Late night market, inflation, DPEU, Everyman, Subway & other:

PREMIUM EMAIL – PLEASE DO NOT FORWARD:

A DAY IN THE LIFE:

Judging from the quantity of Out of Office replies coming in, either a large number of people are still on holiday for the second week of Easter or there has been an outbreak of forgetfulness when it comes to turning the auto-response off.

Langton is here, though.

And we’ve adopted the easiest and most obvious response to the above problem by failing to grasp how to turn on any kind of automated email in the first place.

Anyway, in the hope that there are some people out there, let’s move on to the news:

PUBS & RESTAURANTS:

Late night market:

REKOM UK has updated on the UK late-night leisure & hospitality industry saying that the ‘cost-of-living crisis is catching up with students’ spending habits on a night out.’ It says it has noted lower consumer confidence and says that its ‘report shows pricing to be most important factor for Brits when deciding where to go on a night out…’

• REKOM finds that consumers are going out less but are staying out for longer when they do make the effort. It says ‘today’s challenging environment is proof of why businesses should adapt to market conditions and [it] advises hospitality sector to be responsive to new customer behaviours.’

• REKOM says that 77.3% of those surveyed ‘say that the cost-of-living crisis has cut down the number of times they go on a late night out.’ It now notes ‘lower consumer confidence levels for the late-night leisure sector.’

• Pre-drinking at home remains the most popular way of saving money. REKOM says 35.1% of respondents fuelled-up at home. Peter Marks, Chairman of REKOM UK says ‘it is completely natural – and expected – that people are changing their spending habits as a result of the cost-of-living crisis. Inflationary pressures are currently impacting every sector, so these survey results come as no surprise.’

• Mr Marks says ‘however, it’s also worth noting that no matter what the economic outlook is, people will always prioritise good value and will make changes in their everyday lives to accommodate that.’ He maintains that Saturday is the most popular day for going out and says ‘we’re seeing that when people are out, they are out for longer, indicating that they want that ‘big night out’ experience.’

Cost of living crisis:

In a similar vein, PwC finds that 50% of consumers are either very or extremely concerned about their personal financial situation. It says that a majority of this group has already altered their level of non-essential spending….

• PwC, which says this is a global phenomenon, expects luxury items, travel and fashion to bear the brunt of cutbacks. Even so, some 26% of those surveyed said that they would spend the same amount on luxury or designer products over the next six months and as many as 21% will increase their spend.

• Interpreting the above data, Pragma Consulting says ‘forecasts predict that inflation has already hit its peak and will begin to lessen as we get further into the year. Spend will appropriately increase as conditions improve, with the potential for another revenge-spending wave to ensue’.

Easter spending:

Barclays reports that ‘Hospitality and Leisure businesses benefitted from a 2.7% per cent increase in the total number of sales over the Easter Bank Holiday Weekend (7-10 April) – compared to Easter 2022 – as Brits made the most of the warmer weather and enjoyed days out after months of cutbacks….’

• It says restaurants were up 3.09% (around a third or less of the rate of inflation) with camping & caravan sites up 8.4%. Fast food was up 0.5%, which equates to an almost-10% real decline.

• Marc Pettican of Barclaycard Payments comments ‘it’s encouraging to see so many Brits make the most of their Easter celebrations this year. Consumer spending surged across Hospitality and Leisure as people enjoyed the sunshine across much of the UK this weekend and headed out to restaurants, camping and caravan sites, and sport centres.’

• Applying the word ‘surge’ to what amounts to a real-terms decline may be misplaced. Nonetheless, Mr Pettican continues ‘while our research shows that half of consumers are consciously trying to cut back on discretionary spending overall, this uplift in transactions demonstrates that many Brits are still keen to spend their time off outdoors, socialising and eating out with friends and family.’ He concludes ‘this will be welcome news for UK businesses amid the rising cost of living, and as they look forward to another boost in trade over the Coronation weekend and upcoming May bank holidays.’

Drinks sales:

CGA’s Drinks Recovery Tracker suggests that wet sales in the on-trade were down by 3% in the seven days to Saturday 25 March. Short time periods will be heavily impacted  by the weather and other short term factors.

Inflation

The Daily Mail reports that Pret A Manger ‘has pushed up prices by as much as 18 per cent on the back of soaring food ingredient costs, punishing energy bills and the need to give staff three pay rises this year….’

• The paper says that ‘steep rises in the cost of some breakfast items and treats’ are a feature. It says ‘the increases, which are likely to be mirrored by other coffee shop chains such as Costa, Starbucks and Caffe Nero, suggest there is no let-up in the cost of living squeeze.’

