Langton Capital – 2022-04-22 – PREMIUM – March Tracker, consumer confidence, WFH, AB InBev, XPF, Carlsberg etc.:
March Tracker, consumer confidence, WFH, AB InBev, XPF, Carlsberg etc.:
PREMIUM EMAIL – PLEASE DO NOT FORWARD:
A DAY IN THE LIFE:
Don’t you sometimes feel as though you’re working alternately for the tax authorities and for other quangos such as the FCA, producing documents that, though unlikely to be read, would get you into hot water if you didn’t supply them?
Because, groan, we do.
Anyway, it’s the end of a short but long-feeling week. The sun looks as though it’s trying to shine, so it just remains to say have a great weekend and on to the news:
COFFER CGA BUSINESS TRACKER – MARCH.
The most recent Coffer Peach Business Tracker concludes that the UK pub & restaurant industry ‘achieved solid growth from pre-COVID-19 levels in March’. However, the Tracker concedes that, with three years’ price increases in there, the difference between real and monetary performances is widening. It says ‘with high inflation hitting both margins and spending, hospitality’s recovery from COVID-19 remains fragile.’
• 4% like-for-like growth vs 2019 compares with the 3% growth seen in February and the 1% fall experienced in January.
• Bars, which tend to be wet-led, performed best in March with like-for-like sales growth of 8% ‘as consumers continue to seek high tempo and experiential visits’. Later-night venues have been the amongst the last to return to normality & a degree of novelty may be at play.
• The Tracker reports ‘restaurants were close behind with 6% growth, thanks in large part to flourishing delivery sales, while pubs were up 2%.’
• The point re delivery is well-made. Restaurants grew this markedly during lockdown and will now not want to surrender it. Pubs were largely unable to follow suit.
• The Tracker reports that ‘trading in London continues to lag well behind other parts of the country’. It says that, in London, ‘like-for-like sales inside the M25 in March were flat, compared to 6% growth beyond the M25.’
• CGA’s Karl Chessell says ‘two years on from the start of the pandemic and unprecedented turmoil in hospitality, these figures show managed groups are building back steadily. It’s particularly pleasing to see bars performing so well, as people return to late-night visits.’
Impact of inflation:
• CGA makes a good point when it says ‘however, like-for-like figures are well below inflation, and with soaring costs in energy, food and other areas hurting both operators and consumers, real-terms growth will be extremely challenging for some time.’
• Margins are not addressed in or by the Tracker. Whilst many sales prices have been hiked, they are arguably unlikely to have gone up.
PUBS & RESTAURANTS:
UK consumer confidence nears record low:
GfK has released its UK consumer confidence report for April saying that ‘consumer confidence [is] in freefall as Index crashes seven points in April to minus 38.’ It says that the headline score is just one point off its lowest on record. It says ‘all five measures were down in comparison to the March 25th announcement.’ GfK’s Joe Staton says ‘the cost crunch is really hitting the pockets of UK consumers and the headline confidence score has dropped to a near historic low.’
• He continues ‘the scores looking at the next 12 months for our personal finances at -26 and the general economy at minus 55 are worse than the 2008 financial crash. The personal finance score for the next year is also worse than the initial Covid shock in 2020.’ He adds ‘when rising inflation and interest rates meet low growth and declining incomes, consumers will understandably be extremely cautious about any spending.’
• Mr Stanton continues ‘there’s clear evidence that Brits are thinking twice about shopping, as seen in the tumbling Major Purchase Index – now is not considered to be a good time to buy. This is dire news for consumer confidence and with little prospect of any economic relief on the horizon we can only forecast further falls in the Index for the year ahead.’
• Looking at the measures in turn, GfK reports that ‘the index measuring changes in personal finances over the last 12 months has decreased six points to -19; this is 16 points worse than April 2021.’ It says ‘the forecast for personal finances over the next 12 months has decreased eight points to -26; this is 36 points lower than this time last year.’ Re the General Economic Situation, it says ‘the measure for the general economic situation of the country during the last 12 months is down nine points at -60; this is two points lower than in April 2021.’
• GfK wraps up a miserable set of numbers by saying ‘expectations for the general economic situation over the coming 12 months have dropped by six points to -55; this is 44 points lower than April 2021.’ It adds ‘the Major Purchase Index has decreased by eight points to -32 in March; this is 20 points lower than this month last year’ and says ‘the Savings Index has gone down by eight points to +10 in April; this is 12 points lower than this time last year.’
The EU is asking householders and workers to drive less and potentially to work from home three days a week in order to reduce reliance on Russian energy. Should such advice spread to the UK, it might lead to a stalling in what is already a hesitant return to the office.
Barclaycard Payments, which measures spending on plastic and which doesn’t therefore make any adjustment to reflect the decline in the use of cash, has reported that Easter bank holiday spend was up by 74%. This will come as news to most operators although, clearly, the use of plastic over the bank holiday could have been up by that much.
• Barclaycard says people were making the most of the sunny weather and the lack of restrictions. This is true but, as we are comparing with 2019, the comp period did not have any restrictions (of course) and the weather, if anything, was warmer then than it was this year.
