13 November 2011

Pub and Restaurant Sales Defy Economic Gloom

Despite bleaker news on the economy and consumer confidence, the British public is continuing to go out to eat and drink – with the country’s bigger pub and restaurant chains seeing increasing sales.

While retail numbers fell in October, leading pub and restaurant groups collectively saw like-for-like sales ahead 0.9% for the month, compared with the same time last year. Total sales, which include the effect of new openings, were up 5.1% on October 2010.

The figures come from the Coffer Peach Business Tracker, which tracks monthly performance across 24 major pub and restaurant operators. The October figures come on the back of a 2.8% like-for-like rise in September, a 0.6% increase in August and a 1.0% advance in July.

“People may be reluctant to go out and buy more ‘stuff’, but they are still willing to go out to eat and drink. It’s about the experience, especially if it’s good quality and great value,” said Peter Martin of Peach Factory, the market consultancy that produces the sector Tracker, in partnership with KPMG, UBS and the Coffer Group.

“Quality is still the main factor in choosing where to go out, but value is becoming increasingly important, and with the cost of eating-in and eating-out narrowing in many parts of the market, it remains an attractive proposition even for those with families,” Martin added.

Bigger operators were continuing to invest in their concepts and offers, and competition remained fierce, he said. Consumers were increasingly turning to brands, which offered quality, value, consistency and reliability.

As a result, the eating and drinking out-of-home market had continued to out perform the retail sector. According to the British Retail Consortium / KPMG Retail Sales Monitor, like-for-like retail sales were down 0.6% last month, with total sales up just 1.5% on October 2010.

Trevor Watson, director at Davis Coffer Lyons: said “The figures show that operators have been able to sustain and indeed grow top line sales. Some operators have benefited from the unseasonably warm and dry autumn. Management emphasis continues to be focused on defending margins against a background of rising costs in just about every key line of the P&L account.”

Richard Hathaway, KPMG’s Head of Travel, Leisure & Tourism, added: “Despite the turmoil in the eurozone, the performance of Britain’s leading pub and restaurant operators remains remarkably robust. Although like-for-like growth remains modest, continued positive figures in the current environment are a credit to the quality of the sector’s brands and customer offerings. Total sales growth of 5.1% demonstrates that operators continue to invest in new sites and upgrading or refreshing of existing portfolios.

“Looking forward, however, weak consumer confidence, high inflation and the on-going squeeze on personal finances remain the biggest threats to underlying growth for pub and restaurant operators and, unfortunately, these are not likely to go away anytime soon. The Chancellor’s Autumn Statement will therefore be eagerly awaited and the sector will be keen to see some growth stimulus measures that would encourage confidence during the festive season.”

Jonathan Leinster, Head of UBS European Leisure Research, observed: “The +0.9% like-for-like increase is comparable to the +1.1% recently reported by JD Wetherspoon for the quarter ended October 23. Consumers are still allocating discretionary spend to pubs and restaurants, however, UK pubs stocks have continued on their downward trajectory over the past three months.

“In part, this is due to ongoing concerns over UK consumer spending. However our UK household cash flow indicates that cashflow pre-savings should rise 2.5% in 2012, which would be similar to 2010 and a significant improvement on 2011. We believe that consumers do find value in some of the pub offerings and we maintain ‘buy’ ratings on JD Wetherspoon, Marston’s and Greene King.”