Langton Capital -2021-06-07 – Key issues, trading (and restrictions), staff, rent arrears, Portugal & other:
Key issues, trading (and restrictions), staff, rent arrears, Portugal & other:
A DAY IN THE LIFE:
Well, we’re back from holiday and have a lot to catch up on.
In addition, we’ll formulate some sort of narrative as we visited dozens of cafes, coffee shops, pubs & restaurants and will outline some of our experiences (which were mixed to say the least) over the coming days.
We saw the good, the bad and the pitiful, the latter in the more literal sense that some operators seem stunned or depressed to the point that they may struggle to get back to anything like normality.
Which is a great shame although, for other operators, there will be opportunities. Selling the products and services that people want to buy, at prices they are willing to pay from units that they wish to visit would be a good start but, as always, the devil is in the detail.
Anyway, that’s enough of that for the moment. On to the news:
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THE MAIN ISSUES:
There are a number of ways of saying it (you should take the time to see the wood for the trees, keep your eyes on the prize, focus on the signal rather than the noise etc) but, as always, there are big issues facing hospitality.
Langton comment. See premium email.
PUBS & RESTAURANTS:
• CGA has reported that the sunshine ‘heated up drinks sales over the Bank Holiday weekend.’ It says ‘widespread sunshine and the Bank Holiday weekend combined to give drinks sales a much-needed boost in the final days of May’ with LfL sales up by 41% on 2019 on Sunday and up by 55% LfL on the Monday. It says ‘the bumper two days were particularly welcome for bars, where year-on-year drinks sales jumped 105% on Sunday and 23% on Monday. Beer gardens helped to make it a strong weekend for pubs (up 40% on Sunday and 60% on Monday), with restaurants (up 30% on Sunday and 55% on Monday) slightly behind.’
• Langton comment: See premium email.
• CGA has said that its consumer pulse survey has shown that the Euros this year should boost trade. It says ‘30% UK consumers plan to watch games in football’s upcoming Euros in a pub, bar or restaurant—a reminder of the major potential of live football for the On Premise, despite the current restrictions.’ It says younger customers are particularly interested in viewing the football in the pub and concludes ‘football tournaments are always good news for pubs and beer brands in particular, and with all three home nations taking part there will be some great opportunities right across Britain.’
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• The British Beer & Pub Association has reported ‘that pubs traded 20% lower in their first week of reopening indoors than the same period before the pandemic.’ It says ‘restrictions and social distancing measures pubs are having to implement, which are making them unviable as businesses. The BBPA says ‘turnover for the pub sector in the UK as a whole for the week of May 17th was at 80% of the same period in 2019, despite 95% of UK pubs (some 45,000) reopening to trade.’ CEO Emma McClarkin says ‘pubs trade on incredibly small margins, so being 20% down on normal times is huge and incredibly concerning.’ She adds ‘what is especially worrying is that there was a lot of enthusiasm to visit the pub when they first reopened indoors. When that initial enthusiasm to return to the local cools down, trade could get even worse, leaving pubs unable to get beyond break even.’ Ms McClarkin goes
• Langton comment: See premium email.
Trading restrictions & impediments:
• There is plenty of speculation that the 21 June removal of all restrictions may be delayed and / or watered down.
• ‘Government sources’ have told the Telegraph that the “work from home if you can” advice could be extended beyond the 21 June reopening date. A final decision will be made on 14 June.
• Whilst Portugal and the overseas tour operators are understandably disappointed that the number of green list countries has been reduced (and effectively includes no large holiday destinations), the outlook for staycations has improved. Langton comment. See premium email
Staffing issues, labour shortages:
• The Press has caught onto this with papers talking about ‘raiding’ colleges for staff, companies poaching chefs from each other, loyalty bonuses appearing and finders-fees being paid to those able to provide applicants for jobs. This seems to be the case in the US (see below) as well as in the UK. The Times says ‘the crisis, caused by an exodus of workers to Europe and side-effects of the furlough scheme, is the latest blow for hospitality operators.’
• In the US, NRN reports more foodservice jobs are being advertised as the US jobless rate has fallen to 5.8%. The Bureau of Labour Statistics says ‘employment in leisure and hospitality is down by 2.5 million, or 15%, from its level in February 2020.’ NRN says ‘restaurant companies have announced employee applicant incentives and special hiring days as they deal with labour shortages.’
• An answer (albeit one of several required) to labour issues? Restaurant Dive reports ‘McDonald’s is piloting voice-ordering technology at the drive-thrus of 10 Chicago restaurants.’ Langton comment: See premium email.
• Debt and rent accruals:
• The Mail on Sunday quotes Jeremy King, whose London restaurants include The Wolseley, as saying that there may be a ‘Doomsday scenario’ for hospitality businesses unless all major Covid restrictions are removed as planned on June 21. He calls on the government to extend the ban on landlords evicting tenants ‘because if they do not, many will throw in the towel.’ The ban is due to expire at the end of this month. Langton comment: See premium email.
Other Covid news:
• Michael Gove has told the BBC the Government is “open minded” about extending furlough beyond September.