• It says, looking at ‘Pret’s so-called station shops, which are placed near Tube and rail stations plus airports, the price of an all-butter croissant has gone up 40p – 18.2 per cent – to £2.60.’ It adds ‘most of these also went up at Pret high street stores, although the increases were lower in cash and percentage terms.’

Labour market:

A report from the Recruitment and Employment Confederation and KPMG suggests that the supply of candidates for jobs has increased for the first time in more than two years. The rise is reported to be ‘modest’….

• This may mean that the squeeze in the labour market is moderating, though the cost of labour – and the consequent rate of overall inflation – remains high. The REC says ‘while the market is still tight, it should be getting gradually easier for firms to hire over the next few months.’

• The REC adds ‘the continuing fast rate of pay growth is likely reflective of the impact of inflation on wage offers, as well as low labour supply. That means increasing pay is likely to persist, despite more people beginning to look for work.’ KPMG adds that March was a “curate’s egg” for jobs. It says ‘while the labour market continues to show resilience, it is nowhere near pre-pandemic levels of stability.’

• Langton. There are both supply and demand issues at play here. Supply can’t be changed overnight but it is possible that, as demand slips a bit, the need for labour will become less acute. The price, however, as stated above, is still high and, despite exhortations not to pass the cost on, hospitality operators will have little choice other than to do so.

Other news:

Springboard reports footfall at shopping centres up +15.0% YoY for the week ended 8 April, boosted by strong consumer demand in the run up to and over Easter.

Discounting. Not an awful lot of it about though M&B’s Toby Carvery is offering kids eat for a pound until Thursday.

COMPANY NEWS:

DP Eurasia has reported full year numbers to end-December saying that LfL system sales growth for continuing operations was minus 5.3% after plus 26.0% last year. The company reports system sales growth for the first 11wks of this year as +18.2% for continuing operations and +11.6% in Russia…

• Re the 2023 Outlook, the company says ‘the strong store openings momentum in Turkey is anticipated to continue for both Domino’s and COFFY, driven by solid franchisee demand.’ it says it ‘anticipates that it will maintain organic and LfL sales momentum in 2023 driven by sustained network growth, volume expansion and targeted price adjustments. New customer acquisition and increased order frequency levels are expected to contribute to growing volumes.’

• DPEU says it is ‘mindful that 2023 will be another year of volatile macro-economic circumstance and uncertainty. The inflation risk persists, and while the Group has a good track record of managing and negating the impact of inflation, it may affect overall growth levels. Nevertheless, the Group continues to believe that it can continue to appropriately manage the inflationary risk.’

• CEO Aslan Saranga comments he is ‘pleased to be reporting solid results.’ He says ‘strong trading momentum was maintained, thanks to the healthy dynamics of the sub-sectors the Group operates within and the team’s careful navigation of the obvious challenges, inflation being one.’

• He says ‘in 2022, our LfL performance caught up with the rapid pace of inflation, as we successfully implemented our targeted action plan to overcome macro factors largely outside of our control.’ Mr Saranga says ‘2022 was a year that proved our resilience and agile executing capabilities. I am very pleased to be delivering strong store growth and maintaining healthy profitability levels at the same time’ and adds that ‘the Board expects another year of good growth in 2023.’

The New York Post reports that Subway may cut its sale price from around $10 billion to perhaps ‘upwards of $7 billion…’

• The Post reports that sources have told it the auction ’has drawn lacklustre interest from prospective buyers — forcing the sandwich chain to push back bidding deadlines and raising the possibility of a lower sale price.’ It says ‘after taking an initial round of bids in late February, sources said Subway has failed to set a deadline for second-round bids, which typically comes a few weeks after indications of interest are submitted.’

Loungers is reported set to open its first bar and restaurant in Northumberland.

M&B’s Browns Covent Garden has re-opened after a £2.5m refurb.

Tupperware in the US is reported set to go bust unless it can access emergency funds.

The Black Sheep Brewery plc has confirmed that it is reviewing its financing options and may be up for sale, appointing Teneo as its financial adviser. Charlene Lyons, chair & CEO of The Black Sheep Brewery, said ‘Forward funding is an issue for many businesses in the tight market brought about by the after-effects of Covid-19 on the hospitality sector and this is exacerbated by the cost-of-living issues affecting consumer spending.’

Railway coffee franchise Puccino’s plans to grow its UK estate to 125 sites over the next five years, with five new sites set to open in 2023. The company recently opened its first site of 2023 in East Croydon.

In an interview with MCA, Vagabond founder Stephen Finch announced that the company has put forth a bid on an ‘exciting venue that will push the business forward significantly’ saying that ‘Gatwick will be the equivalent of four or five Vagabonds’. Finch indicated that airports and sites outside London will be a priority for the brand going forward.

