Leading analyst Nick Batram at Peel Hunt has said that the long-term dynamics of increased eating out should be positive for The Restaurant Group, but the challenge in the short to medium term will be the living wage.
Batram said: “JDW’s Q1 update suggests the costs may have been underestimated by the sector, although TRG should have more flexibility to mitigate some of the wage inflation. However, the group has proved in the past that it can cope with cost pressures, and in such an environment it is the high-quality operators that emerge as relative winners.
“The Restaurant Group, which will update next week, has made solid if not spectacular progress thus far in 2015. When the group last updated LFL sales for the 34 weeks were +2%, a slight decline from the 2.5% for the first six months. However, in 2014, the period between H1 and 34 weeks saw LFLs peak (+3.5%), declining to +3% for 45 weeks and ultimately 2.5% for the year as a whole.
“The Coffer Peach data also showed chain restaurants enjoying a strong September (LFL +2.8%) after a flat August. Given this, we could see LFLs at TRG strengthen from the 2% reported at the 34-week stage and, with strong cinema attendances, the run to the end of the year should also be positive.”
