Davis Coffer Lyons

Severe weather during early January took its toll on Britain’s eating and drinking out market. Leading pub and restaurant groups collectively saw like-for-like sales dip 5% against the same month last year, as people stayed home rather than brave the snow.

The figures come from the monthly Coffer Peach Business Tracker, run by Peach Factory in partnership with KPMG, UBS and the Coffer Group, which monitors performance across the UK eating and drinking-out sector.

”With so many city centres feeling more like ghost towns it is perhaps surprising that the figures weren’t worse,” said Peter Martin of Peach Factory. Total sales were down 3.2% on January 2009.

“It proves once again the major effect that bad weather can have on this sector.”

The disappointing January results come on the back of a strong December, which saw like-for-like sales ahead 2.9% on December, 2008 - marking a healthy performance by big name operators. They also follow nine consecutive months of collective positive like-for-likes for the 15 companies making up the Business Tracker group, which include leading managed pub chains Mitchells & Butlers, Whitbread and Punch Pub Co and leading casual dining restaurant groups Gondola, Pizza Hut and Tragus.

January sales were 35% below those of December - a comparison made worse by the fact that December was also a five-week month.

”However, bosses in the sector remain generally optimistic,” added Martin. Peach Factory’s Business Leaders’ Survey, to be published later this week, shows that just under 50% of senior executives are fairly optimistic about the coming year, compared to a little over 20% who are fairly pessimistic and 30% who are neutral. The positive sentiment is strongest among food-led rather than drink-led businesses.

The aggregated results for January are:
Like-for-like sales change (against same month last year): - 5.0%
Total year-on-year sales change: - 3.2%
Monthly sales change (against December 2009): - 35.1%

David Coffer, chairman of the Coffer Group, said: “The extreme weather conditions changed consumer patterns and downgraded turnover across the board in January, a month traditionally lacklustre in the trading calendar. The real effect of the discounting deals that the industry has seen in the last 18 months will surely come to surface soon and it will be interesting to see the impact it will have on the bottom line. The test of recovery will be in the next quarter’s results.”

Richard Hathaway, head of Travel, Leisure and Tourism at KPMG commented: “This year’s freak winter weather made January trading for the pub and restaurant sector even tougher than usual. This is the first negative month of like-for-like sales since last spring and the largest decrease in month-on month sales since the Tracker was launched. The dramatic impact the weather had on reduced footfall has been reflected across other sectors - KPMG’s Retail Sales Monitor saw the worst January sales growth in 15 years.

“However, January 2010 aside, considering the severity of the downturn over the past 12 months the leading pub and restaurant groups have proven to be very resilient in the circumstances. Even in the weaker months, trading hasn’t been as bad as could have been expected.

“Key to this success has remained understanding what customers want in these times and providing a great experience and good value. If you can get this right, the tracker shows that despite economic difficulties, people will still eat out.”

Jonathan Leinster, head of European leisure and tobacco research, at UBS Investment Bank, added: “For the first three weeks of January, Greene King’s and Marston’s managed pubs had already reported like-for-like sales declines of 4% and 6%, respectively, so a poor number for the industry ought to have been expected. Snow and ice clearly took their toll, but the VAT increase and a difficult comparison aggravated an already difficult trading situation.

“Total sales across the sample fell 3.2% year-on-year. The difference between this and the like-for-like number is clearly new site openings. We expect the difference between the two statistics to narrow in 2010 since few formats have added sites in the last two years.”

“Comparisons for most of the listed managed pub companies are easier in February and March than they were in January. Marston’s had some soft results early in February 2009 due to snow in the Midlands. Over the two months, like-for-like sales averaged -1% for them. JD Wetherspoon and Mitchells & Butlers were trading around +0.5% on a like-for-like basis a year ago. Greene King was the stand-out a year ago with like-for-like sales around +7%, so is facing a very difficult comparison. This was due to their very successful reinvigoration of Hungry Horse and the locals businesses.”

For more information, contact:
Helena Holm, The Coffer Group,
0207 299 0709, hholm@coffergroup.co.uk
or
Peter Martin, Peach Factory,
01704 550383, peter@peach-factory.com