfortably” and “The DIY disruptors making over the sector”. The Editor’s column was written before Wednesday’s M&S finals, but still has the confidence to say that “Maybe, just maybe, M&S has turned a corner”. And as print deadlines don’t mean much these days, Retail Week has also just published its annual Retail 100 ranking of the individuals transforming retailing. At the top, Jeff Bezos of Amazon replaces Dave Lewis of Tesco in the number one position, but, significantly, this year’s ranking sees the exit of
BDO High Street Sales Tracker: Given the impact of the first lockdown on “non-essential” stores and Food shopping a year ago, it remains hard to make sense of year-on-year Retail Sales figures at present, but today’s BDO High Street Sales Tracker for medium-sized Non-Food chains paints another strong picture for w/e May 23rd, given the soft comps. We would, however, as normal, point out that the BDO index is just an unweighted average of the percentage changes in the sales of their reporting retailers and is skewed to Fashion…so we wouldn’t take it too literally. BDO Fashion LFL sales were up c80% (versus -24% a year ago), whilst Total BDO LFL sales (including a handful of Homewares and Lifestyle retailers, as well as the Fashion retailers) were said to be up by c85% (up c301% in Store sales and up a mere c4% in Online sales)…
Next Week’s News: After the Bank Holiday on Monday, next week/June starts off on a quiet note, but Wednesday brings the latest monthly Nielsen grocery sales figures, as well as the FTSE Quarterly Index review in the evening, whilst we get the B&M finals on Thursday.