Mobility data, consumer squeeze, WFH, menus, recovery & margin etc.:

A DAY IN THE LIFE:

Welcome to another five-day week, one in which I’m beginning to worry for my sanity.

That because I have about four Eurovision songs rattling around in my head and I can’t get them out.

Something about wolves and bananas and there are some very disturbing visuals, mostly a blended mix of what actually happened a week ago last Saturday alongside Will Ferrell’s wonderful film Eurovision: The Story of Fire Saga.

So where are Radiohead, Muse, even The Beatles and that lot when you need them?

Anyway, it’s Monday and that’s going to need some work. On to the news:

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PUBS & RESTAURANTS:

Consumer squeeze:

Once again, this is all over the papers. And with good reason. In brief, the former BoE governor Mervyn King has called for Britons to brace themselves ahead of a ‘very unpleasant period’ with ‘considerable’ interest rate hikes expected. Lord King said the current situation will take ‘tough action. And it’s not a pleasant period through which we’re going to have to go.’

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Consumer group Which reports that hundreds of staple grocery items had already risen in price by more than a fifth over the two years prior to the recent surge in food inflation caused by Russia’s invasion of Ukraine.’ This accords with the view of the Institute for Fiscal Studies, which says that inflation is impacting poorer demographics (who spend a larger proportion of their income on food than do others) more acutely than other consumers.

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The Daily Mail reports that ‘Britain faces summer of shortages on supermarket shelves after just one in four seasonal crop pickers turn up to work in some areas.’ It says ‘the impacts of Brexit, with a large number of seasonal crop pickers traditionally coming from the EU, Russia’s invasion of Ukraine and delays in issuing temporary visas have been blamed.’

The BBC quotes E-on UK boss Michael Lewis as saying that up to 40% of his company’s customers will be in fuel poverty by October. He has called on the government to do something to help. Lewis says ‘we do need more intervention in October and it has to be very substantial.’

Menus:

Lumina Intelligence’s Menu Tracker reports that prices on menus have grown by 3.1% but the number of menu items has increased as operators try to entice customers while balancing rising inflation rates. On average, the price of a dish on operator menus is £6.97 plus 2.5% since February 2022. Prices at pubs and bars rose by 3.1%, while chain restaurants climbed by 2.2%. These numbers seem relatively modest.

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Working from home:

The Times reports that Toby Courtauld, CEO of GPE, says that those who predicted the ‘death of the office’ have been proved ‘plain wrong’. In the year to March, GPE agreed a record £38.5 million of new leasing deals, with tenants on average paying nearly 10 per cent above what bosses expected this time last year. Occupancy or the lack of it has a bearing on revenues for city-centre-based operators whose customer base comprises office workers. Ultimately, it should affect rents.

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Costs & margin:

The MCA reports that data is the key to managing food and drink inflation, according to David Read, chairman at Prestige Purchasing. Read wrote ‘The most immediate challenge of course is to hold the line on margin. Simply saying no to reasonable price increases may be a workable tactic in more stable times, but won’t be the most effective route now.’

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Sector recovery & performance:

Lloyds Bank UK Sector Tracker shows that tourism and recreation businesses continued to recover in April, but inflation and rising costs are already starting to have an effect. The tracker showed there were early indications that inflation has started to erode purchasing power and dampen consumer demand.

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CGA has updated on drink consumption for the week to 14 May saying that a ‘sunny Saturday puts drinks sales in growth for fourth week in a row.’ It says that total drink sales were up by 1% on the same week three years ago. In real terms, that is a marked decline. CGA says that ‘cool weather at the start of the week meant sales were down by between 8% and 15% from Sunday to Wednesday. However, they rose in line with the temperatures in the second half of the week, peaking with 19% growth on Saturday. As well as the sunny weather, pubs and bars were boosted by screenings of football’s FA Cup Final.’

