19 July 2011

Eating and Drinking-Out Bounces Back in June

Spending on eating and drinking out-of-home bounced back in June after a flat May with like-for-like sales for the month up a healthy 3.9% on the same time last year. Total sales were ahead 4.7%.

The figures come from the Coffer Peach Business Tracker, which monitors sales performance across 23 major pub and restaurant operators.

Much of the recovery can be put down to the half-term school holidays and the football World Cup effect, with restaurants and food-led pubs in particular benefiting from the fact that there was no major tournament this year, commented Peter Martin of Peach Factory, the market consultancy which produces the sector Tracker in partnership with KPMG, UBS and the Coffer Group

The data also shows pubs and restaurants continuing to out-perform the retail sector. According to the British Retail Consortium / KPMG Retail Sales Monitor total UK retail sales were up just 1.5% in June.

“The football World Cup in June last year had a mixed impact. While drinks-led pubs in general saw an upside, restaurants generally suffered sales drops. Big sporting events are a mixed blessing – and even pubs didn’t perform as well as they had hoped last year,” added Peter Martin.

“That said the increase this June shows an underlying resilience in consumer spending on eating and drinking out, which seems less fickle than retail. While it would be premature to forecast any significant upturn for the market, it remains solid,” he added.

May had seen a slight 0.3% decline in like-for-like sales – following a 3.8% uplift in the holiday month of April.

Commenting on the latest figures, Mark Sheehan, Managing Director, Coffer Corporate Leisure, said: “Multiple pub and restaurant operators are continuing to gain market share from independent operators, especially outside London. The World Cup last year was particularly tough for restaurants who are consequently seeing good lfl growth on weak figures. The hospitality sector is working hard to combat weak consumer spending.”

Richard Hathaway, Head of Travel, Leisure and Tourism at KPMG in the UK added: “These are pretty respectable figures, showing that smart operators and dynamic brands in the sector continue to take a growing share of the UK consumer’s hard earned and shrinking disposable income.

“Eating-out is still on the agenda for many households, despite considerable doom and gloom in the economy, and there being no real sign of this changing before the end of the year.”

Jonathan Leinster, Head of UBS European Leisure Research, said: “June was better than expected given all the negative news around the U.K. consumer, and we suspect that the strength in the Coffer Peach Business Tracker will have come from the branded restaurants that have easy comparisons due to last year’s World Cup.

“Consumers are still allocating discretionary spend to pubs and restaurants, with like-for-like sales averaging 2.6% since December. While UBS expects household cash flow to be under pressure this year, there is still demand for eating and drinking out. We believe this points to market share gains from value formats. Large listed pub companies with scale, which have been investing through the downturn, should be well positioned. We have ‘buy’ ratings on JD Wetherspoon, Marston’s and Greene King.”

He added: “Some investors have raised concerns about margin pressures as utility and food and beverage contracts are renewed. We are less concerned. Groups dealt well with much greater input cost pressures in 2008/2009, and labour and rent costs are much less of an issue now.”