Pubs code, footfall, delivery, stock outages, WFH, tax rises & other:

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A DAY IN THE LIFE:

Try as we might, we can’t get away from our DNA.

That’s kept us from joining the 99% of living organisms that are extinct but it can be manipulated as those social media guys that came up with the Like button and others such as the blue circle, green circle etc when you’ve got messages etc, know only too well.

Because, whether you try to rise above it or not, you get a little buzz from the above and, in the way that schoolkids of old may have looked at Wisden (remember that?) or those FA books that came out at the end of the season that were full of stats, you can now look at your statistics on your various social media networks and boy, that’s a giant rabbit hole if ever there was one.

Indeed, it can mean that you fail to see the wood for the trees and, though both content and marketing are important, there’s a reason why Harry Kane is worth more than the shirt he wears and that’s the way it should be.

Anyway, we’re grinding to the end of a long-feeling short week. Have a good weekend and on to the news:

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PUBS & RESTAURANTS:

Trading:

• The British Beer & Pub Association reports that it yesterday submitted its response to the Consultation on proposals to amend the Pubs Code. It says that, whilst ‘pubs across the nation have suffered during the pandemic, it has also demonstrated the strengths of the leased & tenanted model and in particular the partnership between the pub owning company and tenant or lessee.’ The BBPA says the help provided by property owners ‘shows that the leased and tenanted model is working well and that at this time wholesale changes to the Code which could undermine the relationship between pub company and tenant or lessee would be unnecessary and obstructive.’

• The BBPA says ‘through the pandemic, pub-owning companies provided £285 million in reduced or cancelled rent to tenants who couldn’t trade because of lockdowns, or whose trade was reduced because of restrictions.’ It says ‘risk and reward is shared between tenant & lessee and pub company’ and ‘a pub company will still give significant support to a tenant or lessee to help them run and grow their business.’

• Further comment: The BBPA contrasts the above with the position that independent pubs and those leased from commercial landlords have found themselves, where their interests and those of their property owner are not aligned. It says such operators ‘would generally not have had access to anywhere near the same level of support during the pandemic. Likewise, as widely reported, the casual dining sector did not receive rent cancellations or reductions from institutional landlords like those given by pub owning businesses.’

• The industry could do without further disruption and any fanning of the flames of antagonism. These had died down markedly as many independent operators, who had been critical of the tie for many years, may have either regretted moving to free of tie leases (which can be brutal in hard times) or may now appreciate the benefits of the tie if they haven’t made the move. The BBPA says ‘the pandemic has shown the true merits of the leased and tenanted pub model.’ It adds ‘the partnership between tenant or lessee and pub owning business has never been stronger. The value and support received on a tie agreement has really come into its own during Covid. It is vital that the Pubs Code supports the long term viability of the model.’

• UKH’s Kate Nicholls comments in City AM that al fresco dining should be left on the menu for operators in London. City AM says ‘the extension, and proposed permanent retention, of streamlined pavement licensing was something we heartily welcomed when it was announced back in July. Since then, it has proved a lifeline for hospitality venues all over London and the country.’ It says that supportive measures going forward would include ‘measures such as facilitating pavement licences at a local level.’

• Springboard reports that footfall to shopping destinations were 18.6% lower than in August 2019, with bricks-and-mortar retailers still struggling to recover. However, August’s footfall level was 20% ahead of what was seen in summer last year. Diane Wehrle, marketing and insights director at Springboard, said ‘Brits chose to stay home for the summer which gave a welcome boost to high streets’. However, central London continued to suffer from the lack of office workers and overseas tourists with shopping visits down by 38% on 2019.

• Further comment. A partial, perhaps 50% recovery in the shortfall seen last year feels about right. The $64,000 question, however, remains: is this it or will footfall continue to edge up, albeit at a slower rate? We would see a further recovery as likely but, with department stores closing & the return to the office fitful, this may be gradual and, at the end of the day, not total

Delivery trends:

• In California, assemblywoman Lorena Gonzalez proposed legislation that would require food delivery companies to provide customers and restaurants with itemized cost breakdowns of third-party fees and commissions charged on each transaction. Gonzalez said ‘We’ve seen reports of restaurant owners losing money on food delivery app orders because of hidden fees from companies like DoorDash, UberEats and GrubHub’.

Shortages & pricing:

• Coca-Cola Europacific is facing supply chain pressure as it reported a shortage of aluminium cans and a squeeze on lorry driver numbers.

• The HGV driver shortage will inevitably lead to price rises, according to the boss of Iceland, with almost 50,000 drivers leaving the roads in the last two years.

