18 April 2011

Consumers Not Giving Up on Eating Out

Growth among the UK’s leading restaurant and pub groups slowed in March – but the eating-out market still comfortably outperformed retail.

Latest monthly figures from the Coffer Peach Business Tracker, which monitors sector sales performance, show like-for-like (same-store) sales grew 0.9% in March, with total sales, which include new site openings, up 3.4% on March 2010.

They are in clear contrast with a much gloomier retail sector, where the British Retail Consortium reported March sales down 1.9% overall, and down 3.5% on a like-for-like basis.

The monthly Coffer Peach Business Tracker is produced by the Peach Factory consultancy in partnership with KPMG, UBS and the Coffer Group and records sales performance across 19 major pub and restaurant operators, including the likes of Mitchells & Butlers (the Harvester, Toby and All-Bar-One owner), Whitbread restaurants, Pizza Hut, Punch Pub Co, Gondola (owner of PizzaExpress), Tragus (Café Rouge and Bella Italia), Wagamama, Orchid Pub Co and TGI Fridays.

Despite the fact that they were down on the 3.1% like-for-like increase seen in February, the March figures show that consumers are still prepared to get out of the house for a meal and a drink, and in particular with the bigger, often branded, chains, said Peach Factory director Peter Martin.

“The slow-down may have something to do with the corresponding weeks last year including the first part of the Easter break,” he added. “So, these results may be slightly better than they appear,”

“However, trading is still tough and competition for the public’s time and money is increasing. There is a fight for market share across eating-out, and those continuing to invest in improving their offer and adding sites are the ones winning out,” he added.

Month on month, March sales were 22.3% ahead of February, however March was a five-week month compared to four-week February.

Mark Sheehan, managing director at Coffer Corporate Leisure, part of the Coffer Group, said: “Although trading remains tough, there is a strong sense of optimism in the market, backed up by canny investors such as Duke Street Capital and Lyceum Capital who have recently invested in the sector with their acquisitions of Wagamama and Eat respectively.

“Restaurant and pubs sales are holding up relatively well across the sector, although there is an ever-increasing regional bias towards the south east. London is now almost operating its own economy, benefiting from the weak pound and its position as a one of the world’ leading international centres.”

Will Hawkley, director in leisure at KPMG, said: “It will be interesting to see what impact the recent many tax changes have on consumer spending in April, set against the back drop of the upcoming spate of bank holidays and the recent good weather especially as households seem to be focussing on paying down mortgage balances. Can the sector continue to grow as real income for many households declines?”

Jonathan Leinster, head of European leisure and tobacco research, at UBS Investment Bank, said: “March data included Good Friday through Easter Sunday last year which made this year a difficult comparison. With that in mind, and considering the retail backdrop, we believe nearly 1% growth should be viewed as a good result.

“We believe all of March’s gain was price and mix. Growth is likely to have been mostly in menu pricing. In the first quarter, we believe, like-for-like sales growth excluding VAT and duty grew 5%. This compares favourably to +1% at Sainsbury’s excluding fuel, but including VAT, and to the general malaise in the retail sector. There was some pent-up demand early in the year for going out following December’s weather-related cancellations, and January 2011 had an easy comparison, but the continued divergence of results is curious. Perhaps lower restaurant meal inflation compared to general food inflation creates a perception of better relative value that can explain some of the difference in growth.

“We expect March trading for the listed pub companies to be stronger than the Coffer Peach Tracker result in March, and we are forecasting around 2% growth for April. We believe the listed companies have generally invested more recently into their estates, and are enjoying relatively better sales as a result.”

Coffer Peach Business Tracker is powered by Demographix