It is pretty heroic for Restaurant Group to be guiding for earnings at the top end of expectations given all the challenges currently facing it.
“The impact of Omicron disruption was evident in a slowdown in December but when it comes to the things Restaurant Group has been able to control it has done a decent job – perhaps most notably keeping a tight rein on costs at a time of rapid wage and input cost inflation.
What will be particularly pleasing for investors is the fact that the leisure division, centred around entertainment venues, is doing well when historically this part of the business has really struggled.
It suggests the restructuring of this part of the business, which includes chains like Frankie & Benny’s and Chiquito, is paying off.
“The jewel in the crown is still Wagamama. While its acquisition in 2018 was widely seen as over-priced at the time, owning it has been priceless for Restaurant Group given the strength of the brand. You dread to think how it might have coped in the pandemic without it,” said AJ Bell’s Russ Mould.
“All areas of the business are continuing to outperform the wider market and the company might well need to keep this up if it is going to continue to thrive against the backdrop of a cost of living crisis. This will put pressure on household budgets and likely reduce appetite for eating out.
“More positively the lifting of restrictions and the opening up of travel again, which would boost its airport-based concessions, could provide the business with a tailwind.”