On the face of it, Luminar’s interim results last Thursday seemed to suggest there were grounds for optimism. To my mind, however, it’s still a bit of a horror show.
Like-for-likes have come back a little, from -20.2% at the half year to a better -16.9% in the seven weeks to 14 October. However, this time last year, Luminar announced that like-for-like sales in the seven weeks to 15 October 2009, were down -14%.
So it does not take a mathematical genius to work out that a -16.9% decline on top of a -14% decline last year is not the stabilisation story that stakeholders are desperately seeking.
As Paul Hemming, head of corporate finance at Zolfo Cooper, said: “Whilst on first impression it appears as if management are beginning to turn things around, the recent trading ‘improvement’ to minus 16.9% must be viewed against much weaker comparatives.
“September 2009 saw a significant drop in like-for-like sales across the nightclub market and therefore Luminar are unlikely to have had any real performance improvement.
“It will take longer before we know if management’s hard work is really paying off.”
The group also revealed last week first half pre-tax profits (before exceptional items) of £1.8m, down from £5.2m last year, which in turn were down some 40% on the year before that. True, the business is getting smaller, but Luminar cannot keep selling six, eight, 10 nightclubs a year, and the profit erosion is way out of kilter with the estate rationalisation.
There are some big issues at play here. Apparently, due to the ebb and flow in population characteristics, the number of people in the UK turning 18 is currently falling year-on-year, which means that Luminar’s pool of new customers is shrinking.
Research into the nightclub market also suggests that people are stopping going to nightclubs (as an entrenched regular activity) at an earlier age.
The share of spend that Luminar takes is relatively small. Its average spend per visit is about £12 – just over £3 on the door (down 10%) and £8.37 on drinks (up 1.37%). It suggests its customers are spending most of the money they set aside for a night out elsewhere – in supermarket drinks aisles and in other venues.
There is also the fact that previous management regimes spent a good deal of time and money creating one-room mega nightclubs, which when full are brilliant places to be. The trouble is that not enough of them are very full at the moment, which must have a damaging impact on their ongoing appeal.
None of this is to suggest that the business cannot be turned around but what is clear is there remains significant challenges.
What is clear is that the issues dogging Luminar are not just about the economy - too much emphasis has been placed on the downturn as the source of the problem. Youth unemployment must be a big issue, but it is not the only issue.
One of the key tasks for chief executive Simon Douglas and his management team is relevancy, and differentiation, of product.
As has been written in this column before Luminar also has to compete with the likes of Yates and Revolution, which do not charge an entry fee before a certain time and have much of the same appeal – drinks, music, the possibility of meeting your future spouse and so on. If Luminar venues are bigger versions of Revolution or Yates they will fail. They have to be sufficiently different and sufficiently special in order to lure customers in.
That Luminar is only just introducing cocktails and premium drinks brands shows it has not been at the races for some time. What operator who wants to win in the 18-24 age segment – especially one that needs to operate the very best nightspot in town – can afford not to stock the killer brands?
To be fair this reality is not lost on Douglas & Co. They seem to fully appreciate that the Luminar product has to improve dramatically and have set about this task with vigour, be it re-instating proper glass, increasing the frequency of live music acts at clubs, creating different nights to appeal to different customer segments (ie student nights, comedy nights), and tie ups with the best club and dance music brands, such as Ministry of Sound.
But what is clear is that Luminar needs to get somewhere fast.
When operators get lazy – either in their actions or their thinking – customers are only too willing to get up and walk away.
Nick Basing, the recently-installed chief executive of Essenden, the tenpin bowling centre operator, spoke of how that part of the leisure market had “fallen asleep at the wheel” – the standards, level of amenities, food and drink propositions were all way off the mark. Now, consequently, he and his team have a big catch-up game on their hands.
Unfortunately, it is the same situation for Luminar.
The good news is that Britain’s biggest nightclub group does have in place credit approval for a new banking facility which will place the group on a more solid footing.
Pizza the future
Gondola Holdings, the casual dining group led by Harvey Smyth and backed by private equity giant Cinven, is definitely not asleep at the wheel.
After bringing next-generation ASK and Zizzi formats to the market in the past year, the group has unveiled its vision of the future for its stand-out killer brand, the 380-strong Pizza Express business.
As Mark Angela, who heads the chain, said last week at the grand unveiling, not everything that has been introduced at Pizza Express Richmond – dubbed the “Living Lab” – will work but what is clear is that Gondola are serious about propelling the brand forward, and the new eaterie is a bold statement of intent.
New innovations include a great new look utilising a palate of bright colours (lots of red, white and blue), a kitchen that is slap bang out in the restaurant (replete with a viewing-come-dining bar), lots of new food products, a new interactive kids area plus an inordinate number of ‘sound’ disks that litter the open-plan ceiling, which serve to reduce the noise in the restaurant by 50%, aiding the flow of conversation (apparently, the document that explains the technology and patent of these disks runs to 160 pages). There are also a number of giant domes, a bit like giant lampshades above some tables, which have been installed also in the name of conversation.
Anyway, there’s too much great stuff to document here – for the full story visit www.futureexpress.co.uk or better still, visit Pizza Express, Red Lion Street, Richmond-upon-Thames, Surrey, TW9 1RE.
