Langton Capital – 2021-07-23 – GfK, delivery & takeaway, Covid passports, WFH, cruises & other:
GfK, delivery & takeaway, Covid passports, WFH, cruises & other:
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A DAY IN THE LIFE:
I don’t know if it’s nostalgia for the long lost days when Donald Trump was president, or whether it’s something – or somebody closer to home – but I was thinking of lies and lying the other day.
Because, like driving offences (careless driving, reckless driving, dangerous driving, manslaughter and murder), there must be some sort of scale at work and, in parallel, like a tree that falls in the forest when nobody’s watching, perhaps a lie isn’t even a lie if nobody finds out.
Rambling a bit here but surely all of us ‘lie’ when we say something that we believe to be true – but we’re wrong. AKA the: ‘are you a liar or an idiot’ position.
And some will ‘lie’ when they say things that they hope is true or just want very much to be true. These comprise optimists, naiveties, fantasists or nut jobs.
Others lie if they believe they’ll never be found out. In which case it simply didn’t happen but still others lie because it’s a default position and they have the dexterity to hold a number of contradictory statements in their head at any one time.
And these are a fascinating study because they maybe know that, even if they live to 100, they’ll never run out of new people to disappoint and, with that in mind, they’d better get cracking as soon and as often as possible. On to the news:
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CGA HOSPITALITY AT HOME TRACKER (comment on delivery & takeaway):
• CGA reports that delivery and takeaway sales in June this year are running at triple pre-Covid levels for restaurant and pub groups
• The Tracker concludes that ‘more than a third of managed groups’ sales’ now come from food delivered or taken away by customers
• CGA says ‘deliveries and takeaways remain a core part of managed restaurant and pub groups’ sales despite the return of eating-out.’
• It says that ‘sales in June were 225% higher than in June 2019—a drop on growth figures of 345% in April and 273% in May, reflecting the return of the majority of restaurants and pubs for the first full month of indoor service of 2021 in June.’
• The Tracker reports that ‘deliveries and takeaways accounted for 35% of managed operators’ total sales in June, with eat-in contributing the remainder (65%).’
• Both delivery and takeaway sales have risen, but CGA reports that delivery sales have risen four times as rapidly as takeaway. It says ‘the emergence of third party ordering platforms in recent years means the volume of deliveries now exceeds that of takeaways and click and collect orders.’
Further CGA comment:
• CGA says ‘the restaurant and pub delivery market has flourished during the lockdowns of the last 16 months, and while growth has slowed from the period of forced closures, it is going to stay a very big part of managed groups’ sales.’
• Karl Chessell continues ‘we can expect to see more people revert to eating and drinking out now that COVID restrictions have been eased, but some consumers will not want to give up their new order-from-home habits.’
• Mr Chessell adds ‘juggling the three elements of eat-in, take-out and third-party delivery is going to be a big operational priority over the remainder of 2021 and beyond. Those that get it right can maximise this revenue stream without diluting dine in sales.’
PUBS & RESTAURANTS:
• GfK has updated on consumer confidence in the UK saying that it rose to minus 7 in July and is edging ahead of pre-pandemic levels. The company says ‘GfK’s long-running Consumer Confidence Index increased to -7 in July. Two measures were up in comparison to the June 25th announcement, two measures were down and one stayed the same.’ It says confidence ‘has held firm or improved for six months in a row.’ GfK says ‘personal finance expectations for the next year remain strong and there’s a dramatic jump this month in our major purchase sub-measure with shoppers agreeing that now is the ‘right time to buy’. The healthy seven-point rise aligns with strong retail growth figures that reflect the gradual unlocking of the UK high street and release of pent-up demand as Brits hit shops, restaurants and venues.’
• Further comment. GfK says that ‘threats from increasing consumer price inflation, COVID variants and rising infection figures, the looming end of furlough and the Job Retention Scheme, could put the brakes on this rebound. Consumers are aware of these pressures judging from the latest fall – from -2 to -5 – in how they view the general economy in the year ahead.’
• Christie & Co reports that the pub market remained buoyant in the first half of 2021 in its mid-year review of the UK pub and restaurant markets. The report also noted that there was a challenging backdrop of a third national lockdown and prolonged period of operating restrictions. For the UK restaurant market, the last six months was a very tough period for operators, with the decline in the value of the eating out market was expected to reverse in 2021 but this is now likely to happen by the end of 2022.
