28th Sep 2023 15:18
(Alliance News) - Mitchells & Butlers PLC on Thursday reassured investors with some "strong" trading in the final quarter of its financial year, with customer's still eating out despite tighter budgets.
"Pub giant Mitchells and Butlers has been making hay while the sun shines, and through some rain too," said Derren Nathan, head of equity research at Hargreaves Lansdown.
The Birmingham, England-based company operates restaurants and pubs under brands that include Harvester, Toby Carvery, All Bar One, Nicholson's and O'Neill's.
On Thursday, it reported "strong" trading in the final quarter of its financial year, saying annual results will be at the top end of market expectations.
Mitchells & Butlers reported like-for-like sales growth of 9.7% in the three months that ended September 23, a faster pace than the 9.1% growth seen in the financial year as a whole. The pace of increase matched the third quarter. Second-quarter growth was the weakest at 6.4% and first-quarter growth the strongest at just over 10%.
Total sales for the year were up 11%.
Within the like-for-like full-year growth figure, food sales increased by 8.6% and drink by 9.9%. In the financial fourth quarter, this relative performance was reversed, with food sales up 12% and drink up just 6.4%.
Mitchells & Butlers noted that like-for-like annual sales were up 11% from pre-Covid financial 2019, driven by spend-per-head.
Nathan noted that "the out-performance against the rest of the market is impressive, particularly in a time when customers pockets are facing an unprecedented squeeze." He added that it should bring "some comfort" to investors."
AJ Bell's Russ Mould added that "people may be feeling the pinch but they still need the release of an evening out."
"The appeal of its offering is reflected in its outperformance of the market, suggesting its venues are sufficiently attractive and are in the right locations to pull people in on a regular basis," Mould continued.
Looking forward, it said cost headwinds were abating and remain at the bottom end of the range previously expected.
Mitchells & Butlers said it remains "mindful" of the challenging macroeconomic environment and pressures on the UK consumer, but is confident that the current financial year will be at the top end of consensus expectations and lend momentum to financial 2024.
"We are delighted to have continued our strong like-for-like sales performance through the fourth quarter, underpinned by volume growth and reflecting increasing out-performance against the market," said Chief Executive Phil Urban.
Mitchells & Butlers shares were up 4.2% to 223.60 pence on Thursday afternoon in London. In the last 12 months the stock is up 66% and in the year-to-date shares have risen by 56%.
"However this fails to capture the broader long-term weakness - its share price is still struggling to regain its pre-covid levels," warned Victoria Scholar, head of investment at interactive investor.
In 2019, Mitchell & Butlers shares traded as high as 420.35p, which is about 88% higher than the current market price.
Scholar added: "Mitchells & Butlers is trading sharply below the highs seen in 2019 just before the onset of the pandemic. A combination of lockdowns and travel restrictions followed by the revival of post-covid inflation and cost of living pressures have punished the stock."
By Sophie Rose, Alliance News reporter
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