Langton Capital – 2021-06-14 – PREMIUM – 21 June, trading, staffing, BrewDog, JDW, Revolution Bars, Saga & other:
21 June, trading, staffing, BrewDog, JDW, Revolution Bars, Saga & other:
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A DAY IN THE LIFE:
Spare a thought for your shoes.
Mine pretty much fell off my feet on Friday but, after perhaps 2yrs and c3.5 million steps, they had done pretty well.
And they have to be given some credit for preventing the rest of me from coming into too close a proximity with things that I don’t really want to think about too much; ancient bubble gum, dog mess and my feet to name but a few.
So, overall, they did pretty well and fully deserved the heroes send-off that I gave them; viz a one-way slide down the rubbish shoot.
Anyway, here’s a poser for you: If it takes four or five seconds to fill a kettle and perhaps 30 seconds to fill a toilet cistern, how long did it take to fill the Med (via the Zanclean Flood) when the wall at Gibraltar holding back the Atlantic failed? Answer above Pubs, below:
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Somewhere between two and 10,000 years. Or, indeed, a figure either side of those two numbers because, at the end of the day, the scientists are just making educated guesses (as indeed they are in other areas of our lives at present).
PUBS & RESTAURANTS:
Threat to 21 June:
• Government sources have told the Guardian that the lifting of all lockdown restrictions in England is likely to be delayed for up to a month from the planned date of 21 June.
• UKHospitality warns that the government must stick to its roadmap and lift all restrictions on 21st June or risk further jeopardising the future of thousands of hospitality businesses. UKHospitality CEO Kate Nicholls said ‘due to the amazing efforts of the NHS in rolling out vaccines, it is time to lift the restrictions that are crushing businesses.’
• The Night Time Industries Association says that over the past year the Night Time Economy has seen the loss of over 700,000 jobs, billions of pounds in revenue has left thousands of businesses, artists and creatives in financial hardship. The NTIA has urged the government to allow clubs, venues and events to open, saying ‘we will not survive if we are not able to open our doors.’
21 June removal of restrictions:
• Judging by the pre-briefings and mood-music, a delay to the removal of restrictions on 21 June is all but certain when Boris Johnson speaks later today. Sky quotes observers as saying that a delay to lifting lockdown is “inevitable” and it goes on to say that a narrow majority of the public would agree with that decision. Hospital admissions are rising at present (even given current, more modest lifting of restrictions) but deaths, thankfully, are only edging up slowly. An Opinium poll of 2,002 UK adults found that 54% thought the lifting of restrictions should be postponed, up from 43% two weeks ago, says Sky.
• Trade reaction. Although there has been a definite move towards a more cautious approach over recent days, hospitality trade bodies have said that any moves to delay un-lockdown would cause further damage to the sector. The Times reports ‘hospitality leaders have reacted with fury’ and says ‘more than 5,000 music gigs by artists including Olly Murs, Beverley Knight and McFly are also expected to be cancelled at a cost of £500 million.’ UKH says a four-week delay to the end of restrictions will cost pubs, bars, hotels and restaurants £3 billion in lost sales and £4 billion to the economy overall, reports The Times. A further 200,000 jobs in the sector could be lost.
• Langton comment: The PM has said that the roadmap to un-lockdown had to be irreversible – but he never promised that there could not be delays. The delay hasn’t been confirmed yet – but it could (and probably will) be later today.
• Perhaps hopes and expectations re ‘freedom day’ had been inflated to such a degree that any divergence from the current path was bound to be taken badly. The is a) understandable but b) may have put undue pressure on the government to stick to a timetable that was beginning to look risky if not actually reckless.
• The Times says that on Saturday ‘Johnson’s “quad” of senior ministers — Rishi Sunak, Michael Gove and Dominic Raab — discussed ways to “sugar-coat” the delay by finding ways to enable more events to go ahead this summer.’ There could be some tweaks re the number of guests allowed at weddings and it is likely that the ‘expectation management’ plans have been in action for some time.
• As the fight to ‘save’ 21 June has not been lost yet, there may be some reluctance to move on to the next stage – which will be to ask for more compensation and support. The BCC, however, has said that chancellor Rishi Sunak may ‘need to’ delay the tapering of the furlough scheme from July 1. There will also, shortly, be calls for the 5% rate of VAT on food sold by hospitality operators to be extended and for the suspension of business rates to be similarly pushed forward.
Any silver lining?
• No silver lining, as such, but it’s worth remembering that everything is relative. Some operators are currently performing rather well whilst others are shut. For the better-performing operators, any sustained pressure could ‘help’ (in rather a grim way) capacity to remain lower when lockdowns finally do finish.
