Summer dry spell Greene King boss explains how the holidays have given the pub trade a hangover
A RISE in the cost of overseas holidays is likely to constrain consumer spending in pubs, according to the boss of one of the UK’S biggest chains.
Shares in Greene King tumbled nearly 16pc yesterday after the chain revealed underlying sales had fallen in recent weeks. Rooney Anand, the chief executive, said discussions with customers and managers suggested consumers were feeling the pinch after their summer breaks.
The fall in sterling means holiday spending money goes less far than in previous years, and Mr Anand said he thought this had been a key factor behind soft recent trading, as well as poor weather during the summer.
“The types of things customers are saying is that it has cost them more to go on holiday, and they had taken out more euros than they thought they would have to,” Mr Anand said.
Alongside the return to school, which inevitably throws up things such as uniform costs, Mr Anand said consumers were increasingly reluctant to put more money on their credit cards. The chief executive added that while he was not drawing direct parallels with the run-up to the financial crisis in 2008-09, there were similar patterns playing out now.
Mr Anand said the part of its food-led estate targeted predominantly at bluecollar workers was the first to weaken in the run-up to the financial crisis and that this part of the business was a major factor in the 1.2pc drop in like-forlike sales at the pubs it owns and runs in the first 18 weeks of this trading year.
Shares dropped 103.5p to 555.5p yesterday but Mr Anand said, while he was cautious about future trading, the company boasted healthy margins. He added a £60m rise in costs had been offset by £45m in cost savings.
Mr Anand also said its leased and tenanted business had continued to perform well, with like-for-like net profit up 1.4pc after 16 weeks. And the 0.5pc fall in volumes at its brewing division was better than the 2.9pc drop in the wider UK ale market. Mr Anand credited this partly to its innovations in craft beer, with its craft academy for young brewers helping it happen upon new recipes.
Simon French, a Cenkos analyst, said that weaker consumer confidence alongside increased costs would mean “some downward pressure” on the City’s full-year forecasts for the brewer. “Furthermore, the read-across to other pub companies will likely see weakening of their share prices,” he added.