Credit deflation and the reflation cycle to come (part 9)

[AWW]

46 minutes ago, ThoughtCriminal said:

Mind blowing that people are paying 5 quid for a cup of brown piss from these places.

People aren't though - that's why Pret had to introduce a subscription. The marginal cost to Pret of making a cup of coffee is pennies. Better to have £30 a month from those people who do like Pret's brown piss and are happy to pay "20p a cup" as the man maths says, than to have people staying away because the cost for a single cup is £3. In fact, they're in the office 2-3 days a week and go to Pret twice a day, so they're paying about £1.30 a cup, which is what decent coffee costs on the continent. Pret also gets a nice predictable revenue stream and some guaranteed footfall. They wouldn't have been able to do this ten years ago, but people are much happier to take out subs for services nowadays.

I wouldn't be surprised to see "breakfast porridge" and "lunchtime soup" subs soon. Again, very little marginal cost.

Edited May 2 by AWW

[Loki]

Subscription soup kitchens when?

[Yellow_Reduced_Sticker]

On 30/04/2024 at 09:02, MrXxxx said:

.............................................

On a serious note, is PFC now a 'basket case'?!

[sancho panza]

1 hour ago, ThoughtCriminal said:

Costco do Nespresso pods that are as good as any expensive cup of coffee I've ever had. Works out about 10p a cup.

Mind blowing that people are paying 5 quid for a cup of brown piss from these places.

I meet an old friend once every few motnhs for coffee.Went to costa last time and it was near four quid for a coffee.we wont be going there again.

they had three staff on,at £11.44 per hour and having watched the tills while we were there,there will be laods of costa branches that are going to struggle to clear their hourly wage bill,let alone other over heads.

alos worth noting @AWW comments on subs which is possibly the way forward for these companies that are to survive.

I think it's inevitable that some will go under.

on the back of Starbucks warning yesterday,Doordash stock got tapped a bit,making it seem that at the amrgins US domestic economy rolling voer

but look at the big pciture,this is a $51bn market cap with revenue at $8.6bn.Long term loss maker.

TLDR= slow down in order growth,still not making profits,balance sheet $10bn assets,$4bn equity BUT $3bn of that goodwill and no timetable for profitbaility

https://www.fastcompany.com/91116687/doordash-2024-q1-earnings

DoorDash heavily narrowed its net loss and hit new quarterly records for key metrics for the first quarter of 2024. But growth of total orders, marketplace gross order value, and revenue—while all still up double digits from the same time a year ago—is slowing from the same breakneck pace it achieved in past quarters. 

DoorDash reported revenue of $2.51 billion for the first quarter, up 22% from the same quarter a year ago. Total orders gained 21% to reach 620 million, while marketplace gross order value was up 21% year-over-year to $19.2 billion.

DoorDash is the largest player in the U.S. restaurant delivery space, though it has failed to turn a profit yet. However, the company narrowed its net loss to $25 million, down from $156 million in the fourth quarter of 2023. DoorDash hasn’t provided an outline on when it expects to hit profitability. 

 

 

[sancho panza]

sorry to bang on about coffee shops but I think they're an important indicator of stress at teh economies margins.

@ThoughtCriminal mentioned participation rates and coffee shops/cafes employ a lot of people.

with that in mind consider the following and that revenue growth is substantially below inflation if these figures are correct.

 

https://www.ibisworld.com/united-kingdom/market-research-reports/cafes-coffee-shops-industry/

 

[HousePriceMania]

1 hour ago, Lightscribe said:

Used to have a bean to cup Gaggia machine (bought from a price mistake from Holland Phillips outlet) , but it took up too much space and required regular maintenance etc so sold it for more than I bought it for.

Nowadays I just grind beans in advance in an air sealed pot and just use a Mokka pot. I also use a frother (ooh er missus) on heated milk.

That's exactly what I do, these are now my beans of choice....from Lidl

[Harley]

1 hour ago, Pip321 said:

We still like to sit down in a shitty dark room with those yellow daft lights, old battered furniture, unplastered walls, trip hazard floor boards and old comfy seats but now only twice a week.

Again, we made that at home!

[Harley]

1 hour ago, AWW said:

but people are much happier to take out subs for services nowadays

Yep, it's everywhere now as the accountants point out the advantages of a stable revenue stream.  Usually of little/no benefit to me.  Latest was my dentist.

PS:  The old company store (maybe with tokens) type thing next?

Edited May 2 by Harley

[MrXxxx]

23 minutes ago, sancho panza said:

sorry to bang on about coffee shops but I think they're an important indicator of stress at teh economies margins.

I think they are an important indicator i.e. an 'inexpensive' luxury that people don't cut back on first when the economy starts to 'turn sour', so if coffee shop[ turnover starts to decline significant you know to ignore the 'good news'/soft landing stories in the media.

p.s What's happened here?...I go away for a couple of weeks and Pizza ovens has been replace by coffee machines...how can I ever have a chance of knowing what 'in fashion' if you lot are going to 'move the goal posts' every few weeks?! :-)

[Axeman123]

2 hours ago, ThoughtCriminal said:

It's a measure of how fucked we are that George Galloway is the most Right-wing MP in Britain, and it's not even close.

