Leading analyst Jamie Rollo at Morgan Stanley reports on a roundtable meeting with Stonegate Pub Company, which has seen trading pick up in February from the industrywide slowdown in January, and how the group has seen upside from competitors deprioritising the drinks part of their business.
Rollo said: “We held an encouraging roundtable with Stonegate, the UK’s fourth largest managed pub company (post the Greene King/Spirit acquisition). Management confirmed the slowdown in industry trading in January that has already been discussed by other companies, and noted a greater degree of predetermination about when people decide to go out (more volatility, with festive / pay days strong and quieter times weaker).
“Pub trading has not picked up as much as the economic tailwinds might suggest, but historically pubs have been seen as the sector to be last affected in both the downturn and upturn as consumers focused on bigger ticket items, so hopefully the upturn will come. We were encouraged to hear from Stonegate that industry trading in February has been somewhat better (relief after the growing “Dry January” fad?), and that another beer duty cut looks likely (“best Chancellor in 40 years”, see here).
“Stonegate sees upside from competitors deprioritising the drinks part of their business, an area on which it is unashamedly focused. It also thinks the proposed MRO bill potentially means years of uncertainty for the Tenanted and Leased pub sector, with some good quality pubs likely to be sold off to Managed operators.
“Wetherspoon is still seen as something of a destabilizing competitor, and questions are being raised in the industry about whether its high levels of investment in staff and amenity are paying off.”
