Costs & pricing, wages, trading, Artisanal Spirits, Gaming Realms & other:

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A DAY IN THE LIFE:

I know pretty much every driver in Britain, in the world, for that matter, considers themselves ‘above average’.

Which can’t be true, of course, but I can’t help thinking that, when it comes to genuinely bad driving, it’s like a game where I don’t know the rules.

A bit like American Football.

I’m vaguely aware that there are rules is what looks for all the world like a massive free-for-all but just what they are escapes me and it’s the same with drivers who overtake on the brow of a hill, block you at junctions and then speed off when the lights turn from green to amber and slow down to turn left, don’t and then speed up, slow down again, speed up and then slam their brakes on and turn left.

This time without indicating at all, it must be in the rules and then, when they come to park, they do it two feet from the kerb and make sure it’s on a blind bend.

However, for the traffic cops and parking wardens out there, I accept that I should probably abide by the mantra that only the man without sin has the right to cast the first stone.

Anyway, commiserations to the now-somewhat-desperate Hull City and let’s move on to the news:

THE OUTLOOK FOR COSTS & PRICING:

Introduction: There was no last minute reprieve in last week’s Spring Statement hence, mindful of the fact that this is a huge topic that we can only cover in outline, it seems appropriate to comment on the outlook for costs & pricing:

Backdrop:

• Although inflation has abated in general, it has remained a tad higher in hospitality and external cost pressures are about to impact in the shape of higher labour costs (NIC & minimum wage) and reduced Business Rates subsidies.

• This will impact hospitality at a time when a) it has hardly been shooting the lights out and b) the consumer could be in for a period of stagnation in real living standards.

• Chancellor Rachel Reeves has focused on spending cuts but she made no concessions re her October 2024 cost increases.

• Spending cuts will impact the incomes of some would-be customers and, courtesy largely of Ms Reeves’ inheritance and changed geopolitics, at some point, taxes may rise further – both for business and, ultimately, for the consumer.

• Operators have been talking a good fight when it comes to passing cost increases on to the consumer (and re cutting labour forces), but reality will be upon us in just a few days’ time.

Labour:

• Hospitality is a service industry and, unlike some other sectors, automation can only go so far.

• Meaning that labour is a high fixed and variable cost – perhaps 30-32% of revenues – and it is sticky on the downside.

• Higher NIC rates, lower thresholds and a higher minimum wage could add 10% to payroll or 3pps to the above percentage of revenue.

• Mitigation could help but it will not be sufficient to offset the entire impact though a silver lining, of course, is that some of the NLW increase could come back through the tills. NIC increases, on the other hand, will skirt the consumer and go straight to HM Exchequer.

• Prices to the customer will rise but this is a competitive industry and some may break ranks. Margins will certainly not rise. They are unlikely to be held and, on balance, they will decline.

Business rates support:

• From 1 April – tomorrow – Business Rates relief will fall from 75% to 40%.

• Taking away a ‘good thing’ (or reducing it in this case) is almost indistinguishable from doing a ‘bad thing’.

• Certainly that’s how the industry sees it but, to put the above in perspective, this has never been a relief available for very large sites or for chains.

• However, for operators who have benefited from the relief and, rightly or wrongly have come to rely on it, the reduction of the discount will be a major problem.

• Software firm Ryan suggests that the business rates bill for the average pub could rise from £3,938 to £9,451. Any overhaul of the system of business rates will come too late for the sector to avoid something of a financial hit in the next tax year and, likely, the one after.

• Star Pubs (Heineken) central operations director Caren Geering says ‘we were disappointed on the decision to cut business rates support in the Budget in October and that will present a huge challenge for our pubs.’

• Again – but this time only for smaller operators and tenants – companies are likely to attempt to put up prices but this will be a challenge and margins will contract.

Selling prices:

• The ground has been thoroughly prepared for price increases and some have been implemented already.

• But testing elasticities will irritate customers who, at the end of the day, will only pay so much for a pie, a pizza and a pint when they can buy almost indistinguishable products in the off-trade.

• Meaningful Vision anticipates that dine-out prices will rise faster in the coming year, making it a less attractive option for many.

