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Morning Briefing Strap Line
Mon 22nd Oct 2012 - Breaking News
Collyer – two year sales growth risen to 3.2 per cent from 2.2 per cent for major quoted operators: Deutsche Bank analyst Geof Collyer has reported that his survey of the major quoted pub and restaurant companies shows they have collectively lifted their two years sales growth figures to 3.2 per cent from 2.2 per cent. But he warned that sales growth could slow as operators create even more capacity. Collyer said: “Most companies would highlight that 2011 and 2012 have been two of the most volatile years in recent memory. This volatility is exacerbated by the growth of food where spend per head is higher than the average trip to the pub but less frequent. It is also important to look at this kind of trend since almost all of the groups in the survey have different year-ends so the longer term trend is more indicative for comparable performance. The total sales picture is better, reflecting investment and rollout by the major pub and restaurant companies and eating out brands that comprise the 25 groups that contributor to the Coffer Peach data. We estimate the rolling 12 month total sales growth at +5.1 per cent. We have taken the current month and aggregated the same month in the prior year to get a trend that strips out the odd changes in holiday dates, weather differences, and general month-on-month seasonality. The average seems to be coming out at just over +three per cent for 2012, which generally seems to be slightly above or in line with cost inflation as defined by most companies in the sector. Operational gearing from top line growth does not always drop through to the bottom line as it should. JD Wetherspoon has frequently stated that it needs about two per cent like-for-like growth (all other things being equal) to offset cost inflation. On a two-year view for full years, all of the major quoted groups are delivering above this three per cent trend line. And as we also pointed out, those with London and south east exposure (Greene King, Spirit, Fullers, Young’s) were delivering comfortably above this at around plus eight per cent. However, we would also point out that the strong like-for-like sales growth during 2011 was accompanied by a reduction in the pace of additional space rollout, not just a weaker recession-impacted 2010. A common complaint against the high street operators in the general retail sector historically has been that the addition of new space has put existing shops under unnecessary sales pressure. Just as the pace of like-for-like sales growth seems to be improving – the two-year trend has progressively risen from +2.2 per cent for the two years to December 2010 to +3.2 per cent for the two years to September 2012 – it is quite possible that the pace of like-for-likes growth slows due to too much capacity coming on stream. It may be that companies are planning on a sales boost once the UK comes out of the current economic slough, but by way of a warning on this front, it is worth noting that like-for-likes have been either negative or below +1.5 per cent in six of the nine months year-to-date.”

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