• The NIESR has reported that the localised nature of outbreaks at the moment means that the R rate is around 0.8 in some parts of the country and as much as 1.5 in others. It says its ‘findings suggest that localised outbreaks can be locally contained through high vaccination rates and changes in behaviour. But there is more to be done in this regard to prevent local spikes morphing into waves.’
• The British Institute of Innkeeping, British Beer & Pub Association and UK Hospitality have written to the Chancellor to highlight just how critical it is that the 21 June relaxations to restrictions go ahead. The bodies say ‘the Government is assessing potential risks around removing all restrictions on the 21st June and we urge them to follow their own roadmap, if the data supports it, and to allow the hospitality and pub sector to open free of restrictions.’
Company & other news:
• Caffe Nero. The Telegraph reports Caffe Nero as saying that any further restrictions could put the company’s future in jeopardy. It says the company’s accounts warn that closures, trading restrictions and a legal challenge by landlords to its recent restructuring of the business cast “material uncertainties” over its future. Auditors in many cases have been demanding such comments be made by directors. The Telegraph quotes a spokesman as saying ‘as is the case for all other retail and hospitality businesses, we certainly hope the Government will not impose additional lockdowns as that would create further uncertainty.’
• Company Rescue reports that ‘Wright & Bell, who own the Kitty Hawk and Lino London-based restaurants, has entered administration.’ It quotes the company as saying that ‘the firm hoped a new agreement would be reached with creditors but in reality, it was not possible, leaving no other choice but to appoint administrators.’ It adds that ‘Wright & Bell Limited has confirmed this administration does not impact any of the other companies the operator owns i.e. Green Room, Marsha and Whyte & Brown.’
• UKH has said that the bottle ‘Deposit Return Scheme must be workable for pubs, hotels, cafés and restaurants.’ CEO Kate Nicholls said: “We support the principle and aims of a DRS system, and believe that it could be an effective vehicle to improve recycling rates across the UK. However, such a scheme must not overly burden hospitality businesses, which are in a fragile state following more than a year of punitive restrictions to trading.’
• The Guardian reports that a number of shopping centres across the UK could close permanently as a result of growing internet sales and Covid-19 related shut-downs.
HOTELS & LEISURE TRAVEL:
Portugal removed from the green list:
• Transport secretary Grant Shapps has confirmed that Portugal will be removed from the England’s green list from tomorrow. He says ‘the positivity rate has nearly doubled since the last review in Portugal and the other thing is there’s a Nepal mutation which has been detected and we just don’t know the potential for that to be a vaccine-defeating mutation.’ Seven countries were added to the red list.
• Jet2 CEO Steve Heapy says consumer confidence in international travel will take a “massive hit” as a result of the above decision. TTG quotes him as pointing out there will be “big empty-leg costs” for flying aircraft just one way of a journey. He spells it out, saying ‘three weeks after starting operations to Portugal, airlines have now got to stop and pull everyone out. People not having been away for two years, wanted a little bit of sunshine, and then little bit of return to normality, and now they’ve been pulled home.’ Langton comment: See premium email.
• Jet2.com and Jet2holidays has pushed out its restart date to July.
• Portugal’s president of tourism, Luis Araujo, has said that the UK’s decision to remove the country from green ‘safe’ travel status was disappointing. He says ‘our country is open and prepared to welcome any tourist and we have taken all the necessary precautions to ensure the safety of our visitors and residents.’
Other travel news:
• ACI Europe, which represents European airports, has said there could be “widespread chaos” at airports this summer if / when volumes increase, due to Covid-19 requirements.
• Air traffic management company Eurocontrol has said that European air traffic, reported as down 61% last month, is only scheduled to be down 43% this August.
• STR reports that US hotel occupancy in the week to 29 May was only down 4.2% on 2019. The figures were ‘skewed more to the positive because the 2019 comparable was the week after Memorial Day. Regardless, this past Saturday’s 83.0% occupancy level was the country’s highest since October 2019.’
FINANCE & MARKETS:
• Sterling at $1.4145 and €1.1626. Oil $71.40. UK 10yr gilt yield 0.79%. World markets mixed on Friday and into Monday with London set to open up around 4pts.
RETAIL WITH NICK BUBB:
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TRADING STATEMENTS & EVENTS:
Upcoming results are set out below:
• 8 Jun 21 DP Eurasia AGM
• Est 13 Jun 21 Barclaycard Consumer Spending report
• 15 Jun 21 Vianet full year numbers
• 22 Jun 21 Coca Cola HBC AGM
• 24 Jun 21 Bank of England MPC meeting
• 13 Jul 21 Pepsi Q2 numbers
• 23 Jul 21 Premier Foods Q1 update
• 27 Jul 21 Campari H1 numbers
• 27 Jul 21 Games Workshop FY numbers
• 3 Aug 21 Domino’s Pizza H1 numbers
• 5 Aug 21 Bank of England MPC meeting
• 10 Aug 21 Intercontinental Hotels H1 numbers
• 12 Aug 21 TUI Q3 numbers
• 18 Aug 21 Carlsberg H1 numbers
• 19 Aug 21 Rank FY numbers
• 22 Oct 21 Intercontinental Hotels Q3 numbers
• 26 Oct 21 Campari Q3 numbers
• 8 Dec 21 TUI FY numbers
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