Is the restaurant sector set for rocky times ahead?
A profits warning from Clapham House yesterday (3 December) set alarm bells ringing. Was this the first sign of a consumer downturn across the food service industry?
Horizons FS doesn’t think so, and results announced today from both Greene King and Carluccio’s support this.
Greene King has today (4 December) announced pre-tax profits up 7% on last year and, despite the smoking ban, a rise in like-for-like sales across its estate. Yes, the company does expect the second half of the year to be more challenging, but it is convinced its business model is strong enough to prove resilient.
Today has also seen another set of positive results. Carluccio’s has announced a sixth year of double digit growth in turnover and operating profits. The Italian restaurant chain is sticking to a strong opening plan which aims to see five new stores per year and has signed a franchise agreement for the whole of Ireland, extending the brand to a new market of customer.
So one company’s results aren’t necessarily representative of the sector, and observers need to look hard at where the weakness at Clapham House lies – primarily in its relatively recently acquired shopping centre brand Tootsies.
Horizons’ research shows that shopping centres account for approx 4% of all spending in the UK full service and quick service sectors. Poor trading conditions in shopping centre sites will obviously hit those operators (such as Clapham House and Out of Town) who focus on these sites but they are not typical of the market as a whole
It should also be noted that Clapham House say that they expect a reasonable outturn over the coming year or so. I agree with them.
Horizons is predicting a strong Christmas across high street restaurant brands, although trading for those based in shopping centres will depend more heavily on consumer spending and shopping habits.
Horizons estimates that despite fears of a spending downturn British consumers will this year fork out a massive £3.7bn on eating out during December – a rise of 22% on the monthly average spend for the rest of the year of just over £3bn.
Restaurants will see the biggest upturn in trade this Christmas, with takings likely to rise 40% above the monthly average for the year to £917m. Food and drink sales through hotel restaurants are expected to rise 44% to £798m during December, while turnover in pubs will rise by a third – to £609m, compared with usual average monthly sales of £464m.
December is the month that most people eat out – even if they don’t during the rest of the year. Either they are catching up with friends, going to office parties or going to the pub for a meal to give themselves a break from cooking. Many popular restaurants are now booked right up until Christmas – particularly for Friday and Saturday nights. You now have to plan at least six weeks ahead to eat in some restaurants.
Average spend in a restaurant in the UK is £10.30, according to Horizons, but this is likely to increase during December.
Always remember, at Christmas time consumers like to treat themselves to that extra drink or a dessert they wouldn’t ordinarily have.