Warm spell eats into Restaurant Group’s profits

THE owner of Frankie & Benny’s is expected to report another fall in profits next week, with chief executive Andy McCue expected to outline the progress of turnaround efforts.

A consensus of City analysts forecast that half-year pre-tax profit at the Restaurant Group will fall over 30 per cent to £25.2million as warm June weather and poor cinema attendance look set to have dented footfall. Because of their locations, sales at the group’s restaurants, which also include Garfunkel’s and Chiquito, are closely aligned to cinema attendance.

Tim Barrett, analyst at Numis, said: “A weak film slate and record June weather were unfavourable for cinema attendance, meaning it seems reasonable to expect a small, temporary moderation in footfall.”

In its last trading update, the Restaurant Group said like-for-like sales fell 1.8 per cent in the 20 weeks to May 21, with total sales declining 1.5 per cent.

However, the figures marked an improvement on the fourth quarter, which saw like-for-like sales drop 5.9 per cent.

For the half year, Numis is pencilling in a 2.5 per cent dip in sales, with the performance of the firm’s pubs business likely to have been boosted by the warm weather and mitigating a decline in restaurants. As part of Mr McCue’s turnaround, the company has been closing under-performing restaurants and rejigging menus.

It comes after the Restaurant Group admitted it had lost value-conscious customers at Frankie & Benny’s after price hikes, with the firm pledging to “look at the pricing architecture of the menu” and “reinvigorate the value offer” in a bid to attract more families to its outlets.

Mr Barrett added: “Investors are well aware that 2017 is a transitional year – the new CEO only unveiled his strategic findings in March and menu rollouts were only completed at the start of May.

“We therefore expect the market’s focus to be on the customer response to new menus, execution of the cost savings plan and exiting closed properties.”

But rising inflation triggered by the collapse in the pound could hamper Mr McCue’s plans, with recent industry data indicating that people are opting to eat out less as the resultant squeeze on consumer spending intensifies.

Last year, the Restaurant Group posted a pre-tax loss of £40million after being stung with a £117million exceptional charge linked to restructuring efforts.