Galloway is a fundamentally disagreeable personality, but when you see the horrors agreeable personality types have nodded along with in order not to rock the boat with regard to child transing etc, I say the importance of having a stubborn and argumentative minority of people in society is under-appreciated.

[MrXxxx]

7 minutes ago, Harley said:

PS:  The old company store (maybe with tokens) type thing next?

Bring back Green Shield stamps, that's what I say!...oh, and the tokens for useless glasses you used to get in all the petrol stations.

[Harley]

Depleted our trading portfolio today.  Just one left waiting for the US open.  Only late because we didn't stick to the rules.  Nothing appealing atm.  Pretty much the only technically cheap things with a possible bit of momentum behind coming up on our radar are bond funds (86%).  Think I'll go and do an engine rebuild!

[Axeman123]

1 hour ago, AWW said:

Pret also gets a nice predictable revenue stream and some guaranteed footfall. They wouldn't have been able to do this ten years ago, but people are much happier to take out subs for services nowadays.

Recurring revenue streams are key to analysts share price targets too. Can't have a subscription sevice without collecting large ammounts of customer data either, which is again worth money. Just as McDonalds tells investors that it is a real estate business rather than a food one, the actual serving of coffee will soon be incidental to Pret's P&L.

[spygirl]

23 hours ago, spygirl said:

Youll be waxing about open outcry next....

All regulation has added transparency and took more n more leverage out of trading.

SW has long driven trading.

Sure, theres a few spaces for humans but the rise of SW platofmratons automation is unstaoppable.

Helped by a disaster every ~5y where a trader will basically blow up an orgs profits for the last ~10y.

In terms of traders and JSC.

Regulators want stuff cleared. and they want rid of of any nontraded/non transparent crap.

JSCV are becoming more n more tha market as days go by. Sure, they are mainly ETF. 

HSC profits cannot be ignored. Sure there might the odd genius - or lucky - trader.

However JSC consistently  produces v large returns.

Traders dont.

 

 

 

 

 

 

I knew it would nto be long ....

2 days later ...

SocGen trader fired for ‘unauthorised’ bets says ‘risk team and bosses’ share blame

Kavish Kataria complains he lost his bonuses and claims his options trades made money

 

He claimed he had made $50mn for the bank in eight months and complained his “previous year bonuses were also withheld and I was just paid seven days salary”. “I would like to ask during all this time there was no one to check what has been happening on the desk?” he wrote. “I accept I did trade options on Indian indices and according to me it was in my mandate and well within the trading limits.” “Trading industry is so big but there are no rules or regulations which fight for trader justice,” Kataria said. SocGen declined to comment on Kataria’s statement.

[MrXxxx]

1 hour ago, AWW said:

People aren't though - that's why Pret had to introduce a subscription. The marginal cost to Pret of making a cup of coffee is pennies. Better to have £30 a month from those people who do like Pret's brown piss and are happy to pay "20p a cup" as the man maths says, than to have people staying away because the cost for a single cup is £3. In fact, they're in the office 2-3 days a week and go to Pret twice a day, so they're paying about £1.30 a cup, which is what decent coffee costs on the continent. Pret also gets a nice predictable revenue stream and some guaranteed footfall. They wouldn't have been able to do this ten years ago, but people are much happier to take out subs for services nowadays.

I wouldn't be surprised to see "breakfast porridge" and "lunchtime soup" subs soon. Again, very little marginal cost.

Mmm, unfortunately Pret has now 'killed the Golden Goose' that was this predictable revenue stream due to really thinking about why it was so successful in the first place:

https://metro.co.uk/2024/03/15/pret-cracking-customers-share-subscription-20473911/

Rather than 'turning a blind eye' to people being a little 'flexible' with their subscriptions, Pret decided to be a bit authoritarian. As a result the customers experience/ease has been devalued, and people are now 'giving up' on Pret. This is really silly on Prets part for a number of reasons:

1. The small cost of this flexibility to Pret has cost them a predictable revenue stream.

2. If people no longer have a subscription then they are not 'tied' to Pret, and so can 'wander' between coffee shops and where they buy each day.

3. As for 2 above, if they are not coming in they are not 'up buying' on items that give a better margin/spend i.e. flapjacks, croissants, sandwiches etc.

4. If/when Pret decides to generate/reinstall such a subscription service again people will remember the previous one and the 'issues' that arose, so they [Pret] will be in a harder position than any other chain that decides to do the same but hasn't a history of previously failed subscription models.

If I was a CEO of another rival coffee chain I would be 'jumping' on this opportunity now by introducing a rival subscription for the following reasons:

1. You can 'catch' all of the disgruntled Pret subscribers that have or are considering leaving Pret's scheme.

2. With all the negative Pret stories in the media a rival scheme would a) be viewed as a 'knight in shining armour', and b) get free positive publicity on the back of the Pret story.

