A leading analyst has warned that it fears that trading in the leisure sector is set to get notably tougher and as a result has reduced its estimates for the pub and restaurant groups it covers. In its latest sector note for July, Altium Securities has announced that it has cut the forecasts for 2009-2010 for all its food and drink companies, except for Domino’s Pizza. The group said that Domino’s had remained unchanged as it was believed that the company could deliver scale benefits over and above its current assumptions over the forecast period. The report said: “We fear things are currently getting notably tougher and with operators loathe to increase prices much to offset significant input price inflation, margins can only go one way- down. “With limited ability to cut costs in most instances (without harming service levels) changing guidance on new opening programmes (largely intact to date) would be the next chief risk to many estimates in our view.” The analyst said that it felt that it was inevitable that restaurant operators would begin to come under pressure despite their resilience to date. As a result it has forecast negative like-for-like sales in both 2008 and 2009, as well as lower margins due to significant cost pressures. Carluccio’s and the Individual Restaurant Company have both seen their like-for-like sales revised to minus 1% due to higher utility and food input price pressure. Clapham House’s estimates have been cut due to increased cost pressures and the timing of unit openings and The Restaurant Group is forecast to see l-f-l sales down by 1.5%. Greene King and Marstons’ managed division are estimated to see l-f-l sales down 2% and JD Wetherspoon is forecast to see l-f-l sales to July 2009 fall 2%, with a 1% fall in gross margins and a 5% increase in pub overhead costs. Fullers like the above-mentioned pub groups is also set to see margins reduced due to higher utility costs and food price inflation. The report concludes: “Many operators should still drive growth each year over the forecast period: albeit largely or exclusively driven by new units. “The pubcos are likely to find it tougher than the restaurant companies. The medium term attractions of the latter should return to the fore on a 12 to 18 month view.”