• It says that, in a worst-case scenario, where most of the growing operating costs are passed on to consumers through price increases, inflation in the foodservice sector could rise to as much as 7%.

Conclusion:

• The above will be a part of an ongoing situation, meaning that a conclusion may perhaps be misleading.

• However, although hospitality is a ‘self-healing’ industry, in the short to medium term, it is hard to believe other than that trading and the cost environment will be somewhat challenging.

PUBS & RESTAURANTS:

Trading:

The warmer weather helped drink sales report CGA’s latest Daily Drinks Trackers, which cover the weeks to 15 and 22 March. In the first of the two weeks, drink sales were up by a sub-inflation 2% on the same week last year. The week to 22 March was better as sales were up by 5%, almost double the rate of price inflation. The week to 22 March marked the fourth consecutive week of nominal sales growth…

• CGA reports that, in the week to 15 March, the Six Nations and better weather buoyed trade. Long drinks performed well with cider up 10.7% and beer sales up 6.1%. Wine, soft drinks and spirits were down by 3.1%, 3.8% and 6.1% respectively. CGA says that ‘peak growth days in the second half of this month have included Saturday 15 March, when the final round of Six Nations rugby matches lifted drinks sales 5% ahead of the same day in 2024.’

• In the second of the two weeks, long drinks again helped sales with cider up 13.6% and beer up 7.9%. Soft drinks and wine were up by 4.3% and 1.3% respectively and spirits sales were down a lesser amount at minus 3.7%. St Patrick’s Day fell on a Monday and helped sales on what would otherwise have been a quiet day. Drink sales on St Patrick’s Day were up 27% on the comparable (but not very comparable) Monday of the same week last year.

• CGA’s Rachel Weller says ‘good weather, live sport and big occasions like St Patrick’s Day are always a powerful combination for pubs, bars and suppliers. These numbers are very encouraging signs for the Spring and Summer, and Mother’s Day, Easter and two May Bank Holidays give the On Premise a lot to look forward to—especially if the sun shines.’

• The latter caveat is critical. The sun is shining, which is great but, this being the UK, it can’t be relied upon to shine all spring and summer. CGA adds a further cautionary note saying that ‘many consumers remain affected by rising costs, and the Chancellor’s Spring Statement this week has done nothing to mitigate the extra costs that are looming for businesses in April. Venues and suppliers will need to be at the top of their game to sustain growth in the weeks ahead.’

Rising wage costs: Workforce impact:

The Resolution Foundation has pointed out that, whilst the NIC and NLW changes that impact this week will add 3.4 per cent to average labour costs, the increase will not be evenly spread across earnings groups. The cost increase will be 6.6 per cent for the bottom 10 per cent of earners but just 1.7 per cent for the top 10 per cent…..

• Furthermore, the impact will be greatest for part-time staff earning close to the previous cut-off for NIC. It says that labour costs will rise by 10.2 per cent for a full-time adult earning the minimum wage – but they will rise by as much as 14.2 per cent for a part-time worker earning £10,000 a year on the same hourly rate.

• This is likely to impact recruitment decisions and not always to the benefit of the employees concerned. The Resolution Foundation is forecasting a drop in employment numbers of around 85,000, concentrated across the lowest-earning segments of the economy. It forecasts a drop in employment of 0.7 per cent in the bottom decile of the pay distribution, telling the FY ‘this is a significant number . . . which would have been smaller if policy had been better co-ordinated.’

Consumer disposable income:

A number of bills will be rising next month, that is from tomorrow. This will reduce disposable incomes available to spend on non-essential products and services. Bills that are known set to rise include water bills (by around £120 a year), energy bills (up by £111 a year), council tax (up by around 5% in most cases, much more for second home owners), car tax, broadband, phone and TV licence costs and Stamp Duty.

Cost hurdle:

With rates support reducing from tomorrow and NIC and NLW changes also kicking in, the cost outlook for hospitality is about to change materially. The Guardian reports that ‘an increase in national insurance and a rising living wage is leading to predictions of a hiring freeze across the sector….’

