Langton Capital – 2023-09-14 – PREMIUM – Dynamic pricing, food costs, cash, Pat Val, Yo Sushi, CMBC & other:
Dynamic pricing, food costs, cash, Pat Val, Yo Sushi, CMBC & other:PREMIUM EMAIL – PLEASE DO NOT FORWARD: A DAY IN THE LIFE: I took a walk from London Wall over to Spitalfields Market yesterday to have a potter around and get my step count up and, if the collapse in the number of men wearing short trousers is anything to go by, the end of summer is in sight. Indeed, it may have passed already as I only saw about five blokes summered up and one of them was me. Another chap had a DHL polo shirt on and two of the others were wearing steel-toe-capped boots and were carrying a plank of wood leaving perhaps 500 or so others wearing either chinos and open-necked shirts or were sweating their way around The City in the full besuited Monty. But I’ll push on. At least until the wind and the lashing sleet forces a rethink; on to the news: PUBS & RESTAURANTS: Dynamic pricing. This may have been expected or normal or what everyone does – but the Press didn’t see it that way and the subject attracted a lot of comment yesterday. The idea of a ‘happy hour in reverse’ didn’t go down too well because, though the relationship between prices on a Monday and a Saturday may be the same under both systems, the optics are very different… • Langton. CAMRA CEO Tom Stainer said the move was ‘troubling’ and said that, whilst ‘we know pubs and brewers are having a difficult time at the moment…we don’t think an extra charge penalising customers that want to support the industry is the right solution.’ He says CAMRA’s ‘fear is that it could convince people to stay away.’ • Steven Alton, CEO of the BII, said it was ‘indicative of the reality of operating costs right now where pubs are trying to find any opportunity to deliver decent margins’. • Loungers chairman Alex Reilley said a similar system was already operating across many industries and says ‘a number of city centre brands do this already (and have done for some time) – at least Stonegate have been honest about telling their customers. Maybe hotels and airlines should charge a flat fee and maybe Greggs and Costa should charge the same in service stations as they do on the [high street].’ • Geographic pricing differentials would not seem to generate the same heat as price supplements charged on busy days. Food costs: The relationship between food input costs and the output prices charged by hospitality is not linear. In the US, where the Labour Department yesterday said that CPI in the year to August was 3.7%, the gap between input and output food prices did not widen for the first time in six months. Other news: The ISMEA has reported that Italian wine production is down 12% YoY to around 44 million hectolitres. At the same time, French wine production is predicted to be 44-47 million hectolitres, which would put it above Italy for the first time in 9 years. Cash vs plastic: UK Finance has reported that cash payments took a larger proportion of total transactions for the first time in a decade last year. Debit card are still the largest constituent of overall payments… • In a sign of how much things have changed, UK Finance reported that nearly 22 million people only used cash only once a month or not at all last year. Only around a million people ‘mainly’ use cash. The average value of a contactless card payment was £15.10. COMPANY NEWS: Five years after the collapse of the company, the Serious Fraud Office (SFO) has charged four people in connection with the failure of Luke Johnson chaired Patisserie Valerie in 2018…. • Christopher Marsh, the former CFO, his wife Louise, financial controller Pritesh Mistry and financial consultant Nileshkumar Lad have all been charged. Pat Val once had almost 200 stores and the fraud led to the loss of more than 900 jobs and 70 sites. • Langton: After years of silence, it is interesting to note that there will be some further action taken, in a public forum, to understand how such a large company could be so apparently incompetently run and who was to blame (at least in a criminal sense) for bringing the company down. The failure came as a complete shock to chairman Luke Johnson, his fellow non-executive directors and, apparently, to the group’s auditors. • Questions were raised at the time as to how this could have happened. How the directors, those not charged with criminal offences, could not have known that the Head Office numbers did not tally with numbers in the branches and that a major cash pile was in fact an illusion and that the company had debt. • The professionalism or otherwise of the company and those that ran it was very much called into question but the SFO is concerned here only with criminality rather than directorial competence or the lack of it. • The SFO said the suspects conspired ‘to inflate the cash in Patisserie Holdings’ balance sheets and annual reports from 2015 to 2018, including by providing false documentation to the company’s auditors…During this time, the company also reported holding £28m in accounts, yet concealed £10m in debts from its investors and creditors.’ • Lisa Osofsky at the SFO says ‘Patisserie Valerie’s abrupt collapse rocked our high streets – leaving boarded-up shops, devastating job losses and significant investor losses in its wake.’ She says ‘today is a step forward in getting to the bottom of this scandal.’ Carlsberg Marston’s Brewing Company (CMBC) announces plans to close Wychwood Brewery from November this year…. • Wychwood’s brands, including Hobgoblin Ales and Firecatcher, will continue to be brewed within the CMBC network. Earlier this year, CMBC also revealed plans to sell Ringwood Brewery in Hampshire. • Langton: It’s a shame to see regional breweries close down but Wychwood is by no means the first, and sadly it is unlikely to be the last, to suffer such a fate. Land may be used for alternative purposes and brewing may be more efficiently undertaken at a larger site. YO! Sushi UK Ltd has reported its FY numbers for the period ended 27 November 2022 to Companies House. The ultimate parent company and controlling party is Mayfair Equity Partners Nominees Ltd, with YO! Sushi UK Ltd being consolidated into the Snowfox Midco 1 Ltd group company. Alongside YO! Sushi UK, Snowfox consolidates companies which operate other kiosks & manufacture sushi for sale through grocers in the UK, USA & Canada. It also has sizable franchising operations. In the year ended 27 November, YO! Sushi UK (the main UK trading