Gregg’s, Competitive Socialising, confidence, BK UK, ROO, holidays etc.:

PREMIUM EMAIL – PLEASE DO NOT FORWARD:

A DAY IN THE LIFE:

I’m not sure that Smart Meters are good for your mental health.

Of course, your mental wellbeing might be considered incidental. Holing it below the waterline might just be collateral damage in the mission to get people to consume less electricity but, as you watch that little meter tick up and work how much it costs you to boil a kettle, to keep the fridge on for an hour or two when there isn’t much in it and the rest, I’m not at all sure that it isn’t quite important.

So much so, in fact, that I’ve decided, to give the gizmo a good talking to and throw a tea-towel over it on the basis that, as I was always told, if it’s got nothing nice to say, it should say nothing at all.

And if that kind of behaviour is good enough for ostriches, which aren’t extinct and which have been around for 20 million years or so, it should be good enough for me. On to the news:

PUBS & RESTAURANTS:

Consumer finances:

Consumers need to both have the inclination and the ability to spend. Confidence (see yesterday’s email) will not have been helped by the current political shenanigans. As regards the ability to spend, Moneyfacts reports that a typical two-year fixed rate that had a rate of 2.34% at the start of December was now priced at 5.75%.

• This will clearly take cash out of people’s pockets. Roughly 100,000 people a month come to the end of a fixed deal and often re-mortgage, first-time buyers sign up to fixed deals and around 1.5m homeowners are on variable or tracker deals. All of these consumers will be seeing pressure on their disposable income due to the higher rates.

• Whilst the staggering of consumers coming out of fixed mortgages may slow the impact of higher rates on spending in total, it will have a very material impact on the 100,000 or so people each month who have to pay much more on their mortgage.

Levels of activity:

S4Labour reports on what it calls a ‘shocking September for hospitality’, saying ‘hospitality growth faltered last month with sales down by nearly 7% versus the same period in 2021…’

• S4Labour says ‘the biggest contributor to this figure was food sales, which saw a drop of over 12.5% this year.’ It adds ‘London saw an increase in turnover of nearly 9%, albeit, largely owing to a modest base point in 2021, when much of the Capital was still experiencing low footfall as a result of at-home working.’

• Richard Hartley, Chief Innovation Officer at S4labour, adds ‘these are a sobering set of figures. This is the first significant indicator of a change in out-of-home eating and drinking habits and is likely to be causing shockwaves through the industry.’

Looking at footfall more generally, Springboard has reported that footfall in the full week to last weekend was up 3.4% on 2021 but was down 2.3% on 2019…

• Springboard reports ‘all of the rise was driven by a bounce back in activity on Monday, when there was a significant drop in footfall in the week before last due to the bank holiday on the day of Her Majesty the Queen’s funeral.’

• It says ‘in contrast – footfall declined on Tuesday following a rise in the week before last when people had gone back to work after the bank holiday. From Wednesday onwards, footfall returned to a more normal pattern.’

• London was up on Monday but down on the week as a whole. Springboard says ‘these results, together with a drop in activity in Springboard’s “Central London Back to the Office” benchmark, suggests in increase in working from home last week.’

Other news:

Alcohol impact zones. Poppleston Allen reports that Liverpool City Council are consulting on whether to vary or remove the existing Late Night Levy. This consultation follows news that Nottingham City Council removed their Late Night Levy.

Trends in the US. A Toast Survey in the US finds that 39% of restaurants have been tracking the price of key ingredients and 38% have changed the number of food suppliers they use in response to rising prices. Some 36% of respondents said they have increased pricing while 31% reduced the size of their menu offerings…

Staff costs: It’s still competitive out there. Lidl is paying more and Curry’s is reported to have increased staff pay, this time by around 3.5%, for third time in just over a year

The mini-Budget: U-turns may damage confidence. Prior to the announced reversal of the planned tax cut for people earning over £150,000 a year, foodservice analyst Peter Backman commented that, for most consumers, the tax benefits they were to receive would be dwarfed by the impact of rising interest and mortgage costs.

Red tape: UK Hospitality has welcomed moves by government to cut red tape…

• CEO Kate Nicholls says ‘we are delighted the Government has listened to our calls to cut the burden of red tape on businesses. The Prime Minister’s plans to exempt medium-sized (classified as those with between 50 and 500 employees), as well as small businesses from reporting requirements and future and reviewed legislation will be a significant boost for thousands of operators in our sector and others.’

Company rescue reports accountants Mazars as saying that the number of construction companies in danger of collapse had risen by 54% over the previous three months…

• This matters because construction is an industry that both takes on and shed labour at a fast pace. Companies in danger are likely to cut back on hours or staff numbers or both.

Mixed moves on the markets, both up and down. Deliveroo up 5%, Hostmore up 5%, DP Eurasia 12%. Saga down 5%, Just Eat down 7%, Carnival down 7%, Cineworld off 8% and Tortilla down 33%.

