Pubs & Restaurants – A slower market:
Note, a lot’s priced in. The sector is cheap. Some PERs are single digit & yields are near 5%.
- It’s fast becoming official; the market is tougher.
- Peach Tracker for March & April (smoothing Easter) suggests LfL sales down c0.2%
- Marston’s yesterday alluded to tougher H2 comps (starting April)
- M&B today said that Q2 sales were down around 2.8%
- Restaurant Group has said a lot of things, few of them good.
The very near term:
- The weather can be ‘noisy’ in the shoulder seasons, spring & autumn
- Sun versus rain makes a major difference
- The April Tracker favoured restaurants, beer gardens weren’t full
Underlying trends, grounds for optimism:
- Wages: Real wages are rising. Costs are benign & employment levels are high
- Brexit: This should be a side issue but uncertainty impacts confidence & spending patterns
- NLW: This will raise labour costs, it’s a major headwind
- NLW continued: But prices may rise a touch & cash should be recycled. An extra tenner in wage packets is more likely to be spent in the pub than it is on a new house, car or holiday
The old truisms remain true (of course):
- Price rises have to be earned. Innovation is necessary. Incumbents must battle new entrants and remain relevant, they cannot coast.
- Consumers eschew gimmicks. Vouchers are best avoided. Price-gouging is a no-no.
- But for operators selling products that customers want at a price they are willing to pay, the outlook remains relatively positive.