TGI Fridays sees 2018 sales slump

TGI Fridays UK saw revenue fall in 2018 but backer Electra has stressed that like-for-likes have picked up in the current financial year.

Sales for the UK franchise of the US-themed chain stood at £208.8m last year, down from £216m in 2017 and £211m in 2016, an update on Electra’s portfolio reveals. It said that last summer’s hot weather and World Cup fever combined with the problems of over-supply in the casual dining sector and rampant promotions had hit sales.

EBITDA during the period fell from £33.3m to £25.3m while operating profit dipped year-on-year from £22.3m to £14.2m.

Electra said that as of 31 March, TGI Fridays’ investment fair value was £132m, compared to £125m in September 2018. It means the valuation has returned to the same level as 2014, when Electra first invested in the business.

On Monday the brand opened its 86^th UK site in the Rushden Lakes complex in Northamptonshire.

In January 2018, Electra put the chain on the market but ended the formal sales process eight months later. It has since said that discussions continue on possible individual portfolio or group sales across its investments. This morning, the group said its strategy was to ”conduct a managed wind-down of the portfolio over a period of time, allowing optimisation of returns, the return of cash to shareholders, and ultimately winding-up of the company in the medium term”.

Reporting on the performance of TGI Fridays, the update said: “Demand in the casual dining market continues to grow and offers attractive opportunities for those brands that keep up with changing consumer expectations. TGI Fridays continually seeks to improve its proposition, updating its menus, refreshing its stores and developing its staff, as it aims to provide an experience that is valued by its customers. Over the last year, new healthier menu items and an updated ordering platform have been introduced.

“The business continues to pursue a strategy of sustainable growth through highly selective store expansion and has a strong pipeline of future stores, but with the flexibility to take advantage of opportunities in the market. Recent acquisitions have provided a high return on investment of around 35%, providing confidence in the company’s expansion plans.

“In summer 2018 the combination of exceptional weather with the football World Cup compounded what was already a market challenged with over-supply and widespread discounting to be a difficult period for TGI - although it remained profitable and cash generative. Since autumn 2018 the trajectory has been one of gradual recovery and the business is now well placed to continue its recovery over the summer months.”