Key Takeaways
Shares of Mitchells & Butlers PLC (LSE:MAB), the owner of All Bar One and Toby Carvery, fell as much as 8.7% on Thursday after the company reported flat underlying profits for the first half of the year, citing inflationary pressures and a sharp slowdown in sales growth.
"We have delivered another robust performance despite the significant inflationary cost challenges facing the sector," Chief Executive Phil Urban said in a statement. He highlighted that customer demand remained resilient and that the company was continuing to outperform the market.
For the 28 weeks ending April 11, the pub and restaurant group posted adjusted operating profits of £181 million, unchanged from the prior year. Total revenue increased by nearly 3 percent to £1.49 billion, while statutory pre-tax profit rose 7 percent to £143 million. However, a significant moderation in recent sales spooked investors; after growing 4.5 percent in the first quarter, like-for-like sales growth slowed to 1.8 percent in the second quarter and to just 1.1 percent in the last three weeks.
The results show the pressure on consumer discretionary spending and the persistent impact of inflation on the hospitality sector. While the company said it was outperforming the market, the slowing sales trend raises questions about demand heading into the crucial summer months. The company attributed the recent slowdown to tougher weather-led comparatives and disruption from tube strikes.
Cost inflation remains a headwind, though guidance improved modestly. The company now expects inflationary pressures to be around £120 million for the full year, down from a previous estimate of £130 million.
Despite the share price drop, some analysts saw a resilient performance. "The valuation looks undemanding given M&B is still taking share, deleveraging and investing at attractive returns," said Anna Barnfather at Panmure Gordon, who noted the shares trade at the bottom of the pub sector range. The company also managed to reduce its net debt, excluding lease liabilities, to £747 million from £860 million a year earlier.
The sharp slowdown in recent trading suggests consumer budgets remain tight, a potential warning sign for the broader hospitality industry. Investors will be closely watching the company's next trading update for any signs of stabilization or further decline in consumer spending.
This article is for informational purposes only and does not constitute investment advice.