• Key headwinds in the first half of the year included the ongoing restrictions as well as the shortage of staff returning to the workforce, due to a combination of Brexit and furloughed workers leaving their jobs for alternative work. On the other hand, the takeaway and delivery sector continued to boom and investors remained most attracted to freehold opportunities in rural and coastal tourist-led locations, which capture trade from staycations
• Per the Guardian, the ‘pingdemic’ staff shortages are leading to supermarkets having trouble keeping shelves stocked. The government is being urged to include supermarket staff, lorry drivers and other frontline workers on a list of those exempted from self-isolation rules if they get tested daily.
• Per the BBC, the British Retail Consortium urges the government to ‘act fast’ to allow fully vaccinated retail staff or those who have tested negative for coronavirus to go to work. One supermarket, Iceland, has revealed almost 4% of its staff, about 1,000 employees, were currently off for Covid-related reasons.
• Further comment: The Pingdemic is getting real in that supermarket shelves are starting to empty. This happened in March last year and led to hoarding. The government appears to be keen to avoid hoarding this time around and, because the rules are due to change on 16 August at any rate (no self-isolation for people with two jabs, daily tests instead), critics may be pushing on an open door in saying that the changes should be brought forward. Food riots would be best avoided. The Co-op has said it was ‘running low on some products’, whilst Iceland said it was having to shut some shops but it urged customers not to panic buy. Minister Kwasi Kwateng said the government was ‘concerned about instances of shortages, we are looking at the supply chains of critical industries and we are reviewing that situation.’
Covid passport confusion.
• There is no clarity as to which venues are to be covered and which are not. In addition, Labour has said that it will not vote with the government to force Covid passports onto younger consumers wishing to visit nightclubs. Government rebels may be sufficient in number to vote down the proposals. The Huffington Post reports that PM Boris Johnson has told the 1922 Committee that he was trying to persuade younger adults to getting jabbed and that the passports might not be necessary by the time that the end of September comes around. Such wooliness does not make planning for the venues in question very easy.
Working from home:
• Return to the office. City AM reports that ‘younger workers in London are more eager to get back to the office compared to their older counterparts.’ It quotes data from Land Securities, which ‘shows 70 per cent of London office workers are already coming into the office at least one day a week’ with a third of worker now back to their pre-Covid routines. Workspace says 77 per cent of workers aged between 18-34 in the capital are looking forward to coming back to the office, compared to half of staff aged 35 and over.
• Separately, Sir Howard Davies of NatWest has said that his own company may never return to the routine work-weeks seen pre-Covid. Bloomberg quotes the NatWest chairman as saying ‘the days when 2,500 people walked in through our office door at Bishopsgate at 8.30am and then walked out again at 6pm, I think that is gone.’ He adds ‘we are looking at having a minimum expectation of a few days a month where people will definitely have to be in the office, and then it will vary by teams, but I suspect there won’t be many people doing five long days in the office.’
• Bank of England deputy governor Ben Broadbent has said that the bank should continue to stimulate the UK economy and maintains that the uptick in the rate of inflation in the UK is temporary.
• Further comment. Given the labour shortages out there and the upward pressure on wage costs, this may be more a hope than an expectation. Various MPC members have made mildly contradictory statements in recent days. Mr Broadbent says that physical bottlenecks, production shortages, international trade issues and wage pressures should all abate. He says ‘while we know it [inflation] is going to go further over the next few months, I’m not convinced that the current inflation in retail goods prices should in and of itself mean higher inflation 18 to 24 months ahead, the horizon more relevant for monetary policy.’ This is interesting as far as it goes but the average household, if it runs out of money in the short run, doesn’t necessarily believe it’s immaterial because things will have settled down in two years.
• Shake Shack (in the US) has said that it is to ‘invest’ $10m in its employees. It says this will go towards sign-on and retention bonuses meaning that the ‘bonus’ will presumably be given simply for not resigning. Restaurant Dive in the US also quotes Chipotle as saying it is not having staffing issues mainly because it has jacked up wages. Restaurant Dive also reports that Shake Shack ‘is already offering $1,000 hiring bonuses for managers and has extended its $500 hiring bonus for hourly restaurant workers hired between June 10 and August 31 in many locations’. It says Shake Shack ‘is giving managers a monthly subscription allowance for up to 12 month that can be put toward cell phone bills, entertainment or other services “that enrich their mental, physical, or emotional wellbeing.”’
