A leading analyst has said that due to the poor weather and very strong comps, he expects the third quarter performance from Spirit Pub Company to be more staid and pointed out that the last couple of months had been trying for the pub sector as a whole.
Geof Collyer at Deutsche Bank said: “We expect the London presence to have helped Spirit remain ahead of most of its peers, though the recent retail like-for-like experience reported by most in the sector for April and May has been disappointing.
“Marston's (95p) nine weeks to 12 May were -0.1%, including -11% for the last two weeks of April; M&B (218p) five weeks to 12 May were -2%; Young's (651p) reported -2% for the seven weeks to 21 May and Fuller's (828p) like-for-like retail sales for eight weeks to 26 May were -2.3%. Greene King's like-for-like were +4.5% for the 13 weeks to 15 April, but do not include the Royal Wedding period in the comp. It is a marathon not a sprint, but the past couple of months have been trying.”
Collyer said: that after modestly softer like-for-likes across Spirit managed estate in Q2 (vs. Q1), he expects the pace of sales growth in retail to slow again in Q3.
He said that total sales across Spirit’s managed estate would be helped by pub reopenings after the refurbishment during H1.
He said: “The increasing food mix (40% of retail) in most of the brands is also helping revenue growth. The like-for-like growth in food sales should remain ahead of drinks.
“In its Q212 IMS, the company reported the worst like-for-like decline (-6.4% yoy) in its net income for its leased estate that we have seen in the sector this year. We discussed in our 28 May weekly The Leisure Centre how management is looking to change the shape of the T&L business, but we see this as a slow process.
“Management strategy is to exit 80 underperforming pubs and to convert 200 pubs into franchises. In addition, around 100 pubs are to be converted back into managed, though, as with Greene King's plans on reverse transfers, we see many of these becoming franchises as opposed to full-on managed pubs in time. We would be looking for management's plan on the timeline for the conversion process.”