• Undeterred, Barclaycard says ‘the sunny weather combined with the first restriction-free Easter weekend since 2019 lifted the spirits of Brits as they enjoyed days out and took supported businesses as they return to normal operations across the UK.’ It says ‘our data against the wider backdrop of concerns around the cost of living. As many Brits get back to work, businesses will be hopefully the recent spell of warmer weather returns in time for the next bank holiday in early May.’
The World Bank has warned that there could be a ‘human catastrophe’ as a result of current upheavals in the food market. it says food prices are up by 37% across some categories and it says that the impact is magnified for poorer people as they spend a higher proportion of their income on food.
Bloomberg Intelligence has suggested that plant-based foods could grow to a more than $162 billion market in 2020. Burger King is launching an “Even More Confusing Times” campaign to imply that its meatless meat tastes (almost) as much like meat as meat does.
• Restaurant Dive in the US suggests ‘QSR brands are shouldering a growing part of marketing the challenger product to consumers who are looking for food options that are better for their health and the environment. However, some marketing experts have warned against health- and sustainability-forward messaging, which Burger King is sidestepping with a campaign in support of “chicken nuggets that got no chicken… but taste like chicken.”
Further withdrawal from Russia. Anheuser-Busch InBev has said it ‘will sell its non-controlling interest in the AB InBev Efes joint venture and is in active discussions with its partner, Turkish Brewer Anadolu Efes, to acquire this interest.’
• It says ‘AB InBev’s request regarding the suspension of the license for production and sale of Bud in Russia will also be part of a potential transaction. AB InBev previously announced it is forfeiting all financial benefit as a non-controlling partner from the joint venture operations. As a result, AB InBev is de-recognizing the investments in AB InBev Efes and will report a 1.1 billion USD non-cash impairment charge in non-underlying share of results of associates as part of its first quarter results announcement.’
• AB InBev says it will continue to ‘support its employees, their families and the humanitarian relief efforts in Ukraine.’ It says it has ‘also introduced Chernigivske, Ukraine’s most loved beer brand, to many countries, including the UK, Germany, Belgium, France, Netherlands, Denmark, Austria, Poland, Italy, Colombia and Brazil with additional markets planned. All profits from the sale of Chernigivske will go to support humanitarian relief efforts and AB InBev is guaranteeing at least 5 million USD of support from this humanitarian initiative.’
XP Factory Plc (formerly Escape Hunt) has announced that it has made significant progress in its opening programme for its Boom Battle Bars.
• XPF says it ‘has made significant progress, completing the integration of Boom, expanding the UK footprint and further developing the site pipeline.’ It says there are now ‘11 sites trading, comprising two owner-operated and nine franchises, with a further 10 sites currently in build and scheduled to open over the coming months. Of these 10 sites, 7 are at or near build completion. Once opened, the enlarged estate of 21 sites will comprise 6 owner-operated and 15 franchise venues. Further sites are well progressed and expected to commence build over the summer and ensuing months.’
• The group says ‘progress so far provides confidence that the Board’s target of 27 open Boom venues by the end of 2022 will be comfortably met.’ It adds the ‘trading performance across both owner-operated and franchise sites is validating the Board’s box-economics expectations for both sales and profitability.’
• CEO Richard Harpham says ‘we are delighted at how well Boom Battle Bar has been integrated into the Group. It has been an extremely busy period for site development and we have an exciting run of openings in the coming weeks and months which position us well to deliver on our estate targets for the end of the year. The recent performances from our new Boom sites have validated our expectations for the site level profitability we believe is achievable. In addition, Escape Hunt performance has exceeded expectations for Q1, giving us confidence for the execution of our strategy as a whole.’
Neat Burger, which includes Lewis Hamilton among its investors, is to open its first US site in New York.
Carlsberg has updated on the hit it believes it will take as a result of its decision to exit its Russian business. It says ‘the divestment of the Russian business may take up to 12 months and will have multiple implications.’ It says re 2022 earnings expectation, the company had suspended its outlook but now says it can reinstate this. It says it believes it will see this year organic operating profit development of around minus 5% to plus 2%. It says ‘fully excluding the Ukrainian business in 2021 and 2022, the above guidance would change to: Organic operating profit development of around minus 1% to plus 7%.’
• Carlsberg cautions that it ‘must be emphasised that the earnings expectation is significantly more uncertain than usual, as the development of the war in Ukraine; continued uncertainty on input costs; the COVID-19 pandemic, including possible government actions, particularly in China; consumer sentiment; and the macroeconomic development may have significant implications for business performance during the remainder of the year.’
Nestle has said that rising costs will force it to raise prices again this calendar year. The maker of KitKat chocolate bars and Nespresso coffee capsules says sales in Q1 rose by 7.6%. it says ‘cost inflation continues to increase sharply, which will require further pricing and mitigating actions over the course of the year.’