Company & other news:
• Hotel Chocolat Group has reported that it has successfully placed 11.3m new shares in the company at 355p to raise around £40m gross. The new shares being issued represent approximately 9.0 per cent. of the existing issued ordinary share capital of the Company. CEO Angus Thirlwell says ‘the £40m growth capital raised today will be invested in our fast-growing business, furthering our aim of becoming a global digital-led chocolate brand. I’m delighted that our issue was oversubscribed, demonstrating the support Hotel Chocolat enjoys with its investors.’
• Premier Foods has reported that it has made a ‘very encouraging start to the year [it is a March year end] with Q1 trading and full year adjusted PBT at top end of expectations.’ As anticipated, sales in the quarter to June are down on the same period last year (by 13.2%) due to the stocking up by consumers at the beginning of the pandemic. Sales on the same quarter two years ago are up by 6.3%. International sales are up 17% on two years ago.
• Further comment: Some companies and sectors performed strongly during the pandemic and many food producers are amongst them. The company has used the windfall to pay down debt (which will have permanent benefits) and, quite sensibly, is comparing its performance with that of two years ago. CEO Alex Whitehouse says ‘we have made a very encouraging start to the year, with Quarter 1 sales at the top end of our expectations, as our brands again benefited from the introduction of new products and continued marketing investment. When compared to two years ago, our branded sales increased by over 9% with grocery brands up 12%, continuing the strong momentum of recent years.’ Mr Whitehous says ‘international also performed particularly well, building on the very strong gains from last year, growing by +17% on a two year basis, as we continue to build sustainable, profitable overseas
• UK Hospitality Scotland has called on the Scottish Government to permanently relax planning restrictions on outdoor seating, with the current ‘grace period’ due to expire in September.
• BrewDog reported a £13.1m pre-tax loss in 2020 as sales of its craft beers online during Covid-19 pandemic lockdowns failed to offset the impact of bar closures. Co-founder James Watt said it was ‘without a doubt the toughest year in our 13-year history’ despite the company reporting revenue up 10% to £238m.
• A plant-based food concept is opening in Buck Street Market, according to the owner of Camden Market. Clean Kitchen, founded as a dark kitchen during the first Covid lockdown, will span two floors and have up to 54 covers.
• Domino’s Pizza Inc in the US has reported Q2 sales up 3.5% in its home market with international sales up by more than 10% despite a ‘very difficult staffing environment.’ The company added 238 net new units in quarter.
• Moët Hennessy has launched its first ever Tequila, Volcan De Mi Tierra. It says this is one of only a small number of Tequilas to have its own distillery, which sits at the base of the Tequila volcano.
• Hotel Chocolat has announced that it ‘notes recent press speculation and confirms that it continues to assess funding options, which may include a possible equity issue, to increase the Company’s long term sales capacity to capitalise on faster growth.’ Sky says that it believes the company will ‘announce a share sale to raise in the region of £30m in the coming days.’ It says ‘Hotel Chocolat’s leading institutional investors are understood to have been sounded out about the proposal in the last few days.’
HOTELS & LEISURE TRAVEL NEWS:
• Analytics firm Cirium reports that Greece ‘most recovered’ European destination this summer. It says that, this coming weekend, some 95% of 2019 level flights will land in the country. Spain and Turkey come in at 66% of 2019.
• The UNWTO says that international tourist arrivals to the end of May 2021 were 85% down on the same period in 2019, and 65% down on 2020. It says there is a slight upward trend evident.
• Carnival’s German cruise business, AIDA Cruises, has added voyages to the end of its existing summer season.
• Twitter yesterday evening reported higher than estimated revenue growth with advertising revenue up 87% on the same quarter a year ago. The group’s shares rose around 5% in after-hours trading.
• Snap yesterday also beat Wall Street estimates for users and revenue in Q2. Shares rose by 10%. Revenue rose by 116% in the quarter to $982m (well ahead of expectations of $845.9 million.)
