Tough September trading hits restaurant, pub and bar groups

October 16, 2017

Britain’s managed pubs, bars and restaurants saw
like-for-like sales decline 0.9% in September as the public appeared to pull back
on spending on eating and drinking out, latest figures from the Coffer Peach
Business Tracker reveal.

Restaurants in London were worst hit,
suffering a 3.2% fall in collective like-for-like sales compared to September
last year. Across the sector, trading was generally better outside the M25,
down just 0.7%, compared to a fall of 1.6% in the capital.

“The negative September numbers follow
on from generally flat trading across the summer – August was ahead just 0.2%,
with London again feeling the pinch more – and will do little to help already
fragile business confidence among operators,” said Peter Martin, vice president
of CGA, the business insight
consultancy that produces the Tracker, in partnership with Coffer Group and RSM.

CGA’s latest Business Confidence
Survey, published earlier this month, showed that while 66% of bosses in the
sector were optimistic about prospects for their own company, only a third
(34%) were upbeat about prospects for the market as a whole, down from 43% in
May.

“Rising costs around property, tax,
people and raw materials have increased pressure on margins already this year
in what is an ever competitive market. Faltering sales will only add to sector
concerns,” added Martin.

“Interestingly, these weaker eating-out
numbers come in a month when retail sales grew, fuelled in part by higher food
prices in supermarkets, which may have helped dampened out-of-home eating.

“We have also seen the British Tourism
Authority announce record numbers of foreign visitors and an increase in
‘staycations’. However, these do not seem to have helped London, where domestic
tourism appears to be down,” Martin observed.

“Both pubs and restaurants had a tough
September, but it is worth noting that pubs and bars in London traded
relatively better, down just 0.5%, while restaurants away from the capital
actually saw like-for-likes grow marginally last month, up 0.2%.”

Total sales growth in September among
the 38 companies in the Tracker cohort was 2.6%, compared to the same month
last year, reflecting the continuing if much more subdued effect of new
openings. Underlying like-for-like growth for the sector, for the 12 months to
the end of September, was running at 1.2%, with total sales over the 12 months
up 4.1%.

“The one positive point is that
consumers are still going out to eat and drink, and although sales are sluggish
and hard won at least they are not suffering the way other parts of the economy
are, such as car sales,” Martin added.

Trevor Watson,
executive director at Davis Coffer Lyons,
said:
“These figure show that the
industry is under cumulative pressure not just from the headwinds of increased
costs, but also from weakening consumer confidence.
The property market for good sites is proving to be resilient at
present, however, there is no doubt that the months ahead will be a testing
time for weaker operators particularly those in high cost locations. We expect
to see an increase in availability of sites generally during the autumn.”
 

Paul Newman, head of leisure and hospitality at RSM, added: “There’s no getting away from the fact that
September has been a fairly dismal month for casual dining operators,
especially in the capital. These sales numbers continue to be underpinned by
the growing influence of food delivery and fierce discounting between brands.
Operators will hope that a focus on premiumisation over the festive period will
help to claw back some of this lost margin.”