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Restaurant Group not ready to party yet

by LLB Editor
15th Sep 21 10:46 am

Restaurant Group has outperformed the market in all parts of its business which is quite an achievement. But the outlook is harder to stomach with supply chain problems and labour shortages threatening to make life difficult.

The leisure and hospitality industry has been through some tough times since lockdown measures first started to ease, amid choppy trading conditions.

“Restaurant Group has done well to stay ahead of the pack, but the business is still loss-making which means it must find ways to accelerate revenue growth. This is particularly important given it wants to open new restaurants, more accommodation for its pubs and extra standalone kitchens to feed delivery orders,” said AJ Bell’s Russ Mould.

“With inflation lifting costs across multiple industries, Restaurant Group should use this opportunity to push up its own prices to help protect margins. After all, consumers are having to get used to a higher cost of living, so any menu price changes won’t look out of kilter with what’s going on across the country.

“But a potential downside is that many people’s wages might not be keeping pace with inflation and so the number of times they can afford to go out, or even order in a takeaway, may have to be reduced.

“Furthermore, the slow recovery in international travel has means Restaurant Group’s airport concessions, once an important source of revenue, are acting as a drag on the group.

“Its purchase of Wagamama in 2018 raised a lot of eyebrows at the time due to the high price it paid. Yet this is now looking like a very sensible purchase as it has reinvigorated the group and given it a brand that remains on-trend, whereas some of its other brands are tired and outdated.

“Even though there is scope to do a lot more with Wagamama, market conditions aren’t quite right to be too aggressive.”

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