FINANCE & MARKETS:
• The Treasury is to sell up to 15% of NatWest over the next 12 months in order to part fund the government’s deficit. The Treasury says shares “will only be sold at a price that represents value for money for taxpayers”.
• The ICAEW comments on the UK’s £2.2 trillion government deficit, pointing out that, due to higher inflation rates, the cost of debt service for the quarter to June was £18.1bnm up £6.0bn on Q1 this year.
• The ICAEW says ‘public sector net debt has risen by £420bn since the first lockdown in March 2020, making the public finances more vulnerable to changes in interest rates and reducing the fiscal headroom available to the Chancellor as he seeks to navigate the economy out of the pandemic.’ There are rumours that this year’s Budget could be delayed.
• Sterling higher at $1.3756 and €1.1688. Oil price higher at $73.52 and UK 10yr gilt yield down 3bps at 0.58%. World markets mixed yesterday with London set to open up by around 20pts as at 7am.
RETAIL WITH NICK BUBB:
Consumer Confidence Watch: After today’s latest survey from the widely followed monthly GFK Consumer Confidence index, it’s worth remembering that the record -39 index low seen in July 2008, during the financial crisis, was not tested during the pandemic crisis…The overall July 2021 index edged up from -9 to -7 (its highest since Feb 2020, versus the -36 low seen in the early June 2020 “flash” report), a tad better than the poll of economists by Reuters forecasting a smaller rise to -8. However, polling was done between July 1st and 14th, ie well before the start of the “pingdemic”. In the press release, a seven-point jump in a measure of people’s willingness to make big purchases showed consumers were responding to the lifting of coronavirus restrictions on non-essential shops in May, Joe Staton, GfK’s Client Strategy Director, said: “However, threats from increasing consumer price
Planet ONS Watch (Part 2): We flagged yesterday that in “the real world”, as per the BRC-KPMG figures for June (the 5 weeks to July 3rd), underlying Retail Sales were strong again last month, despite somewhat tougher comps from a year ago, and “seasonally adjusted” life was also good on that strange parallel world, the Planet ONS (aka the Office of National Statistics in Newport), via their official Retail Sales figures…City economists (who still, unaccountably, treat the dubious-looking ONS figures as the gospel truth) will be happy with the 0.5% recovery in month-on-month seasonally adjusted sales volumes (including petrol), driving a year-on-year increase of 9.5%. The year-on-year, non-seasonally adjusted sales value growth of 9.3% fell back from the 22.3% growth in May, despite strong Non-Food sales recovery of 29%, with Food sales only 0.9% up (despite the much-hyped boost from the
Today’s News: Today’s company news cupboard is bare, but the bid battle timetable for Morrisons was clarified yesterday: following the publication by Morrisons of its scheme circular in relation to the recommended offer from Fortress, which included notice of the shareholder meetings to approve the offer on 16 August, the Takeover Panel ruled that CD&R must by 5.00 pm on Aug 9th, “put up or shut up”. CD&R has plenty of firepower to raise its previous 230p offer and the closing Morrisons share price of 265p last night indicates that the City expects the 254p Fortress offer to be beaten…
BDO High Street Sales Tracker: Given the uncertainty about the impact of the “pingdemic” on the economy, today’s BDO High Street Sales Tracker for medium-sized Non-Food chains, for w/e July 18th, looks reassuring. We would still flag, however, that the BDO index is just an unweighted average of the percentage changes in the sales of their reporting retailers (and it is skewed to Fashion), so we don’t think it should be taken too literally. But BDO Fashion LFL sales were still up by c30% on last year (with Online Fashion sales up 25% and Store Fashion sales up by c40%), whilst Total BDO LFL sales (including some Homewares and Lifestyle retailers, plus the Fashion retailers) were up by c21% (up by c35% in Store sales and up by c16% in Online sales).
Next Week’s News: Tuesday brings the final results from Games Workshop, Moonpig and In the Style, plus the interim results from CapCo and Vivo Energy, as well as the latest monthly Nielsen grocery sales figures. In the evening the Apple Q3 results are published in the US. On Wednesday we get the Music Magpie interims, as well as the Ted Baker and Card Factory AGM’s. Thursday then brings the Pets at Home Q1 update, the Dr Martens Q1 update/AGM and the B&M AGM.