• The Guardian adds that ‘hospitality, leisure and retail will be hit particularly hard, largely as these sectors employ more low-paid workers and temporary staff, where slashing the NICs threshold will have the biggest impact. It quotes UKH CEO Kate Nicholls as saying this ‘is the most regressive tax change I have seen in 30 years in hospitality.’ She adds that ‘the government points to tough choices, but it belies that tough choices are being made by businesses about this.’

Other news:

The Telegraph reports that ‘British restaurants are targeting the US as Labour prepares to hammer them with higher taxes at home….’

• The Telegraph, which may be said by some to be working on its own Project Fear, says ‘the Ivy and upmarket Indian restaurant Dishoom are both preparing to expand in the US, while Pizza Express is also planning a second crack at the American market starting in Florida this year.’

• This may be true but it may have more to do with both saturation at home and the almost irresistible desire to get stuck into the US market than tax increases. Entering the US is not without risk. The Telegraph does point out that ‘Pizza Express is attempting to crack the US after a first attempt in 2000 failed to get off the ground.’ Failing to get of the ground can be costly.

Employment. Gig risks. New legislation could lead to company executives hiring unregistered employees unable to work in the UK being at risk of imprisonment for up to five years. Businesses could be legally shut down and be fined £60k per employee if workers are not correctly checked…

• Home Secretary Yvette Cooper is preparing to crack down on illegal workers and the companies that employ them. The move is meant to ‘undermine people smugglers using the false promise of jobs for migrants.’

The Society of Independent Brewers and Associates is to make available a new free portal at www.guestbeer.co.uk which allows pub tenants to check that beer brands are eligible for the Guest Beer Agreement scheme in Scotland.fs

Champagne shipments to UK are reported to have fallen by 12.7% in 2024 against 2023. The UK nonetheless remains the second biggest export market for Champagne behind the US.

The Guardian reports that ministers, senior officials and special advisers were treated to hospitality including lunches, dinners, and sometimes tickets on about 3,500 occasions in five years.

COMPANY NEWS:

Artisanal Spirits has reported full year numbers to end-December saying that revenue rose marginally to £23.6m with EBITDA of £1.1m vs an EBITDA loss of £0.5m in the prior year. The company reports a loss before tax of £3.1m against a loss last year of £3.6m…

• Regarding current trading, the company says ‘the start to the year has been strong, with achievement of double-digit revenue growth in Q1-25 vs Q1-24.’ CEO Andrew Dane adds that ‘our ambition remains to create a high quality, highly profitable and cash generative, premium global business and we made good progress on achieving this during FY24, despite a backdrop of uncertain economic conditions in some markets.’

• Mr Dane says ‘we have delivered profitable growth, helped by our successful acquisition of US based Single Cask Nation in January 2024 and the additional investment in our SMWS USA operations completed in January 2025 also further augments the exciting opportunity for ASC to deliver profitable growth in this key market.’ He concludes ‘overall, we exit FY24 with a good set of results behind us, with a positive start to Q1-25 meaning that we are on track to deliver further profitable growth and cash generation in FY25 and beyond.’

Naked Wines has announced that ‘Rowan Gormley has notified the Board of his decision to step down as Non-Executive Chairman and as a Director of the Company with immediate effect.’ It adds that Deidre Runnette, Senior Independent Director, will assume the role of Non-Executive Chairman on an interim basis until a successor is appointed.

Daniel Thwaites PLC on Friday announced that Susan Woodward, Company Secretary since 2004, will retire from her role on 1 April 2025. Jayne Kirkham will be appointed Company Secretary from the same date. Jayne is a Chartered Accountant and has worked for the Company since 2006.

The MCA reports Papa John’s UK MD Chris Phylactou as saying that the company is looking to grow this year from its “much stronger” cohort of franchisees. The MD says ‘we’re very much focusing on quality over quantity.’ He says ‘if we’re honest, we had way too many partners for the number of restaurants we had. We feel that we’ve got a much more engaged group, and operationally, they’re much stronger.’

Patty & Bun management has said that it ‘remains confident the business has a profitable and bright future’ after completing its latest restructuring. Founder Joe Grossman told the MCA that, ‘with funding being made available by existing investors, Patty & Bun will continue to trade from all its sites and all staff will be kept on to help build the business to a bigger and better future.’

