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Wed 6th Nov 2024 - Update: JDW Q1 lfls up 5.9%, Domino’s Q3, Young’s, Yum! Brands |
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JDW – Q1 lfls sales up 5.9%, cost inflation has jumped substantially again following the budget: JD Wetherspoon has reported that its like-for-like sales in the first 14 weeks of its financial year to 3 November were 5.9% higher than the same period last year. Bar sales increased by 5.7%, food by 5.7% and slot/fruit machines by 13.5%. Hotel room sales decreased by 2.0%. It said that total sales have grown by 4.6% in the year to date, less than like-for-like sales, as a result of a small number of pub disposals. It said: “The ‘CGA RSM Hospitality Business Tracker’ reports monthly like-for-like sales for a number of multi-outlet pub and restaurant companies. In August, the tracker reported industry like-for-like sales of +1.3%, compared to +4.1% for Wetherspoon. In September, the latest month for which information is available, the tracker reported industry sales of +1.7%, compared to +5.7% for Wetherspoon. Wetherspoon has outperformed the tracker for 25 consecutive months.” In the year-to-date, the company has opened two pubs – in Marlow, Buckinghamshire and at London Waterloo station. The company plans to open a total of nine pubs in the year, including sites at London Bridge station, Fulham Broadway underground station and Manchester Airport. Five pubs have been sold in the year, giving to rise to a cash inflow of £2.4m. The company currently has a trading estate of 797 pubs. It said that three pubs now operate as Wetherspoon franchises. The company said: “The first of these, at Hull University student union, opened in January 2022. Sales have approximately doubled compared to the pre-franchise history. The second, at Newcastle University student union, opened in September 2023, and sales increased approximately fourfold in the first year. The most recent franchise opening was at Haven Primrose Valley Holiday park, Filey, North Yorkshire in March 2024, where trading has been encouraging, and we are reviewing plans with Haven to introduce Wetherspoon to more parks in 2025 and beyond.” The business said that following the government budget of 30 October, taxes and business costs are expected to increase by approximately £60m, on an annualised basis, in calendar year 2025, including an estimated 67% increase in national insurance contributions. Wetherspoon chairman Sir Tim Martin said: “The company achieved record sales in the 14-week period and staff retention continues to be at high levels. Cost inflation, which had jumped to elevated levels in 2022, slowly abated in the following two years, but has now jumped substantially again following the budget. All hospitality businesses, we believe, plan to increase prices, as a result. Wetherspoon will, as always, make every attempt to stay as competitive as possible. The company is confident of a reasonable outcome for the year, although forecasting is more difficult given the extent of the increased costs.”
Premium Club members to receive two updated databases this week: Premium Club members will receive two updated databases this week. The latest Propel UK Food & Beverage Franchisee Database will be sent today (Wednesday, 6 November) at 12pm. It will feature ten new additions plus updates to existing entries. It now has 180 entries and more than 76,000 words of copy. Among the new entries are Amorino franchisees 4orty and Sandyman Investments, and Starbucks franchisees 1 Oak Investment Group and The Explorer Group. The next Propel New Openings Database will be sent to Premium Club members on Friday (8 November). The database will show the details of 196 site openings, including Simmons Bars opening their cocktail concept in Manchester, The Wild Swan from Thornbridge & Co opening in London, and BrewDog opening at Belfast Grand Central station. Premium Club members also receive access to four other databases: theTurnover & Profits Blue Book, the Multi-Site Database, the UK Food and Beverage Franchisor Database and the Who’s Who of UK Hospitality. All Premium Clubs members will be offered a 20% discount on tickets to Propel paid-for events including Restaurant Marketer and Innovator (two days in January 2025) and Excellence in Pub Retail (May 2025). Operators that are Premium Club members are also able to send up to four members of staff to each of our four Multi-Club Conferences for free. Premium Club members receive their daily Propel Info newsletter 11 hours earlier than standard subscribers, at 7pm the evening before. They also receive videos of presentations at eight Propel conference events two weeks after they are held. This represents around 100 videos of industry insight over the course of the year. Premium Club members will be sent a dedicated monthly newsletter that will highlight key updates in the sector and direct subscribers to all the vital content their membership offers. Premium Club members also receive exclusive opinion columns every Friday at 5pm, which include the thoughts of Propel group editor Mark Wingett and a host of industry leaders from across the sector. A Premium Club subscription costs an annual sum of £495 plus VAT for operators and £595 plus VAT for suppliers. Companies can now have an unlimited number of people receive access to Premium Club for a year for £995 plus VAT – whether they are an operator or supplier. Email kai.kirkman@propelinfo.com today to sign up.