COMPANY NEWS:

Gregg’s has updated on Q3 trading and says it is ‘trading in line and [its] full year expectations [are] unchanged.’ The co says total sales were up 14.6% for the 13 weeks to 1 October 2022 and adds that ‘company managed shop like-for-like sales [were] up 9.7% for the 13 weeks to 1 October 2022.’

Gregg’s reports that 90 net new shops have been opened in the year-to-date (106 openings less 16 closures) and it continues to expect around 150 net shop openings in 2022. Gregg’s had 2,271 shops as at 1 October 2022. There is ‘no change in cost inflation outlook for the year’ and the ‘full year outcome [is] expected to be in line with our previous expectations.’

• Gregg’s reports ‘as expected, year-on-year growth moderated in August given the particularly strong ‘staycation’ effect seen in 2021, however, momentum returned in September.’ It says ‘we closed our shops on 19 September for the funeral of Her Majesty The Queen and this impacted reported LFL sales growth for the third quarter by around one percentage point.’

• Regarding the outlook, Gregg’s reports that ‘the outlook for cost inflation for the year remains consistent with our previous guidance of c.9% overall like-for-like cost inflation in 2022 and we now hold an appropriate level of forward purchasing cover in respect of our fourth quarter requirements for key food and energy commodities.  We also hold significant energy cover for the first quarter of 2023, with average costs expected to be below the level of the recently-announced price cap.’

• Gregg’s says it ‘continues to trade well in an environment where cost pressures are significant and our outstanding value-for-money positioning is ever-more important to consumers. There remains considerable uncertainty in the economy as a whole but we continue to trade in line with our plan and currently expect the full year outcome to be in line with our previous expectations.’

Competitive Socialising Ltd, which owns Swingers, has reported full year accounts to 26 December to Companies’ House saying that revenue in the year rose to £14.4m from £4.3m in the prior year. The co reports a loss before tax of £6.6m (2020: loss £3.4m) and shareholders funds have declined to minus £1.6m from a positive £4.3m in the prior year. During the year, ‘Swingers launched its first U.S. venue in Washington DC, and has performed strongly since opening. A second Swingers U.S. site opened in New York on 17th June 2022…’

• The company says ‘as of August 2022, all venues are trading strongly. The London venues are on a full year run rate of £18m, Washington DC is on a run rate of $12m (£9m) and New York is on a run rate of $25m (£20m).’ it adds ‘the board continues to manage the Group’s cost base despite significant macroeconomic cost pressures but is well placed for growth over the coming years. The company has a pipeline of new locations in the US and the UK.’

• Competitive Socialising says ‘the Group’s trade has exceeded expectations following the lifting of all restrictions in relation to COVID-19. Whilst the introduction of further restrictions would pose a level of risk, the Group has successfully mitigated such risks to this point.’ It says it ‘maintains a strong cash position and the board estimates that the Group could continue to operate for a period in excess of 13 months.’ This is important in determining whether the accounts should be produced under the Going Concern principle.

• Regarding repairing the balance sheet and fund raising, the company reports ‘a group reconstruction occurred on 20 August 2021, whereby Competitive Socialising Group Limited, a new company incorporated on 27 May 2021, acquired the entire share capital of Competitive Socialising Limited as a share-for-share exchange.’

• It reports that ‘the ultimate equity holdings in the net assets of Competitive Socialising Limited were unchanged by this transaction’ and says ‘following this initial combination, there was a subsequent transaction on 22 August 2021 whereby the entire share capital of Competitive Socialising Limited was transferred to Eagle 2 Limited as a share-for-share exchange, and then transferred again to Birdie 3 Limited as a share-for-share exchange. Following this transaction, Competitive Socialising Group Limited owned 100% of the share capital of Eagle 2 Limited, Eagle 2 Limited owned 100% of the share capital of Birdie 3 Limited, and Birdie 3 Limited owned 100% of the share capital of Competitive Socialising Limited.’

• Yes, quite. It says ‘the ultimate equity holdings in the net assets again remained unchanged, and therefore Competitive Socialising Group Limited continued to opt to prepare its consolidated financial statements using the merger accounting method’ and says ‘there have been no other significant events affecting the Group since the year end.’

• Cash is obviously king and funds will have likely been needed at some point during the current year.

Burger King UK has acquired 74 Burger Kings from its second largest franchise partner, Karali Group, increasing BKUK’s directly owned portfolio to 266 restaurants, half of its 533 strong UK store estate. BKUK plans to expand its total UK estate to over 700 restaurants by 2026….

• BK UK CEO Alasdair Murdoch says ‘the acquisition of Karali – the largest consolidation BKUK has made – marks an important milestone for the business, bringing more restaurants under our ownership, enhancing value and driving operational efficiencies. We believe that we have a strong expansion pipeline and are well positioned to take advantage of the clear market opportunities ahead.’

• Mr Murdoch says ‘as one of the longest standing franchise partners, Karali’s dedicated team have ensured Burger King stores continue to best serve our customers while achieving impressive growth. We look forward to welcoming our new colleagues to the core BKUK team and delivering on the exciting growth plans for the business.’