Boxpark Shoreditch, which recently secured a lease extension, is reported to have welcomed 12 new traders including five new food operators to its site.

The New World Trading Company has reported revenue of £73.5m for the 52 weeks to 31 March 2024. It adds that The Botanist brand is now its focus for growth. The company underwent a CVA in October last year.

US coffee shop operator Dutch Bros aims to double its store count in the US over the next five years to reach 2,029 outlets in 2029.

HOLIDAYS & LEISURE TRAVEL:

Butlin’s CEO Jon Hendry Pickup has told the Sunday Times that his company creates jobs but he asks ‘where’s the help for us?’ Mr Hendry says that Butlin’s employs 4,500 people across its three resorts but the company, like virtually all other companies in hospitality and most across the wider economy, faces higher labour costs.

The Nationwide reports that consumer spending on holidays and travel is up by 520% since the Covid-impacted year of 2021.

UK Hospitality Scotland has reiterated its view that a Highland visitor levy should be postponed. Leon Thompson says ‘the rushed proposals put forward by Highland Council are clearly not suitable for consultation and I would urge the Council to take them back to the drawing board.’ He says ‘the level of detail put forward is not detailed enough, and the lack of proper engagement by the Council with local businesses is telling.’

PE house Blackstone has taken a 22 per cent stake in AGS Airports, which operates the Aberdeen, Glasgow and Southampton airports.

OTHER LEISURE:

Mobile games company Gaming Realms reports full year numbers to end-December saying that revenue rose by 22% to £28.5m with adjusted EBITDA up 30% at £13.1m. The company adds that PBT rose by 61% to £8.3m…

• Regarding the current year and outlook, Gaming Realms says it has made ‘a strong start to 2025, with revenue in line with management expectations, driven by our core content licensing business showing a 22% increase in the first two months of the year compared with the same period in 2024.’

• Re the outlook, the company says it ‘is well placed to deliver further growth in new and existing markets.’ It adds ‘we have launched our content in the newly regulated iGaming market in Brazil and expect to be launching our games with the lottery in British Columbia in Canada, as well as in South Africa in the coming months. To date, in 2025, we have already launched with 9 partners and three new Slingo games. The Board is confident in the Group’s strategy and expectations for the rest of the current year.’

• CEO Mark Segal says he is ‘thrilled to share that 2024 has been another record-breaking year for Gaming Realms.’ He adds that ‘building on the momentum, we have made an excellent start to 2025 with our recent launch in Brazil, a newly regulated iGaming market, which expands our global presence to 21 markets.’ The CEO concludes ‘as we move through 2025, we look forward to sharing updates on our continued expansion into new markets, the growth of our exciting game portfolio and upcoming partner launches.’

Games developer Rockstar Games is set to unveil Grand Theft Auto VI in the autumn, some 12 years after the release of GTA V.

Elon Musk’s AI venture xAI is reported to have purchased X (was Twitter) in a move that some say may be aimed at protecting investors who helped fund the purchase of X from losing money.

FINANCE & MARKETS:

Sterling mixed at $1.2954 and €1.1963. Oil lower at $73.40. UK 10 year gilt yield down 9 basis points at 4.70%. World markets lower on Friday & London set to open some 53 points lower as at 6.30am.

RETAIL WITH NICK BUBB:

• Today’s Market: Wall Street (as measured by the Dow Jones index) slumped by as much as c1.7% at the close of trading on Friday (on inflation and tariff fears) and we imagine that will pull the stockmarket in London down this morning, after the FTSE 100 index closed Friday on c8660.

• Today’s News: Mondays are usually quiet, apart from the usual flurry of share buyback announcements, but today will bring the Pets at Home pre-close update (for y/e March). Back on Friday lunchtime, Boohoo announced that Frasers had managed to just about get enough of the vote (c38%) at the EGM to stop the official name change: “It is no surprise to the Board that Frasers, a major competitor of the group, has voted against the resolution, and continues to act in its own self-interest. Whilst the resolution was not passed, we continue forward as Debenhams Group. Concurrent with the new strategy, the company’s ticker will become “DEBS” from 8am today”. And first thing on Friday, WH Smith created much excitement by announcing that it would receive net cash proceeds of only c£25m from selling the WH Smith High Street Division to Modella Capital and that the stores would be re-branded as TG
Jones in due course.