• The risk may be that well financed outsiders (if they exist) could come into the industry and clear up further down the line. An external threat (think the Spanish galleons arriving at the end of Apocalypto) could make competition between existing operators somewhat moot.
• But do such outsiders exist? Probably, yes – at least in spirit if less so in reality. There are always operators willing to gamble OPM (other people’s money) on a throw of the dice. Some of these would-be operators may secure funding and there are others, perhaps operators themselves, who could get involved. Timing will be key. As will site and management selection. There will be plenty of bad units available with the wrong staff in the wrong location paying the wrong rents. Jewels will be harder to come by.
• The Drinks Recovery Tracker by CGA shows that LfL average sales were up by 41% and 55% on Sunday and Monday of the long weekend (30 and 31 May), compared to the equivalent week in 2019.
• The Scottish Beer & Pub Association (SBPA) predicts that Scotland fans will buy 360,000 pints when Scotland play Czechia in the Euros on Monday.
• KAM Media and the BBPA conducted a survey showing that 85% of pub-going football fans told us that the current restrictions will negatively impact their experience of watching the Euros. Half of respondents said they would be more likely to watch Euro 2020 at a pub if all restrictions on pubs are lifted.
Staffing issues and labour:
• The Daily Mail says hospitality bosses are saying ‘customers are desperate to get back in the pub – it’s our staff who are staying away.’ There were stories last week of operators cutting sessions (say Monday lunch etc) due to staff shortages. The Mail says ‘while business owners are desperate to make up for months of lost trading due to lockdown restrictions, a lack of available staff means many are having to operate their companies under reduced hours – such as remaining closed on Mondays or shutting early at weekends.’ The Telegraph puts it colourfully, saying operators are ‘out of frying pan into the fire as pubs and restaurants scramble for staff.’
• Langton comment: In the US, Restaurant Dive reports that recent official data re the number of job openings available in hospitality show ‘how deep the labour shortage is getting, especially for the foodservice sector, which makes up a bulk of the combined industries. With quit rates so high, foodservices are likely in a perpetual state of hiring, meaning they are spending time and money recruiting and training a lot of employees.’ Dive says that large QSRs could pay around $20m to $40m on these costs. Similar problems are being experienced in the UK where Brexit and the return home of hundreds of thousands of EU staff has exacerbated the situation.
Companies & other news:
• The Times reports that ‘BrewDog is in danger of losing its ethical business certification in the wake of allegations of a toxic work culture.’ BrewDog says that it will learn and adapt after members of staff alleged bullying, hypocrisy re green issues and an overall climate of fear at the Scottish operator.
• BrewDog has appointed a director as its first chairperson. Blythe Jack is MD at BrewDog shareholder TSG Consumer Partners. Co-founder James Watt says ‘we have appointed our first ever chairperson to lead our board. That will be Blythe Jack and we are delighted she will be leading our business at board level. This is effective immediately.’
• Revolution Bars Group has announced the result of its Open Offer saying that ‘a total of 105,001,866 New Ordinary Shares will be issued at the Issue Price (subject to the conditions noted below), of which 5,001,866 New Ordinary Shares will be issued pursuant to the Open Offer and 100,000,000 New Ordinary Shares (the “Firm Placing Shares”) will be issued pursuant to the Firm Placing.’ It says the Firm Placing Shares are not subject to clawback and were not part of the Placing and Open Offer.’
• JD Wetherspoon is reported to have transported staff from other parts of the country to work at one of its pubs near to one of the G7 Summit sites. The company said earlier in the month that it was experiencing some staffing shortages at seaside sites, which it pointed out was normal at this time of year. The company also says ‘we can confirm that four members of staff have tested positive for Covid-19 at the Towan Blystra on Cliff Road in Newquay.’ It adds ‘in accordance with NHS guidelines, these employees are required to self-isolate for the requisite ten-day period.’
• The SBPA has ‘produced practical guidance for pubs [North of the Border] to help ensure screenings are a success and customers and staff are kept safe during the tournament.’ The aim is ‘to ensure a safe environment for both customers and staff, whilst enabling people to enjoy the much-missed freedom of visiting the pub to watch the football once more.’
• US Trade journals suggest that perhaps 3% of restaurants have permanently shut in the US.
• Some reports of shortages of garden furniture and sharp price rises. This will impact both the on-trade and home BBQs.
• In the US, New York City’s City Council is considering a bill that would allow restaurant surcharges of up to 15%. Restaurants would only be allowed to use these surcharges if they pay all of their employees the city’s minimum wage of $15 per hour before tips.
• Over 500 Stonegate pubs will be showing every match from the Euros, with customers having the chance to win 15 pairs of tickets via the company’s We Love Sport app.