• The Times reports that the shortage of workers is worsening saying that ‘employers created almost 200,000 new jobs last week as the struggle to secure workers continued to weigh on businesses.’ The paper is quoting comments made by the Recruitment and Employment Confederation, which said that a further 193,000 vacancies were posted online, taking the total number of active, in its estimation, up to 1.66 million. It says ‘the figures suggest that recruitment challenges will persist.’ European Union workers leaving Britain during the pandemic and high levels of economic inactivity, as well as the furlough scheme, mean that the pool of workers is diminished.

• JDW chairman Tim Martin has said that “strenuous efforts” are being made to link beer shortages with Brexit. The company has recently been suffering from a lack of some beer brands across a number of pubs. Mr Martin says the beer shortage is due to industrial action at the breweries and warehouses that would normally be responsible for the company’s supplies.

• Further comment. It is hard if not impossible at this stage to disaggregate the causes of the many and various labour and product shortages that are holding back the economy. However, as a number of factors (such as the pingdemic and, hopefully, the pandemic itself) fall away, whatever is left may be mostly to blame. Mr Martin says the UK can let in more HGV drivers, should it choose to do so. It has always had this ability.

• Sky quotes Molson Coors, which produces Carling and Coors, as saying the company had been ‘hit by the HGV driver shortage’. It says ‘while overall our availability is good, there are intermittent pockets of pressure in our supply network that are unfortunately affecting a number of Wetherspoons pubs.’ It adds ‘we’re working around the clock with our customers and third-party logistics partners to ensure we minimise any impact to our customers.’ Carlsberg Marston’s said it ‘remains an incredibly challenging time’ and says ‘like many other brewers in the UK, we remain impacted by the ongoing shortage of qualified HGV drivers and urgent government intervention is required to address this in the immediate term.’

Demand – driven by the money in your pocket:

• In what will be another breach of his party’s 2019 election manifesto, the PM is expected to bow to pressure and announce a rise in national insurance payments to fund social care per The Times and The Daily Telegraph. Health Secretary Sajid Javid is pushing for a 2% increase while Chancellor Rishi Sunak is arguing against any increase of more than 1%. Either number would take money out of the pockets of would-be consumers.

• Further comment. The temptation would be to allow inflation to mitigate the hit and watch as companies gave in to demands for higher wages due to take-home pay having fallen. Indeed, it might be politically expedient to increase the minimum wage in order to compensate staff. But, as business would be quick to point out, this would be the shortest and most temporary of fixes as it would hit margins, encourage price rises and bake inflation into the system.

• The papers above would appear to have been briefed. In a move that could see him box himself into a corner, Business Secretary Kwasi Kwarteng reiterated the promise not to raise NI when he told Sky News in August ‘that’s what it says in the manifesto, I don’t see how we could increase national insurance.’ He gave himself a bit of room to break election promises when he added ‘but you know things have been very flexible over the last 18 months, we’ve lived through an unprecedented time, we’ve been spending huge amounts of money that we never thought was possible and it’s up to the chancellor and the Treasury, and the wider government, to decide a budget.’

The future of working from home?

• The Telegraph quotes a KPMG survey that says ‘bosses of the world’s biggest companies have dramatically changed their minds about the future of the office, with four in five saying they have no plans to cut their companies’ physical footprint post-pandemic.’

• Further comment. KPMG finds that 86% of respondents say they will hold onto their existing workspaces. This sounds like (and is) a high number but, if turned around to suggest that 14% are going to cut, it doesn’t sound so good. Furthermore, holding onto existing workspaces might still cover an exit when the lease expires.

• On the other hand, the public sector is also a big employer and Treasury civil servants in the UK have been ‘told they can work from home forever’. The story, interestingly also reported by the Telegraph, says the ‘proposals are an embarrassment for Rishi Sunak, who has championed the drive to get private sector staff back to their desks.’

• Further comment: They may also throw some grit into the wheels of smooth running and cooperation between nos10 and 11 Downing Street as PM Boris Johnson has said that he would like to get the ‘bustle’ back into town centres. Treasury job adverts say that “most Treasury employees will be working a hybrid pattern” despite the lifting of Covid restrictions. As mentioned previously, where people works, matters, because it also tends to dictate where they will spend their money.

Company & other news:

• The British Retail Consortium says that food manufacturing in the UK is under such strain due to staff shortages that some production may have to move out of the country. The group warned that Christmas would be ‘incredibly challenging’.

• Diageo has opened the Johnnie Walker visitor experience, allowing tourists to visit an eight-floor attraction for the world’s best-selling Scotch whisky, in Princes Street, Edinburgh.

• Taco Bell plans to open a second Nottingham city centre restaurant, with this one located in the Victoria Centre shopping mall. 