subsidiary) revenues represented 28.2% of total revenue for Snowfox Midco 1 Ltd. Revenue increased significantly by 53.8% YoY to £84.7m as the hospitality sector reopened post restrictions. Gross profit rose by 64.0% to £35.1m, with gross profit margins improving to 41.4% in 2022 from 38.8% in 2021… • Adjusted EBITDA increased to £7.4m from £0.7m in 2021 with EBITDA margin significantly rising to 8.7% compared to 1.3% the year prior. The company swung back into an operating profit of £1.5m compared to a loss of £5.5m in 2021. YO! generated a profit before tax of £2.2m in the period in question, up from a loss of £4.1m the year before. Wendy’s has confirmed planned openings in Derby, Leeds, Peterborough, Guildford, Cambridge, and Middlesbrough. Wendy’s launched in the UK in 2021 and currently operates c30 sites in the country, aiming to reach 40 sites by the end of the year. Pizza Hut’s major UK franchisee, Heart with Smart, has rubbished claims that its restaurants are under threat of closure, with its CEO saying ‘there’s absolutely no crisis in our business at all…’ • Heart with Smart operates all 152 of Pizza Hut’s dine-in restaurants in the UK as well as five Itsu restaurants. CEO Jens Hofma said the past three to four years had been difficult thanks to Covid-19, rising inflation and increased costs, but that there has since been a ‘strong recovery’ in margins. DUNKIN’ UK is to open what will be its flagship store ( and its second London location), on Wardour Street later this month. Arjun Patel, Director at UK brand franchisee QFM Group, said ‘we have had real success in the North of England since opening and to support our great location in Baker Street, additional new store openings in the capital this year will enable more Londoners to access our iconic brand.’ The Range is to pay around £5m for the Wilko brand name reports Sky News. HOTELS & LEISURE TRAVEL: World Travel & Tourism Council research forecasts the UK travel and tourism sector will exceed the pre-Covid 2019 peak this year, contributing £252.4bn to the UK economy, up from 2019’s peak of £248.5bn…. • However, WTTC president and CEO Julia Simpson cautioned ‘The recovery and long-term growth of the sector is at risk with the self-axing of VAT-free shopping for international tourists.’ Service at Heathrow Airport in October is set to be disrupted as 170 baggage staff go on strike between 17:30 on the 6th and 6am on the 9th, and for ten consecutive days starting on the 20th. Zetter Hotels will open a property in London’s Bloomsbury in early 2025, marking the company’s third site and its first opening in ten years. The property is next to the British Museum and is formed of six Grade II-listed Georgian townhouses that are roughly 300 years old. OTHER LEISURE: French watchdog ANFR has ordered Apple to stop selling the iPhone 12 in France, claiming that the product is emitting too much electromagnetic radiation…. • The ANFR has advised Apple that if it cannot resolve the issue via a software update, it must recall every iPhone 12 ever sold in the country. Apple told the BBC it was contesting the ANFR’s review. FINANCE & MARKETS: The US Labour Department announced yesterday that CPI in the US in the year to August was 3.7%, up from 3.2% in July and slightly ahead of estimates. Petrol costs were the largest delta. The Royal Institution of Chartered Surveyors has reported that house price falls in the UK are now at their most widespread in 14 years. It says that demand in August weakened further as interest rates continued to rise… • The RICS says its house price balance, which measures the difference between the percentage of surveyors seeing rises and falls in house prices, fell to minus 68 in August from minus 55 in July. The RICS says ‘prices are continuing to slip albeit that the relatively modest fall to date needs to be seen in the context of the substantial rise recorded during the pandemic period.’ Sterling up at $1.2499 and €1.1629. Oil up at $92.36. UK 10yr gilt yield down 7bps at 4.36%. World markets mixed yesterday. London set to open around 16pts higher as at 6.30am. RETAIL WITH NICK BUBB: • Today’s News: Apart from the much-awaited John Lewis Partnership interims (see below), this morning has also brought the THG interims and there is a Dr Martens’ analysts product and brand teach-in at 1.30pm (although “no material new financial information or targets will be disclosed”). The THG interims (for the six months to end June) are headlined “Adjusted EBITDA and cash generation ahead of guidance in H1 2023. Full year adjusted EBITDA guidance reiterated”, but the group is still loss-making and revenues are sluggish, although the group trumpets that “Overall sales trends are gradually improving into the second half”.
• John Lewis Partnership Watch: As we flagged on Tuesday, JLP has been able to narrow its overall H1 loss a little, thanks to improved Waitrose trading, despite the pressures on the John Lewis department store business. Last year’s figures (for the six months to end July) have been re-stated, but the loss before tax and exceptional items fell from £66.8m to £54.5m (we expected a fall from £92m to £70m). Waitrose actually did better than we thought, with sales in H1 up by 4%, rather than just +2%-3%, but John Lewis sales were down 2%, much as we’d expected. There is no current trading update and JLP flags that the economic outlook is uncertain, but an improvement in the full year financial results expected, although “Owing to inflationary pressures the Partnership Plan will take two additional years to deliver – in 2027/28 rather than 2025/26”. There is a conference call with analysts at • Today’s Press: According to the invaluable Guardian morning email briefing, the Guardian itself leads off with an exclusive front-page story: “Sunak blocked rebuild of hospitals riddled with crumbling concrete”. The i reports “Ban on energy firms force-fitting prepay meters leaves children under five at risk”. The Financial Times has “EU launches subsidy probe into Chinese electric cars”. As the Labour leader visits The Hague to discuss small boat crossings, the Telegraph leads with “Starmer plots deal to take EU migrants” and the Times follows the same story with “Starmer vows to smash people-smuggling gangs”, while the Daily Mail goes with “Labour ready to open door to EU’s asylum seekers”. Finally, the Daily Mirror continues its series on the “Year of the shoplifter”, with the headline “Out of control”. |
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