• The Wall Street Journal reports that McDonald’s systems in the US, Taiwan and South Korea were hacked according to the company, impacting customer and employee information.
• Brown-Forman, owner of Jack Daniel’s, reports that increased sales of Ready-To-Drink beverages helped boost sales. The company reported Q4 net sales of $812m, up 14% yoy.
• MusicMagpie reports revenue up 3.4% to £72.5m with EBITDA up 14.8% to £6.2m in the first reporting period for the company since its £208m flotation in April. The company said growth was driven by a growing trend of consumers adopting circular economy models to recycle and reuse items.
HOTELS & LEISURE TRAVEL:
• Saga has updated on Q1 trading saying that it has made ‘further progress against strategic priorities.’ The company says that its travel business is ‘due to restart from 27 June 2021, subject to government restrictions.’ This could, on balance, be postponed. CEO Euan Sutherland says ‘Saga has made further strong progress, delivering against all the pillars of our turnaround plan.’ He adds that ‘in Travel we are clearly focused on the safe return to service and ensuring we can satisfy the significant pent-up demand from customers.’ The CEO concludes ‘Saga is a strong brand with loyal customers and great people, and we will continue to innovate, driving change in our markets and strengthening our customer relationships. Looking ahead, while we are mindful of continued uncertainties around COVID-19 and the outlook for the consumer economy, we are confident we have the right strategy and
• Supercity Aparthotels has secured a new site in the city of York. The site is due to open in 2023.
• Travel Weekly reports on holiday enquiries saying ‘demand for this summer has flattened and consumer confidence fallen further following Portugal’s removal from the green list.’ Operators report ‘an immediate drop off in sales’.
• Premier Inn owner Whitbread could face some opposition this week at its AGM (and Q1 trading update) on 17th. Sky reports that ‘one of the City’s most influential voting services, IVIS, has red-topped Whitbread’s remuneration report ahead of its annual meeting next Thursday.
• Travel Trade Gazette reports that Celebrity Cruises, which is owned by Royal Caribbean, has confirmed two guests have tested positive for Covid-19 onboard Celebrity Millennium.
• The CAA reports that air passenger numbers in the UK fell by 223 million to around 74 million. The airport showing the largest drop was Cardiff, down 86.7%, followed by Glasgow Prestwick, which saw a decline of 85.8%. Heathrow was down by 72.7m.
• STR reports that, as more hotels reopen in the US, occupancy stats are being restrained. STR’s Market Recovery Monitor shows that revenue per available room for the week of June 5 was just 77% of the level achieved during the same week in 2019. This is the highest level of the past 65 weeks.
• STR reports that the UK is leading the hospitality recovery in Europe with a rebound faster than in China or the US. Robin Rossmann, STR managing director, said ‘In the space of two to three weeks seven-day occupancy for open hotels reached 60%-65% [in the UK].’
• Following the Scottish government’s decision to ban passenger vessels from calling into the country’s ports, Saga has had to change two UK cruises on Spirit of Discovery.
• Airline leaders have been told that the European Commission is committed to a resumption of international travel within the EU from July 1.
• Stobart Air has ceased trading and is in the process of appointing a liquidator. The company operated regional flights on behalf of Aer Lingus.
FINANCE & MARKETS:
• ONS data shows that the UK economy grew 2.3% in April, its fastest monthly growth since July last year. It says High Street rose on the reopening of non-essential shops and says there was also more spending in pubs, cafes and restaurants. Construction output was modestly lower. Chancellor Rishi Sunak said that the data were “a promising sign that our economy is beginning to recover”.
• The NIESR says ‘another month of rapid service sector growth in April was driven by the re-opening of sectors affected by Covid-19 restrictions, resulting in a 2.3 per cent growth in monthly GDP almost in line with our May Tracker forecast. We expect the recovery to have continued in May and June, forecasting monthly growth of 1.5 per cent and 0.9 per cent respectively.’ It says ‘like March, April was a month of rapid growth in services output, as anticipated, driven by the re-opening of non-essential retail, outdoor hospitality and near-full attendance in schools. May will follow a similar pattern, as further restrictions are lifted, as will June if the final step of the roadmap goes to plan. But falls in construction and production, which were less affected by the 2021 lockdown, remind us that our focus should now be on the prospects for the economy in the second half of the year,
• The CEBR says that the economy will take a £1.6bn hit if ‘Freedom Day’ is delayed by four weeks. It says hospitality, perhaps unsurprisingly, will suffer the largest hit. The CEBR says ‘the Government needs to acknowledge that most of the economic pain will once again be borne by those businesses that have been among the hardest hit by the pandemic so far – pubs, restaurants, nightclubs and many other businesses in the hospitality and cultural sectors are desperate to reopen.’ It concludes ‘the longer restrictions are required, the higher the risk of an insolvency wave later in the year.’
