Investors in Restaurant Group were sending back their shares after a disappointing trading update.
The owner of 450 restaurants and pubs including Frankie & Benny’s, Coast to Coast and Garfunkel’s, is down 28.5p or more than 4% to 656p, one of the biggest fallers in the FTSE 250.
The company said total sales so far this year were up 10.3% or 3% better on a like for like basis. It has opened 24 new restaurants, and plans another 16 before the end of the year. But it said it expected to report good full year results but warned:
Sales have shown lower growth since the end of August and we are seeing some cost pressures.
Douglas Jack at Numis kept his buy recommendation, saying:
Total sales are up 10.3%, with like for like sales up 3.0%, after 45 weeks. Thus, like for like sales rose 1.6% over the last 11 weeks. Due to this recent slowdown, we have shaved 2% off our forecasts.
Although we are cautiously trimming 2014 forecasts, prospects for 2015 remain strong. [The company] should benefit from easy cinema, weather and sports-related comps and strong cinema releases. Also, falling food and fuel costs are not only benefiting the company directly, but also through helping customers’ real incomes start to grow.
Nick Batram at Peel Hunt said:
Like for like sales did slow in the third quarter and this, together with a tightening labour market and the timing of the opening programme, led us to trim our numbers. The high rating affords little room for disappointment and the shares are likely to come off as a result of today’s announcement. However, this could present an attractive entry point for a business where the fundamentals remain strong.
