14 September 2011

Eating-Out Survives Impact of August Riots

Spending in Britain’s leading pub and restaurant groups grew marginally in August – despite the effects of the rioting that hit many parts of London and other major cities. Collective like-for-like sales were up 0.6% against the same time last year, with total sales, which include the effect of new openings, up 3.7% on August 2010.

The figures come from the Coffer Peach Business Tracker, which monitors sales performance across 23 major pub and restaurant operators.

“This is not to diminish the devastation caused to individual businesses caught in the centre of the rioting nor the disruption caused across the wider market as sites were forced to close at the height of the trouble,” said Peter Martin of Peach Factory, the market consultancy which produces the sector Tracker, in partnership with KPMG, UBS and the Coffer Group. “But taken overall, the eating and drinking out sector has come through surprisingly well – thanks in large part to the public who have continued to go out to eat and drink.”

However, results for the month were far from uniform. “Unsurprisingly, the restaurant sector with more high street and urban locations had a much tougher time than the pub and pub restaurant sector and did see an overall decline in sales over August because of the riots,” added Martin.

During the week of the riots itself, the market was down overall, but by less than 2%. “Restaurant chains saw a bigger drop, but not the double-digit decline that some observers have been suggesting,” said Martin. “Pub trading over the country as a whole was flat that week.

“It shows that away from the trouble spots, life largely carried on as normal, and once the worst was over seemed to get back to normality fairly quickly, and that included going out. The fact that the disturbances were at the beginning of the week will also have lessened the overall sales impact.

“Considering the current economic climate, the monthly performance has to be seen as encouraging – although it has to be remembered in was also in the middle of the summer holidays,” said Martin.
The previous month of July had seen like-for-like sales increase by 1.0%, with total sales 3.1% ahead of the same time last year. Month-on-month, August was down 1.8% on July.

Martin concluded: “There has been a lot of speculation and anecdotal evidence around, but our Tracker numbers provide the most accurate and reliable picture of trading.”

The figures also show that pub and restaurant chains continued to out-perform the retail sector. According to the British Retail Consortium / KPMG Retail Sales Monitor, like-for-like retail sales fell 0.6% in August.

Commenting on the latest figures, Mark Sheehan, managing director of Coffer Corporate Leisure, part of the Coffer Group, said: “These figures are very encouraging and better than we would have expected given the combination of the riots, economic concerns and a very soggy August, which have all had a knock-on effect on consumer spend across the country.

“Anecdotally, it has been a challenging summer for operators both in and outside London. Yet the increase in collective like-for-likes within the pub and pub-restaurant sector, are a much truer reflection of the mentality we are experiencing at the transactional end of the market, where there is almost insatiable demand in certain areas and an acceleration in transactions being completed. The economic outlook may be uncertain but cash is still being spent.”

Richard Hathaway, Head of Travel, Leisure and Tourism at KPMG in the UK added: “Although year–on-year the sector has seen some growth and continues to outperform the general retail sector, performance has been essentially flat, bearing in mind inflation as well as the increase in VAT, which will be responsible for some of the growth.

“Month-on-month figures show a small drop in sales, the riots being one of the main reasons. However, the riots were not widespread enough to have a significant long-term impact. Instead poor consumer confidence, high inflation and the on-going squeeze on personal finances remain the biggest threats to meaningful growth in the sector and this is not likely to change very soon.”

Jonathan Leinster, Head of UBS European Leisure Research, observed: “Listed pub companies have had mixed results during the late July and August period with Whitbread continuing to see lfl decline, Wetherspoon seeing small positive lfls in August, while Greene King produced much stronger results, up 4.2%, during the July-August period. All the pub groups said that value deals were driving volumes.

“UK pub stocks have declined between 5% and 25% since the end of June, in part due to heightened concerns over UK consumer spending. However our recently updated UK household cash flow indicates that cashflow pre-savings should rise 2.5% in 2012, which would be similar to 2010 and a significant improvement on 2011, at -0.4%. Consumers are finding value in some of the pub offerings and so we maintain ‘Buy’ ratings on Wetherspoon, Marston’s and Greene King.”