Loungers is outperforming on “multiple measures,” with like-for-like sales growth, new openings, and cost control all exceeding expectations in FY24, according to analyst Liberum.
The all day café, bar, and restaurant operator delivered record revenue of £353.5m for the 53 weeks ended 21 April 2024, reflecting both like-for-like sales growth of 7.5% and the success of the openings programme.
According to Liberum: “The scope for rollout remains vast, the balance sheet is strong, and execution has been exemplary. This is not yet reflected in the share price, which trades on 6.8x EV/EBITDA.”
In addition, Loungers remains largely self-funding, with year-end non-property net debt of £9.7m. The group opened 36 sites in FY24 vs its initial target of 34.
“Once again, Loungers continues to outperform the sector,” Liberum added. “As ever, Loungers’ growth is consistent across location and age cohort.
“While recent growth has been predominantly price-driven, it is important to note that volumes are higher than pre-pandemic.
“We believe that Loungers’ enduring appeal is due to its consistent all-day offering of quality food and beverages at a competitive price point, with menu innovation introducing new and fashionable cuisines alongside the classic, top-selling items.”
Liberum maintains its “prudent assumption” of like-for-like sales growth of 4% in FY25 and FY26, with the recently launched Spring 2024 menu including ongoing innovation alongside a c5% price increase, maintaining value for money.
“Loungers’ implied 7.3% in the last 21 weeks also compares well against the sector’s 3.9% across November-March.”
With FY24 EBITDA ahead of market expectations – helped by easing inflationary pressures and strong cost control – margins are on a path back towards 13.5%, Liberum added.
“We estimated that Loungers was one of few operators to have improved volumes post-pandemic, taking price while maintaining its value credentials with customers. Like most operators, LFL growth since last year has been mostly price-driven, however volumes have remained robust and hence it retains headroom to move prices up again.”