• Sterling mixed at $1.4108 and €1.1657. Oil higher at $73.06. UK 10yr gilt yield down 5bps at 0.71%. World markets better on Friday & London set to open up around 10pts.
RETAIL WITH NICK BUBB:
• Saturday’s Press and News (1): The front-page headlines of the Saturday papers were mostly focused on the rumours that the Government will delay the June 21st re-opening of the economy: the Telegraph said, uncompromisingly “June 21st unlocking called off”, whilst the Daily Mail flagged “Summer of freedom on hold till July” and the Guardian ran with “End of lockdown set to be delayed by up to a month”. However, the Times went with “EU leaders to threaten Johnson with trade war” and the FT ran with “Biden wins backing from G7 leaders to “carry on spending””.
• Saturday’s Press and News (2): In terms of Retailing and other stories, the Naked Wines results on Friday didn’t get the coverage we expected (perhaps overshadowed by the revelations of a “toxic culture” at the trendy brewing company BrewDog), but many of the stockmarket reports picked up on the near 10% fall in the Naked Wines share price, with the Daily Mail quoting our view that investors should have been reassured by the continued sales growth. There was quite a bit of coverage of the news that the Online cycling business Wiggle has been bought by a German sports retailer Signa and the combined group has been floated in the US, via a SPAC vehicle valued at over $3bn, with Lex column in the FT comparing it with THG, given the tech software side of the business. The FT also noted that Frasers and Boots are amongst a small group of UK retailers yet to agree terms to pay unpaid rents
• Sunday’s Press and News (1): The headlines on the front pages of the Sunday papers were rather varied: the Sunday Telegraph went with Covid and “Fears that restrictions could be in place until spring”, the Mail on Sunday ran with the latest Royal row and “Queen’s war on Sussex L.A. spin machine”, whilst the Observer highlighted that “Brexit bust-up torpedoes PM’s bid to showcase “global Britain”” and the Sunday Times said “Ban ministers from lobbying for five years”.
• Sunday’s Press and News (2): In terms of Retail stories, the Sunday Times continued its campaign against JD Sports with a prominent article about the attack on its executive pay by the advisory group Glass Lewis ahead of the JD Sports AGM (“JD Sports blasted over “inappropriate” bonuses”). The Sunday Times also had a snippet about the news that the Issa brothers are to raise £1.6bn by selling off the freeholds of the Asda distribution warehouses. The Sunday Times also noted that a finish-at-home meal-kit business called Dishpatch has raised £10m for expansion and that the wealthy owner of discount chain Home Bargains, Tom Morris, has bought a £50m farm estate in West Lancashire for tax planning purposes. The regular Sunday Times business column by James Timpson had a strong headline: “Treating suppliers well is the foundation of our success”. The Sunday Telegraph noted that the last
• Sunday’s Press and News (3): In terms of all the Economics comment columns in the Sunday papers, we would, as usual, highlight the column by the Sunday Times Economics correspondent David Smith (“A red-hot housing market adds fuel to the inflation market”), in which he noted that “the next few months will be a time of great nervousness for those worrying about prices”. And we would also give a shout-out to the column by the veteran Economics commentator William Keegan in the Observer (“Now the G7 is having its energy sapped by Brexit”), in which he flagged that “The Northern Irish fiasco is not the only fault line in the workings of Brexit”.
• Today’s News: The much-delayed Ted Baker finals (for y/e Jan) have finally been announced today and although the underlying loss of £59m isn’t quite as bad as feared, there isn’t much else to shout about, with Q1 sales (for the 12 weeks to 24 April) nearly 20% down, handicapped by the poor performance of “our retail stores in metro cities and travel retail locations” (which accounted for 36% of pre-COVID global store revenues) and reduced Online promotions. However, Rachel Osborne, the Chief Executive Officer, says “We are making good progress against our strategic transformation plan and Ted Baker is increasingly well placed to take advantage of the significant growth opportunities ahead of us”.
• This Week’s News: The Boohoo Q1 update is out tomorrow (ahead of the Boohoo AGM on Friday). The AO.com finals are on Wednesday, along with the Motorpoint finals. Thursday brings the Halfords finals, the Dr Martens finals and the Sainsbury ESG event/presentation to investors and analysts. Then on Friday we get the ONS Retail Sales for May and the Tesco Q1 update. There should also be more news this week on the progress of the IPO’s of two more Online retailers, Made.com and Victorian Plumbing…