• Nespresso is reported to be trialling drone delivery of coffee capsules to some customers in Tel Aviv-Jaffa, Israel.

• Dutch Bros Coffee has filed for an IPO with the SEC in New York. Bloomberg has suggested that the company could be worth as much as $3bn. The company is the fourth largest coffee-focused chain in the US, behind Starbucks, Dunkin’ and Tim Hortons. It has around 470 stores in 11 states.

HOTELS & LEISURE TRAVEL NEWS:

• Growing consumer confidence and sales over the bank holiday weekend have been driven by the latest traffic light update, adding seven countries to the green list. Steve Cox, sales manager at Premier Travel, reported an increase in bookings, said ‘Forty-five per cent of last week’s business converted on the Friday and Saturday’.

• Independent data showed that the number of UK holidaymakers to Spain fell 40% this summer due to Covid travel restrictions, with international arrivals into Spain in July and August half of pre-pandemic 2019 levels.

• Figures from the International Air Transport Association show that demand for air travel showed ‘significant momentum’ in July but remained far below pre-pandemic levels (down 53.1%). Willie Walsh, Iata’s director-general, said ‘Domestic traffic was back to 85% of pre-crisis levels, but international demand has only recovered just over a quarter of 2019 volumes.’

• Holiday park developer Actually Parks is working with industry consultancy Sutton Hospitality to deliver a new lodge project near the village of Wombleton which will see 29 new lodges built.   

OTHER LEISURE:

• WhatsApp has been fined €225m by Ireland’s data watchdog for breaching privacy regulations, relating to an investigation about whether WhatsApp had been transparent enough about how it handles information. WhatsApp said it disagrees with the decision, and the severity of the fine, and plans to appeal.

• Reuters reports that Reddit is looking to hire investment bankers and lawyers for an initial public offering in New York. It says the company was valued at $10bn in a private fundraising round last month. Quoting one of the sources, it mentions an intended IPO valuation of ‘more than $15bn’. The company makes money through advertising and reported $100m in such revenue in Q2, up almost threefold on the same quarter in 2020.

FINANCE & MARKETS:

• Sterling stronger at $1.383 and €1.1645. Oil higher at $72.98. UK 10yr gilt yield down 2bps at 0.68%. World markets broadly better yesterday but Far East down in Friday trade & London set to open down around a point as at 7am.

RETAIL WITH NICK BUBB:

Signet Watch: The US jeweller Signet (which owns the UK chains of H Samuel and Ernest Jones) reported bumper Q2 results yesterday (for the 13 weeks to July 31st), with overall LFL sales up by 97%. The UK business now only represents c7% or so of total group sales, but it kept it’s end up, with LFL sales 95% up versus last year (up c18% versus 2 years ago)…

CMA Watch: We said yesterday that you might have thought that the new panel assembled by the wretched CMA to reconsider its negative view of the acquisition by JD Sports of Footasylum would take a more relaxed view of the situation, but, alas, it was not to be…And it has been pointed out to us that three of the 4 members of the review panel were actually the same as the original panel! The panel was still chaired by the telecoms consultant Kip Meek and still included the economic consultant Paul Muysert and the consumer/finance consultant Clare Whyley and the only change was that one lawyer (Susan Hankey) was replaced by another lawyer (Paul Hughes). We are sure these fine “consultants” have done their best to provide an objective view of the proceedings, but anybody with some commercial acumen could have seen how bizarre the painfully laboured CMA judgment was and we doubt that any of
the hapless panel members will be boasting on their CVs in the future about their involvement with the incredibly protracted JD/Footasylum case…

BDO High Street Sales Tracker: Today’s BDO High Street Sales Tracker for medium-sized Non-Food chains, for w/e August 29th, is again reassuring, after the continued strong growth seen through the rest of August. We should again highlight 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 the strong recovery sector of Fashion), so it shouldn’t be taken too literally, but it tells a story of further decent Non-Food sales growth last month. Despite stronger comps, BDO Fashion LFL sales were nearly 25% up on last year (with Store Fashion sales up by c35%), whilst Total BDO LFL sales (including some Homewares and Lifestyle retailers, plus the Fashion retailers) were up by c15% (up by c24% in Store sales and up by c12% in Online sales).

Next Week’s News Flow: The BRC-KPMG Retail Sales figures for August are out first thing on Tuesday, closely followed by the Ted Baker Q1 update. Wednesday then brings the Dunelm finals and the Halfords trading update/AGM. The Morrisons interims are still scheduled for Thursday (along with the Mothercare AGM), whilst the CD&R/Morrisons bid prospectus is due at the end of the week.