M&B Q1, Whitbread conference call, WFH, Pret, Scotland & other:

A DAY IN THE LIFE:

Lot of meetings yesterday – including quite a long one in the pub, in fact a very long one, Peroni £6.40 a pint, pale ale £6.00, significant financial damage etc – and a bit rushed this morning, hence a rather short intro.

However, to expand on the above slightly, we had the pleasure of using the Northern Line for the first time in a while last night. This reminded us that it’s claim, alongside that of the Central Line, to being the deepest, darkest and generally most cramped and claustrophobic Tube line is still a valid one.

Though it wasn’t that busy as it turned out and nor were the Kentish Town streets or the pub that we pitched up in. On to the news:

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MITCHELLS & BUTLERS Q1 UPDATE:

Mitchells & Butlers has this morning updated on Q1 trading and our comments are set out below:

Headline numbers:

• M&B reports that LfL sales for the 15wks to 8 Jan were down by 1.5%. It says that food sales were up 5.2% in the period and drink sales were down by 9.1%.

• Splitting the period, in the 8wks to 20 Nov, LfLs were up 2.7% and in the 7wks to 8 Jan, which included Omicron and Plan B, LfL sales were down by 6.0%

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WHITBREAD Q3 UPDATE – CONFERENCE CALL:

Following the release of its Q3 update, Whitbread hosted a conference call for analysts and our comments thereon are set out below.

Trading:

• Accommodation had been strong in the UK pre-Omicron but the pub & restaurant market was more challenging. There has been a ‘softening’ in bookings but it is ‘too early’ to give detail.

o The co believes its pubs are in ‘the value segment’. Says this didn’t bounce back as well as some other segments. Customers are an ‘older demographic’.

o However, the pub performance can’t be looked at in isolation as they do add to the REVPAR achieved by co-located hotels

• The group still believe that LfL REVPAR run rates will return to 2019 levels some time in the next financial year (to Feb 23). There may be some help from a decline in independents (and also inflationary price hikes).

• Central London still ‘very hard to call’. Co believes demand elsewhere will be strong. Re London, any ‘structural reduction’ in white collar travel as a result of WFH, could impact the Capital more directly.

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PUBS & RESTAURANTS:

WFH and move out of cities?

Whilst mortgage lenders have pointed to the race for space (in the countryside rather than in inner cities), The Guardian has said that talk of cities hollowing out has been overdone. It says ‘almost two years into the pandemic, the speculation about “the death of the city” have been proven wrong.’

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The consumer.

The Institute for Fiscal Studies reports that benefits and pensions may lag rises in the cost of living. It says that, because benefits are calculated using historic rates of inflation, most will rise by only 3.1% in April.

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Labour availability & cost.

Pret has become the latest operator to put up basic wages above £10 per hour. The Standard reports that staff were told on Tuesday that basic wages for its 8,000 staff would rise from £9.40 to £10.15. See also Deloitte survey in Finance & Markets.

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The Scottish government has announced that it is to provide a £9 million financial package for the domestic tourism sector. Tourism minister Ivan McKee says ‘we recognise that the public health measures necessary to limit the spread of Omicron have had a severe economic impact, especially for affected businesses in the hard hit tourism sector.’

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The Scottish Tourism Alliance has conducted a poll that suggests one in three Scottish tourism and hospitality operators at risk of collapse. It says around a quarter of operators have lost more than half of their bookings for Q1.

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Analysts in the US are questioning whether delivery can achieve profitability if it services the restaurant sector alone.

Consequences of Covid. Autotrader reports that the cost of used cars rose by nearly a third last year as buyers struggled to find new vehicles. Autotrader says around a quarter of second hand cars are more expensive than their new equivalent.

The MCA reports that Deliveroo, Just Eat and Uber Eats saw an increase in consumer spend over the festive period as consumers opted to eat at home, according to data from Cardlytics. Spend across takeaway platforms rose by 72% in the past year, compared with 20% growth seen by fast food chains directly.

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COMPANY & OTHER NEWS:

BrewDog has reintroduced its ‘All You Can Drink Jan’ offer as well as extending its two-for-one vegan Mondays offer to cover every day of January. Customers can claim unlimited refills of BrewDog AF (alcohol-free) beer on draught in its bars during January after buying a pint of any ‘Headliner’ AF.

Innis & Gunn is set to open its fifth Taproom, located in Glasgow’s West Nile Street later this year. The site will be the company’s second in Glasgow.

Tyne Bank Brewery’s Veganuary celebrations on 22 January will showcase plant-based traders and sustainable crafters from across the region with vegan street food, beers and drinks, and sustainable market stalls.

Per ONS data, the UK hotel sector performed better than the UK as a whole in Q3 2021, overall business investment in the UK fell by 2.5%, although it still grew by 2.6% on an annual basis. However, the hospitality industry remains 23.8% down on the sums invested in Q3 2019, and far off the £1.6bn recorded in the final quarter of that year.

Brett Fleming of Armit Wines has warned that there may still be further contraction of the UK market on the back of Brexit and Covid. Fleming pointed to the dismembering of Berry Bros & Rudd FM&V portfolio, which started following a review of the wholesale business in June 2020 as an example.

In the US, on-trade saw a strong build up to Christmas in the middle of December, with average spend on Christmas day up by around 116% compared to an ‘average’ day. Matthew Crompton, CGA Client Solutions Director, Americas, said there is reason to be confident that 2022 will be a good year for On Premise engagement and visitation. 

LEISURE TRAVEL & HOTELS:

Sky reports that former directors of Thomas Cook are to be formally cleared of wrongdoing after the conclusion of a probe into the company’s bankruptcy which lasted more than 2 years. Full details of the Insolvency Service’s conclusions were unclear on Wednesday, but one source close to the process said it had decided there was no basis for further action against the tour operator’s bosses.

Travel Weekly reports that media rumours suggest an imminent reversal of France’s ban on UK nationals. The Independent reported speculation that an announcement could come on Wednesday ahead of a relaxation of rules on Saturday.

The US CDC has praised the cruise industry for its collaborative approach to the restart of sailings, despite its current advice against cruising. CDC director Dr Rochelle Walensky indicated that the current Conditional Sail Order would not be renewed after its expiry on Saturday.

TfL will target one million speeding fines a year, as more than 623,000 prosecutions have taken place between 2020 and 2021. Simon Ovens, chief superintendent at the Met’s roads and transport policing command, said an additional 564 Police Community Support Officers will monitor speeding limits between 6am and 10pm.

The Wall St Journal reports that hotels are responding to the staffing shortage by cutting services. It says ‘some hotels are getting creative, such as attempting to extend the life of towels by placing single-use packs of facial wipes in rooms for makeup removal…other managers have sent staffers to nearby big-box retailers such as Target or Bed Bath & Beyond for last-minute purchases of sheets and feather pillows.’

FINANCE & MARKETS:

Deloitte’s latest survey of CFOs across the country has suggested that UK CFOs have their sights set on expansion. The ICAEW quotes the survey as saying that ‘expansionary strategies including the introduction of new products and services, development into new markets and the raising of investment are a greater focus now than at any time since CFOs were first asked about this in 2009.

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US inflation has hit 7% in December, its highest level for 40yrs. It is the third month in a row that inflation has topped 6%.

The US has said it will reduce or remove tariffs on British steel ‘when the time is right’.

Sterling mixed at $1.3708 and €1.1982. Oil price higher at $84.46. UK 10yr gilt yield down 3bps at 1.14%. World markets broadly better yesterday and London set to open up around unchanged as at 7am.

RETAIL WITH NICK BUBB:

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