• Saturday’s Press and News (1): On Saturday, photos from the earthquake in Myanmar/Thailand made many of the front pages, but the main headlines were about other stories. The Times went with “Police arrest parents for complaining about school” and the FT flagged that “Idea of choosing between Trump and Europe ‘childish’, Meloni says”, whilst the Daily Telegraph highlighted that Canada’s new Prime Minister, Mark Carney, has denied allegations of plagiarism in his 1995 Oxford University thesis…And if you’re wondering what the wretched Boris Johnson wrote about in his Daily Mail Saturday column, he waded into the war plans group chat scandal and thundered that “Americans know freeloading when they see it – and ours can’t go on forever”. 

• Saturday’s Press and News (2): In terms of Retailing news in Saturday’s papers, the better than expected February ONS Retail Sales figures got some coverage in the FT (“Retail sales increase beats forecasts despite fears for growth”) and the Times (“Shopping still in fashion despite falling confidence”), but the main focus was the surprise news that under new ownership the WH Smith High Street division will be renamed TG Jones! In the Times, one of the main Business stories was headlined “WH Smith quits high street but travel hubs to keep branding” and it had a separate article about “Travel bug takes Smiths across the Pond” (noting that ‘As stations and airports account for 75% of revenue the stationer aims to expand in the US’), as well as a feature on “The boutique buying up the high street” (noting that although it describes itself as a private investment boutique, Modella Capital
specialises in buying and restructuring distressed retailers). The FT didn’t have room to cover the WH Smith deal with Modella, but the Lex opinion column had a look at the news (“UK High Street has proved no match for WH Smith’s wander¬lust”), highlighting that “In Britain, the surnames Smith and Jones are equally common. Yet WH Smith’s switch from one to the other is anything but. The sale of its UK stores and their rebranding as TG Jones is a real break from history”. In other news, another of the main Business stories in the Times was that Frasers had blocked Boohoo’s name change at Friday’s EGM: “Ashley rejects name change for Boohoo”.

• Sunday’s Press and News (1): On Sunday, both the Mail on Sunday and The Sunday Telegraph led their front pages with the row involving Prince Harry and the chairwoman of Sentebale, the foundation he set up in Southern Africa in 2006 to help people living with HIV and AIDS (“Harry is a bully, says charity chief” was the Sunday Telegraph’s headline). The Sunday Times led with another story about heavy-handed police action (“Met smash down door of Quaker meeting house to arrest activists”), whilst the main story in the Observer was “Starmer urged to get tough with Trump as US tariff threat looms”.

• Sunday’s Press and News (2): On Sunday, in terms of Retailing news in the papers, the Sunday Times took advantage of the fashion model photo opportunity to feature a Boohoo story on the front page of its Business section (“Debs hunts for debt deal”), noting that ‘Debenhams, formerly Boohoo, has drafted in advisers from Interpath to explore refinancing options’. The Sunday Times also had a Business section front page story about Asda (“Asda’s tech upgrade set to top £1bn”), flagging that the cost of Asda’s troubled IT upgrade is set to pass £1 billion this year, ‘heaping pressure on the debt-laden supermarket as its new management scrambles to turn around its performance”’, and revealing that Asda has paused the opening of standalone convenience stores over the past year. The Sunday Telegraph also had a Business section story about Asda: “Asda mulls moving jobs overseas in cost-cutting
drive”. The Sunday Times had a feature interview with the boss of sports brand Lululemon (“Lululemon’s ironman takes on the world”), noting that “Fitness fanatic Calvin McDonald is expanding the $36bn athleisure brand into men’s clothing. He says a US slowdown won’t stop him doubling the business”.

