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July 3, 2018

Pegler’s market report – 03.07.18: China and boost in self-service helps Costa offset declining high street


in Insights Press Releases

As published in the Brighton Argus (03.07.18) Business section under the title Pegler’s Market Report:

China and boost in self-service helps Costa offset declining high street

Whitbread blamed a lack of shoppers on the high street for lower sales at its Costa coffee chain. However, Costa sales rose 4.9pc in the three months from March, boosted by the group’s recent and aggressive rollout of express machines in the UK and its push into China. Overall, like-for-like sales for the group, whose other brands include Premier Inn, Beefeater and Brewers Fayre, fell 1.3pc. In April, Whitbread announced plans to spin off Costa, following pressure from hedge fund shareholders. Chief executive Alison Brittain has said the demerger, which will separate the coffee chain from the rest of the business could take up to two years.

Shares in delivery site Just Eat were weak after the company gave a more cautious outlook than expected at an investor meeting. Last year the company’s profits took a hit from its investment in doing its own delivery, pushing it to a pre-tax loss of £76m. The shares previously came under pressure when Deliveroo introduced a new feature putting it in direct competition with Just Eat. The good news was that Just Eat secured a trial period delivering for sandwich giant, Subway.

Investors in Carnival shares may have become a little ‘sea sick’ with the ups and downs of last week. The cruise company cut its full-year profit guidance as it published quarterly results – blaming higher fuel prices and a stronger US dollar for a cut in the annual earnings outlook. It wasn’t all bad news, however. Passenger yield growth (ticket price growth) was 4.8%, which was ahead of management’s traditionally conservative guidance. Some analysts believe that although Caribbean prices have not yet recovered, the guidance for 2018 remains strong and early commentary on 2019 remains robust.

UK house price growth slowed to a five-year low, with an annual rise of just 2pc in June, according to Nationwide Building Society. Meanwhile, prices in London continued to decline, with a 1.9pc year-on-year fall. Nationwide is sticking with its forecast of 1pc growth for the UK in 2018. The lender also pointed out that despite London’s recent underperformance, prices in the capital were still more than 50pc above their 2007 peak, while UK prices are only 15pc higher.

Consumer borrowing from UK banks grew at its slowest rate since 2015 in May, according to data from UK Finance. Total consumer borrowing, which includes personal loans, credit cards and overdrafts, grew at an annualised rate of 3.9pc, its most sluggish for more than three years. The data adds to evidence that debt-driven spending by UK consumers appears to be losing momentum. However, mortgage lending rose 8.8pc, due largely to an increase in re-mortgaging.

Next week we have results from Superdry and trading updates from Associated British Foods and Bovis Homes. Elsewhere, release of the US Federal Reserve minutes will be pored over for indications of when US interest rates will next rise.

By David Pegler, Brighton Capital Management