 

I do wonder how some CEO's justify their inflated salaries when they drop such obvious/silly bo££ocks such as this...perhaps some of it is arrogance and a disdain towards their customers a la the Ratner effect?

Edited May 2 by MrXxxx

[Loki]

23 minutes ago, spygirl said:

I knew it would nto be long ....

2 days later ...

SocGen trader fired for ‘unauthorised’ bets says ‘risk team and bosses’ share blame

Kavish Kataria complains he lost his bonuses and claims his options trades made money

 

He claimed he had made $50mn for the bank in eight months and complained his “previous year bonuses were also withheld and I was just paid seven days salary”. “I would like to ask during all this time there was no one to check what has been happening on the desk?” he wrote. “I accept I did trade options on Indian indices and according to me it was in my mandate and well within the trading limits.” “Trading industry is so big but there are no rules or regulations which fight for trader justice,” Kataria said. SocGen declined to comment on Kataria’s statement.

Fucking state of it

[Axeman123]

3 minutes ago, MrXxxx said:

Mmm, unfortunately Pret has now 'killed the Golden Goose' that was this predictable revenue stream due to really thinking about why it was so successful in the first place:

The ideal subscription customer is one that underuses it, or even forgets they have it and just lets the monthly payment keep going out of their account. The nightmare customer is one that actually uses the five free drinks a day etc that marketing uses to justify the monthly cost as good value to prospective customers, but actually entails the business making an overall loss. Plenty of subscription models will tighten up once they have a customer base established, and culling the pisstakers is probably a net gain for the P&L.

£30/month for even 20 hot drinks away from home (one a day at lunch or commuting in Monday to Friday) is still pretty good value for the convienience factor. If you actually meet friends there after work or on weekend afternoons etc you could at least double that number of drinks. The 20% on food isn't bad either. I have no interest in Pret etc, but plenty do.

[MrXxxx]

4 minutes ago, Axeman123 said:

The ideal subscription customer is one that underuses it, or even forgets they have it and just lets the monthly payment keep going out of their account. The nightmare customer is one that actually uses the five free drinks a day etc that marketing uses to justify the monthly cost as good value to prospective customers, but actually entails the business making an overall loss.

Yes and No.

If its a single product subscription i.e. gym membership then "Yes", but as in this case you can up-sell other higher margin items not included in the subscription, every time a customer is coming in less that's a missed opportunity AND one unique to your shop i.e. by not coming in maybe they are buying their sandwich at Greggs?..so in this case its a "No".

As  for your latter point that's also a "No", as a) the number of 'items per day' is limited, and so b) you base your cost/profit model [and so subscription fee] on this. Knowing these two variables then means you know the minimum [and maximum] profit you will be making from each subscription. In addition, you know your monthly revenue per subscription and so can use this for additional modelling....

...If a business doesn't do this there are three reasons:

1. They are using it as a 'loss leader'; a model used by supermarkets, to get people into the store buying additional items i.e. in this case cakes/sandwiches OR

2. To develop habituation as a method to break into a market or 'spoil' competitors. Once they have achieved their objective i.e. put competitors out of business they have developed a 'moat', and so can then start to increase their prices and recoup any initial losses/reduced profit margins.

2. Management incompetence, as its simple 'sums'/logic.

[tank]

4 hours ago, ThoughtCriminal said:

It's a measure of how fucked we are that George Galloway is the most Right-wing MP in Britain, and it's not even close.

 

The bold George is many things but he's definitely not right wing. 😆😆

[spygirl]

56 minutes ago, Loki said:

Fucking state of it

Raging Il Sun ....

 

[Long time lurking]

 Is this the reason for the Feds buy back scheme launched yesterday ?

Edited May 2 by Long time lurking

[headrow]

1 hour ago, Harley said:

Yep, it's everywhere now as the accountants point out the advantages of a stable revenue stream.  Usually of little/no benefit to me.  Latest was my dentist.

 

I got struck off from my dentist this week.

Tried paying for my checkup in cash and got told that they don't do change and that the £26.80 would in fact cost me £30 , I had my debit card on me but just walked out without paying. Them not giving change is now their problem not mine.

[Errol]

8 minutes ago, headrow said:

I got struck off from my dentist this week.

Tried paying for my checkup in cash and got told that they don't do change and that the £26.80 would in fact cost me £30 , I had my debit card on me but just walked out without paying. Them not giving change is now their problem not mine.

Go back and pay them in 5p pieces only.

[Bobthebuilder]

That was a whopper of a BATS divi today. Is it a special or something?

[Heart's Ease]

Pricking out seedlings and listened to Palisades Gold Radio last three. Ole Grandpa Simpson, Lyn and Jonathan Davies. What a line up! 

I like a bit of Adam Taggart but Palisades is hands down the best thing on the internet. 

JD worth listening to again. He has some interesting short and long term calls which very much chime with the basement thesis.