Domino’s sees return to positive like-for-like sales in Q3, £4 lunch “really resonating with customers”: Domino’s Pizza Group saw its Q3 like-for-like system sales grow by 0.7% on a comparable basis and total system sales of £374.8m, up 3%. It reported total orders of 17.4 million in the quarter, up 3.5% on the previous year. It said: “Total orders have continued their positive momentum in Q4 and were up 5.8% in the first five weeks on a comparable basis. We expect FY24 Underlying Ebitda to be in the range of current market expectations.” During Q3 the company said it had seen a “significant strengthening” in delivery orders, up 6.6% driven by continued service improvements and providing even better value for customers. Collection orders were down 1.5% but remain 14% ahead of 2019 levels. It said that average delivery times were maintained at circa 24 minutes, a circa 1 minute improvement on Q3 23. There were 34 new store openings – in a slower planning environment, and it is now expecting to open 50 to 60 new stores in FY24. The company said: “Our pipeline continues to build well and on track to open our 1,400th store in FY25, our 40th year operating in the UK.” It also said that constructive discussion continues with its franchise partners on a new memorandum of understanding. Andrew Rennie, chief executive, said: “We’ve got great momentum in the business which reflects the intense focus from all of us at Domino’s and our brilliant franchise partners on driving growth in delivery orders, our biggest sales channel. Our franchise partners are giving outstanding customer service with average delivery times at just 24 minutes, a whole minute quicker than a year ago. We’re also relentlessly focused on the best possible value, with offers like our Weeknight Steal and £4 lunch really resonating with customers. We’re focused on growing our like-for-like sales in a sustainable way, primarily driven by order growth and not pricing, meaning lower ticket prices for customers and sustainable like-for-like sales growth driven by volume. In an uncertain environment we are well placed to continue our strategic progress due to the strength of the Domino’s brand and system. We continue to assess additional value-enhancing opportunities to build a larger, more cash-generative business which delivers strong and consistent returns. I look forward to updating shareholders further on our strategic progress at the full year results next March.”
Hospitality industry in ‘survival mode’ after budget blow: Britain’s hospitality industry is in “survival mode” after a £3bn increase in tax and wage costs imposed in last week’s budget, ministers have been warned. The Times reports that at a meeting with leaders of the retail, leisure and food and drink sectors, Jonathan Reynolds, the business secretary, was told that the tax bill for employing a part-time worker had increased by 73% as a result of lowering the threshold for national insurance contributions. One of those at the meeting said that Reynolds did not appear to have “fully appreciated” the impact that reducing the national insurance threshold from £9,100 to £5,000 would have on sectors that employed a large proportion of part-time workers. “It didn’t seem like anyone had done a proper impact assessment,” the source said. Fuller’s told ministers that rising costs would force it to halve annual investment from £60m to £30m. Simon Dodd, the chief executive of Young’s, did not attend but was briefed on the meeting. He said: “We’ve got a board meeting next week so there’s nothing being confirmed but we’ll be looking at a similar thing to Fuller’s.” Dodd said the rise in national insurance contributions, the unexpected cut to the level at which employers start paying and the increase in the national living wage was a “triple whammy”. Young’s will look at halting acquisitions and may pass some costs on to consumers through price increases, he said. “But I’d rather be talking about training and development and succession and acquiring businesses and investment in businesses.” One source familiar with the virtual meeting, hosted by Reynolds and James Murray, a Treasury minister, said the question and answer session with businesses was “completely negative” and dominated by an “onslaught” from the hospitality sector. A number of companies called on ministers to introduce reforms to business rates to reduce costs. “We are currently in survival mode rather than investment mode,” said one senior business figure.