Waitrose is to launch Gail’s Bakery areas within 64 of its shops in the south and east of England by May this year. The supermarket will also be doubling its range of Gail’s sourdough breads and other craft baked goods.

HOLIDAYS & LEISURE TRAVEL:

Christie & Co has announced the sale of Yorkshire’s iconic ‘The Midland Hotel,’ Bradford, to Britannia Hotels. Built in 1890 by the Midland Railway Company, the Midland Hotel will be Britannia’s 64th hotel.

A Deloitte survey has found that business travel spending is tracking towards a full recovery to 2019 figures by 2024 or 2025…

• However, higher costs and environmental concerns will keep the sector below pre-pandemic levels in ‘real terms’. Overall recovery trajectories are similar for both US and European travel managers, although long-haul international trips are recovering more quickly among US companies.

Heathrow has claimed it provided ‘excellent’ service levels during the Easter holidays despite a strike by security staff. The London hub handled more than 6.2m passengers in March, up by one million on the previous month.

OTHER LEISURE:

Everyman Media has reported full year results to 29 December, saying that admissions rose to3.4m from 2.0m and that revenue was £78.8m against £49.0m. Adjusted EBITDA was £14.5m against £8.3m and the loss before tax was reduced from £5.4m to £3.5m…

• CEO Alex Scrimgeour says he is ‘encouraged by strong growth in admissions in the year, marking a return to business as usual.’ Mr Scrimgeour says ‘as a result of our strong performance in year, we are actively returning to an agenda of managed organic expansion. The Company is also assessing acquisition opportunities of existing cinemas which are suitable to be converted into Everyman venues.’

• The CEO says ‘supported by an increasingly strong pipeline of new releases, commitment to the theatrical window from studios and new investment from streamers in films for theatrical release, we view our prospects with increasing confidence. Moving through 2023 and beyond, the Everyman proposition feels as relevant as ever.’

• Langton. Whilst Everyman isn’t in the same boat as Cineworld, losses are unhelpful and the group’s shares are trading at all-time lows. A leap of faith is required but, should the group achieve profits, its revenues, of around £80m, look interesting. The market cap is around £60m with £18.5m or so of debt.

Video game developer Devolver Digital reports revenues +37.1% YoY to $134.6m in its full year results…

• Normalised Adjusted EBITDA was $13.9m, down from $25.7m the year prior. The company said the YoY EBITDA decline reflected underperformance of H1 released games relative to their cost, and increased administrative and headcount expenses. Shares were down 9% on the results…

• Douglas Morin, Chief Executive Officer of Devolver, said ‘We have absorbed valuable lessons during the last year and are eager to move forward from this challenging period. We have tightened management oversight across the Group and welcome Devolver co-founder Graeme Struthers taking the role as Group Chief Operating Officer to drive this process.’

Leeds-based Invincibles Studio  has raised a further £1m from NPIF – Mercia Equity Finance. The funds will be used to build on the success of its Soccer Manager game with the launch of two new football action games.

The British Basketball League (BBL) bought the Manchester Giants out of administration before a search for a new investor was launched. This is despite the BBL issuing a press release last week saying the league was ‘exploring offers from prospective third-party investors’ for the franchise.

The BBC has complained to Twitter about being labelled as ‘government-funded media’. Musk emailed the BBC, saying ‘I do think media organisations should be self-aware and not falsely claim the complete absence of bias.’

Former Twitter boss Parag Agrawal is suing the social media company for failing to cover about $1m in personal legal expenses as it battles investigations by American authorities.

FINANCE & MARKETS:

The International Monetary Fund has said that it believes interest rates in major economies will fall back to their pre-pandemic low levels because of low productivity and ageing populations…

• The IMF suggests that current ‘high’ rates are temporary. They currently stand at 4.25% in the UK. The IMF says ‘when inflation is brought back under control, advanced economies’ central banks are likely to ease monetary policy and bring real interest rates back towards pre-pandemic levels.’ There is no timescale given.

The IMF predicts that the UK will be the worst-performing major economy this year with GDP down by 0.3% followed by a 1% increase next year…

• The IMF says that the world economy is on a ‘rocky road’ following global shocks and a series of bank failures. Global growth is forecast to be at a 30+ year low.

Tony Danker, until yesterday the director general of the CBI, has been dismissed with immediate effect…

• The CBI says that three other employees have also been suspended “pending further investigation into a number of ongoing allegations.” Former staffer Rain Newton-Smith will shortly become the CBI’s next Director-General.

Sterling mixed at $1.2436 and €1.138. Oil up at $85.69. UK 10yr gilt yield up 13bps at 3.54%. World markets better yesterday but US variable late & Far East mixed. London set to open down around 7pts as at 6.30am.

RETAIL WITH NICK BUBB:

Nick is travelling.