Petrol forecourt business EG Group, whose owners, the Issa Brothers, now own ASDA, has said it will create 32,000 jobs globally over the next five years, most of them in the UK. It says most of the jobs will be added in its bakery chain Cooplands and in Leon, both of which it bought in 2021.
Tim Horton’s is to open its first site in London. it reports it will ‘continue its rapid expansion throughout the UK, with plans to open its first restaurant in the capital and double its estate across the country by the end of 2023.’
• Iconic Canadian brand Tim Horton’s says ‘having spent the last eighteen months successfully growing its drive-thru portfolio in key towns and cities, it will now open its first London site at Park Royal, later this year.’ Kevin Hydes, Chief Commercial Officer at the company in the UK says ‘surpassing the 50-location milestone has been a testament to the team and the hard work injected to build sustainable success since inception into the UK in 2017. Despite challenging times for the sector, our model has continued to prove its success and we are confident now is the right time to open in the capital and announce our updated growth strategy.’
• He adds ‘our plan is to continue growing the Tim Horton’s estate, both in London and nationwide, and along with this, we will likely trial new concepts to meet the needs of our ever-growing fanbase. We consider ourselves a real contender within the QSR sector and have ambitions to become the preferred brand of choice, no matter what occasion our guests are seeking to enjoy.’
HOLIDAYS & LEISURE TRAVEL:
Travel Weekly reports that travel over Easter was easier than might have been feared. It says that there were fewer delays than expected. It quotes the Advantage Travel Partnership as saying ‘generally, feedback from members over the weekend is that customers have sailed through, but some have had issues.’
Spain has relaxed its requirement for face masks to be worn indoors. The UK Foreign Office website says there is still a recommendation to wear masks in ‘enclosed public spaces such as shops, cinemas, bars and restaurants, at large events (e.g. concerts, sporting events), when in the company of people considered clinically vulnerable or high-risk and social distancing of 1.5m cannot be observed, at family gatherings, in any other enclosed communal spaces open to the public.’
City AM reported yesterday on ‘reports coming in that Spanish authorities are refusing entry to British nationals trying to enter the country from Gibraltar.’ It says ‘authorities at the border with Gibraltar demanded to see hotel reservations and evidence of onward travel, such as a return ticket or train reservation. Those who were unable to do so were refused entry into Spain.’
• It says ‘the development comes as Spanish authorities are stepping up controls on people from non-EU countries trying to enter the bloc via or from Gibraltar. The checks intensified earlier this week, various local media reported.’ It says ‘a number of travellers were also asked to show proof of funds for the duration of their stay in Spain.’
The WTTC reports that, if its recovery continues, travel and tourism will create almost 126 million new jobs globally in the next ten years. The sector could exceed its pre-pandemic peak by 2023 and is expected to recover to around $8.4 trillion – or 86.7% of its 2019 size – by the end of this year.
European aviation traffic levels are running at around 80% of 2019 levels.
The National Audit Office reports that around £400 million of taxpayers’ money was spent on government hotel quarantine restrictions. It says only 2% of passengers from red list countries tested positive for Covid-19.
Sonder Holdings Inc., whose shares are listed on NASDAQ, has said that it will open four new hotels in London. The company says ‘as a high-growth global hospitality company, we are excited to expand our unique design and tech-powered hospitality offering across the United Kingdom & Ireland.’
Elon Musk is reported to have raised $46.5bn towards his bid for Twitter. The money comprises $21bn of his own money with the rest coming in debt.
CNN is reported to be shutting its streaming service only weeks after its launch.
FINANCE & MARKETS:
Sterling down at $1.3024 and €1.2008. Oil lower at $107.19. UK 10yr gilt yield up 6bps at 1.98%. world markets heading lower yesterday and London set to open around 91pts lower as at 7am.
Consumer confidence numbers, see Pubs & Restaurants above.
RETAIL WITH NICK BUBB:
• Consumer Confidence Watch: After today’s gloomy 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 worst level was the -36 low seen in the early June 2020 “flash” report), but we now have a “third wave”… the “cost-of-living” crisis. The overall April 2022 index slumped by 7 points, from -31 to -38, which was much worse than the -33 expected by a Reuters poll of economists. GfK reported a sharp fall in consumers’ intentions to make ”major purchases” and Joe Staton, GfK’s Client Strategy Director, said in the press release that “This is dire news for consumer confidence and with little prospect of any economic relief on the horizon we can only forecast further falls in the index for the year ahead”.
• Today’s News: The big news today is that, out of the blue, Simon Arora, after over 17 years leading the B&M business, has announced that he intends to retire in 12 months’ time from his role as CEO and that a “succession process”, led by the Chairman Peter Bamford, will consider both internal and external candidates. The statement doesn’t mention Simon’s age, but we can inform you that he is only 52, although we don’t know what he plans to do post-B&M.
• Next Week’s News: As April draws, inexorably, to a close, the pace of company news picks up next week, kicking off with the ABF (Primark) interims on Tuesday. Wednesday brings the WH Smith interims and on Thursday we get the Sainsbury finals. We also hear from “white van man”, via the Howden trading update on Thursday and the Travis Perkins Q1 on Friday.