Leading analyst Douglas Jack at Numis believes that the combination of rising consumer disposable income and strong cinema prospects leaves The Restaurant Group (TRG) best placed to outperform operationally next year.
He said: “Eating out tends to accelerate when the economy strengthens, in addition to which there have already been signs of customers trading up and restaurants reducing voucher promotions. This combined with a potential 5-10% increase in cinema attendance (strong releases; 2014 comps being c.9% below 2009-12’s level), leaves TRG) best placed to outperform operationally next year, in our view.”
According to the Coffer Peach Tracker, managed pub and restaurant LFL sales rose 3.4% in November. LFL sales have risen for 20 consecutive months, during which licensed retail has outperformed retail (BRC) in 16 of the last 20 months.
Jack said: “Restaurant chains (+4.8% LFL sales) outperformed managed pubs (+2.8%) in November. This partly reflected food (+4.0%) growing faster than drink (+1.5%) given that food sales account for an average 45% of revenue in managed pub chains vs. 75% for the restaurants. London remains more buoyant than the rest of the country with LFL sales up 6.1% in November, compared to 2.4% outside the M25.
“Total sales, which include the impact of new openings, were up 6.8%. This implies 3.4% net expansion across the Tracker’s 30 restaurant, bar and pub companies, dominated by restaurants (total sales up 10%: 4.8% LFL; 5.2% net expansion), especially outside of London.
“LFL trading prospects are good, in our view. December trading should benefit from Christmas bookings being 5%+ ahead for many operators. Thereafter, trading should benefit from rising average wages (net income was up 2.2% in October, according to the ASDA Income Tracker), combined with declining cost inflation (essential item inflation in October: 1.1%), particularly with the full benefit of lower crude oil prices yet to feed through to consumers.”