Deliveroo has opened its first physical store, Deliveroo Hop, near Oxford Street in London…

• The Daily Mail rather unkindly says ‘just two customers turn up to order food at delivery giant’s new Oxford Street supermarket within first 90 minutes of doors opening.’ It says the new site will sell 1,750 grocery items supplied by its official provider, supermarket giant Morrisons.’

Former Whitbread managing director Phil Birbeck has taken over from Chris Hill as CEO of RedCat Pub Company. Executive chairman and founder Rooney Anand said ‘Phil’s experience of building and leading strong teams, creating great customer experiences and delivering results will be important as we move into the next phase of the RedCat journey.’

Diageo has acquired Mr Black, an Australian premium cold brew coffee liqueur brand. Diageo had purchased a minority stake in Mr Black in 2015. Co-founder, Tom Baker, will remain involved with Mr Black, working alongside Diageo to build on its success.

Downing has acquired The Pub People Group from its management team – Andrew Crawford and Kevin Sammons – and merged it with its existing investment in Autumn Pubs Ltd. Pub People’s estate of high-quality food and drink pubs is based in and around Nottingham, Derby, Chesterfield, Sheffield, and Lincoln.

Per MA, Skinner’s Brewery has entered into administration, saying ‘Our strong hope is that a buyer can be found and that the brewery in some form will continue to be part of life in Cornwall for many years to come.’

Coca-Cola’s partnership with Molson Coors is set to launch a range of Topo Chico canned cocktails in 2023, following a line of hard seltzers launched last year.

Tortilla shares fell by 33% yesterday as the group reported rising sales but increased margin pressure on the back of multiple rising costs.

HOLIDAYS & LEISURE TRAVEL:

EasyJet boss Johan Lundgren warns that more airlines are set to collapse as the winter low season takes its toll…

• Mr Lundgren said ‘I would have thought there were going to be more failures than mergers and takeovers this year.’ He cited Romanian carrier Blue Air, which has suspended flights until October 10 amid discussions with potential investors, lenders and its government.

Norwegian Cruise Line is to remove all Covid-19 testing, mask and vaccination requirements from today.

OTHER LEISURE:

Tesla reports that it delivered a record 343,830 vehicles in Q3. However, the amount was still short of Wall Street forecasts, which ranged between 358,000-371,000 vehicles. Tesla is attempting to move away from its end-of-the-quarter delivery pushes and instead prioritise a steadier approach throughout the quarter.

TikTok reports that it has increased its turnover in Europe to $990m from $172m in just one year. Pre-tax losses were reported to Companies’ House to be $896mn, up over a third on the prior year.

FINANCE & MARKETS:

Markit has reported its UK Manufacturing Purchasing Managers Index for September saying the month ‘saw the downturn in UK manufacturing output extend to three months, as companies cutback production in response to declining new order intakes.’ The numbers was 48.4 in September, up from 47.3 in August but below the flash estimate of 48.5…

• Markit  says ‘manufacturers linked lower production to a reduction in new work intakes.’ It sways ‘the level of new business declined for the fourth month running, albeit to a slightly weaker extent than in August.’

• S&P Global says ‘the downturn in UK manufacturing continued at the end of the third quarter, meaning the goods producing sector looks set to have acted as a drag on GDP.’ It adds ‘disappointingly, exports continue to fall despite the more competitive exchange rate.’

• S&P says ‘there was also less positive news on the price front, with rates of inflation in input costs and selling prices both picking up in September, linked in part to import costs rising due to the weaker pound.’ It concludes ‘with existing headwinds from the cost-of-living crisis likely to be exacerbated by the current volatility in financial markets, growing economic uncertainty and further increases in borrowing rates, the industrial sector is likely to remain in the doldrums during the coming quarter to add to deepening recession risks.’

• The much larger Services PMI is released on Wednesday.

Sterling stronger on government climb down at $1.1318 and €1.1507. Oil up at $89.29 and UK 10yr gilt yield down another 14bps at 3.95%. World markets better yesterday and London set to open up some 52pts as at 6.30am.

RETAIL WITH NICK BUBB:

• Today’s News: If the bears thought that even Greggs would be hit by the slump in consumer confidence, they would be mistaken, because today’s Q3 update (for the 13 weeks to Oct 1st) is in-line and full year expectations are unchanged, despite operating cost pressures. LFL sales in company-managed shops were up by 9.7% in the period: “as expected, year-on-year growth moderated in August given the particularly strong ‘staycation’ effect seen in 2021, but momentum returned in September”, even though the closure of the shops on 19 September for the funeral of The Queen impacted reported LFL sales growth for Q3 by around one percentage point. In other news, the beleaguered Made.com has issued an update on its sale process, flagging that it has entered into non-disclosure agreements and begun discussions with “a number of interested parties”, who have been asked to put forward non-binding
indicative proposals by the middle of October, despite being warned that the business will need aggregate funding in the region of £45-70m over the course of the next 18 months.

• This Week’s News: Tomorrow brings the Tesco interims, the Vertu Motors interims and the Topps Tiles pre-close update. The N Brown interims are on Thursday, whilst Friday could bring the Superdry finals and a pre-close update from Victorian Plumbing.