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Low and no-alcohol options:

KAM reports that 22% of customers who come to a venue not wanting alcohol will typically default to ‘tap water’, meaning that having a robust low and no alcohol offering can unlock sales growth. Last year only a third of customers rated the range of low and no alcohol options in pubs and restaurants as ‘good or very good’.

Other news:

UKH has maintained that hospitality can be a great levellers and it says that, if given sufficient support, the sector can help will the government’s levelling up agenda. CEO Kate Nicholls says ‘despite more than two years of setbacks, the sector is ready to get back on track and lead the way towards sustainable recovery and resilience.’

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The Daily Mirror has suggested that 90 million extra pints of beer will be sold over the Jubilee weekend. That may depend very much on the weather. The Mirror goes on to report that strikes are threatened at one of AB InBev’s main breweries in the UK.

COMPANY NEWS:

Jamie Oliver has accused the Prime Minister of using the cost of living crisis as an ‘excuse’ for not tackling obesity after the government’s U-turn on halting ‘buy one get one free’ offers on junk food.

Purity Brewing in Alcester and Grainstore Brewery in Oakham have taken the overall Gold awards in SIBA’s Midlands Independent Beer Awards in Cask and Keg beer.

Tata Consumer Products reports annual revenues growth of 7.1% to $1.3bn, driven by the performance of its licenced Starbucks business in India which saw 76% annual revenue growth. Tata Starbucks, operates around 270 stores across India.

Pret is reported set to open in India via a venture with Reliance Industries’ retail subsidiary, Reliance Retail. The chain will operate in a market currently dominated by Cafe Coffee Day and Starbucks, which have more than 500 and 250 stores respectively.

Tortilla is to open its 50th site in the UK, in Portsmouth.

HOLIDAYS & LEISURE TRAVEL:

P&O reports that its ships carried just 19% of their capacity last week, transporting an average of 34 lorries per journey, as commercial customers boycott the organisation. On some crossings P&O’s biggest vessel, The Spirit of Britain, which is capable of carrying 180 lorries, only had 10 lorries on board. A survey by YouGov has found evidence of an ‘instant and dramatic’ negative impact on the brand’s public perception.

Spanish authorities have confirmed that the country is to ease Covid entry rules ahead of the summer peak season. The country will now allow unvaccinated adults to enter if they show a negative test.

Moody’s has reported that Expedia Group’s intention to redeem $1 billion in notes, including all of the outstanding 3.6% $500 million notes due 2023 and 4.5% $500 million notes due 2024 is credit positive. It says it ‘does not materially degrade the company’s strong liquidity, and significantly lowers leverage to near 5x.’

FINANCE & MARKETS:

Huw Pill, chief economist at the Bank of England, has said that higher interest rates have ‘further to run’. He says the Bank’s MPC is forecasting double digit inflation in Q4.

Former Bank of England governor Mervyn King says central banks have fuelled inflation.

The US has said a trade deal with the UK is at risk if the UK government breaches the Northern Ireland Protocol.

The Nationwide has said that house prices may fall due to the headwinds that the market is currently facing.

The ONS has reported that higher sales of alcohol and tobacco were largely behind the rise in overall UK retail sales in April.

The High Pay Centre has reported that the gap in pay between company executives and other workers is set to widen this year. It fell during Covid.

Sterling up at $1.2544 and €1.1842. Oil price higher at $113.42. UK10yr gilt yield up 2bps at 1,88%. World markets better on Friday & London set to open some 49pts higher as at 6.30am.

FORTHCOMING NEWS:

A quieter week, this week. We have On the Beach H1 numbers tomorrow along with the same from West End landlord, Shaftesbury. Whitbread is hosting a teach-in on Tuesday and we have FY numbers from pork giant Cranswick.

On Wednesday, Hollywood Bowl reports H1 numbers and on Thursday, we hear from Ted Baker and Wickes hosts its AGM. AG Barr’s AGM is Friday. See also Trading Statements on the right.

RETAIL WITH NICK BUBB:

• Nick is taking a well-earned break, back later in the week.