• Sunday’s Press and News (3): In terms of the Economics comment columns in the Sunday papers, after the Spring ‘Budget’, we give our usual shout-out to the column by David Smith, the Sunday Times Economics correspondent (headlined “Can AI and housing solve the productivity puzzle?”), which he began by saying “It has been a few days since Rachel Reeves presented her spring statement and, in the circumstances, she did OK. Were it not for the political row about welfare cuts, Wednesday’s announcement might have passed without much comment…The Chancellor was undoubtedly helped by a benign set of forecasts from the Office for Budget Responsibility”. We also enjoyed the column by the veteran Economics commentator William Keegan in the Observer (headlined “The poor don’t need Reeves’s austerity. And neither does Britain”), in which he noted that “With the economy stagnating, this is the very
worst time to depress demand in order to be seen to ‘balance the books’”.

• Today’s Press (1): The front-page headline in the Guardian is “Trump launches ‘very angry’ outburst at Putin over Ukraine”, whilst the main story in the Financial Times highlights that “Trump threatens secondary tariffs on Russian oil if no Ukraine truce agreed”. The Times, however, goes with “Anti-terror tactics to stop people smugglers” and the Daily Telegraph wails that “Ethnic minorities prioritised for bail”.

• Today’s Press (2): In terms of Retail news in the papers today, we can’t see anything of great note, although the FT has an article about the successful UK expansion of the Danish gifting brand Søstrene Grene (“Denmark’s ‘small Ikea’ steps up its targeting of British shoppers”), noting that, after the recent store opening on Tottenham Court Road, ‘Søstrene Grene’s commitment to growth is a rare bright spot on High Street blighted by closures’. The Times highlights that the actress Gillian Anderson has recently launched her soft drink brand G Spot in Sainsburys…and in its preview of this week’s company news, the Times flags that “Investors in Moonpig will be hoping that the online retailer has benefited from an increase in Britons sending cards over Christmas and Valentine’s Day”.

• The Grocer Watch: The widely followed Grocer “33” weekly Supermarket Pricing survey in Saturday’s The Grocer trade magazine now allows loyalty card prices to count towards its ranking of the cheapest supermarket but, on this basis, Asda was still the winner, for the second week running, with a basket costing £62.39. Morrisons was second, on £63.35 and Sainsbury was third, with a basket costing £66.58 (after a useful £7.52 discount for Nectar card holders). Tesco was only fourth, on £68.58 (after Clubcard holders saved only an extra £1.35). Waitrose was well off the pace, as usual, on £74.60. Across the 5 retailers, the prices of the 33 items were on average 3.4% cheaper than a year ago. The separate Grocer “Mystery Shopper” weekly survey on Store Service and Availability saw Sainsbury win, as its c25,000 sq ft superstore in Bourne in Lincolnshire topped the board, albeit with only 71
points out of 100, beating the Waitrose food hall in John Lewis Oxford Street by just one point (the Asda in Stoke came bottom, with just 46 points). Elsewhere in The Grocer, the magazine had an article about the recent shake-up at Morrisons (“Market Street no longer a sacred cow for Morrisons”).

• BDO High Street Sales Tracker: The weekly BDO High Street Sales Tracker for medium-sized Non-Food chains gets a lot of coverage, because… it is the only weekly (as opposed to monthly) guide, that’s publicly available, to what’s happening to Non-Food Retail spending. Unfortunately, we need to make our usual caveats, as, although the survey includes a few Homewares and Lifestyle retailers, it is over-concentrated on relatively upmarket/small Fashion retailers and underplays “big ticket” household spending. We also think that the survey’s approach is statistically flawed. However, the latest survey, for what it’s worth, shows that trading was strong in the w/e March 23rd, against a weak comp, with Total BDO LFL sales up by 10.0% (with overall Store sales up by c5.7% LFL on last year and overall Online sales up by 16.9% LFL), whilst total Fashion sales alone were up by 13.4% LFL.
Lamentably, BDO yet again failed to flag in their overview that Mothering Sunday was much later this year (it was on March 30th, compared to March 10th last year and March 19th in 2023), as Easter is also much later, so that the weekly trading figures at the moment are distorted year-on-year…

• News Flow This Week: As we move on into April/Q2, tomorrow brings the delayed Travis Perkins finals, as well as the latest monthly Kantar grocery sales figures. On Wednesday we then get the Topps Tiles Q2 update and the latest NielsenIQ monthly grocery sales figures, with the Moonpig update following on Thursday.