Yum! Brands – Taco Bell equity stores in the UK will provide “a fantastic test bed”: Yum! Brands, the KFC and Pizza Hut owner, has said that the launch of equity stores for Taco Bell in the UK will provide a “fantastic test bed to generate insights to guide the business model, including an innovation, pricing, technology and restaurant experience”. The company, which operates circa 135 franchise sites in the UK, opened its first equity-owned restaurant in the UK, at Anglia Retail Park in Anglia Parkway, Ipswich, last month. It said it will launch five more UK equity stores this year and ten more in 2025. David Gibbs, chief executive of Yum! Brands, said: “We were also pleased to see our first equity store opened in the UK in late October with a very encouraging consumer response, giving us confidence in our accelerated investment in the brand internationally. Clearly, Taco Bell International has the potential to be a third growth engine for Yum! for many years to come. We expect to open several equity Taco Bell UK stores by year-end, providing a fantastic test bed to generate insights to guide the business model, including an innovation, pricing, technology and restaurant experience.” Yum! Brands reported KFC system sales in the UK were down 6% for the third quarter ended 30 September 2024 compared with the previous year. In the year to date, KFC UK system sales have fallen 3% – one of four markets that have seen a drop in sales. The others are the Middle East, Turkey and north Africa (9%) and the US and Asia (both 7%). The UK accounts for 6% of KFC’s system sales worldwide. Gibbs said: “Starting with the KFC division, which represents 50% of our divisional operating profit, system sales grew 1% as significant unit growth was offset by the aforementioned Middle East conflict impact and transaction softness in several regions navigating constrained consumer spending. Such challenges have led competitors to introduce incremental value offers, namely to capture low ticket transactions in markets such as the UK, France and India. As we mentioned on the second quarter earnings call, the same geopolitical pressures have grown to meaningfully, but less severely impact certain markets beyond the Middle East, Malaysia and Indonesia. As an example, we have seen in the UK, Australia and New Zealand that KFC same-store sales performance in certain individual stores has been significantly impacted. Importantly, these specific pressures have been location specific and not indicative of broader global trends.”
Services sector stalls as spending and confidence take hit: Output from Britain’s vast service industries expanded at the slowest rate in almost a year last month as business confidence and spending was weighed down ahead of the budget. The Times reports that the S&P Global/Chartered Institute of Procurement and Supply final purchasing managers’ index (PMI) for the £1.7 trillion sector fell from 52.4 to 52.0 in October as businesses waited to learn policy changes from the Labour government. A reading above 50 still indicates growth but the increase in output was the slowest reported since November 2023. Respondents to S&P’s survey noted that economic conditions had improved in the UK, helping to lift overall business activity, but some cited “heightened business uncertainty” in advance of the budget as a reason to delay spending decisions. The survey also found that some companies in the sector, which includes industries such as finance, retail, education and health, were finding that geopolitical tensions had discouraged spending. Confidence declined among consumers and business leaders in advance of chancellor Rachel Reeves’s maiden budget amid uncertainty about tax rises. The government indicated that it would need to increase taxes to address a “black hole” in the nation’s finances, prompting the GfK consumer confidence index to fall from minus 13 in August to minus 20 in September, with the Institute of Directors’ economic confidence index registering a decline from minus 12 in August to minus 38 in September. Tim Moore, economics director at S&P Global Market Intelligence, said: “October data signalled another slowdown in output growth across the service sector as heightened business uncertainty and concerns about the general UK economic outlook had an adverse impact on demand conditions. The wait for clarity on government policy ahead of the autumn budget was widely reported to have weighed on business confidence and spending. Broader geopolitical concerns and forthcoming US elections also added to a sense of wait-and-see on business investment decisions in October. At the same time, cost of living pressures remained a constraint on household spending.”
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