Birmingham pub group Mitchells & Butlers (MAB) claims it has increased its market share as cash-strapped customers opt for cheaper pub meals.
The company, which also runs pub chains All Bar One and O’Neills, saw an increase in like-for-like sales of 1.1 per cent in the 10 weeks to July 19, with food outlet sales on a same-outlet basis ahead by 5.1 per cent on a year earlier.
M&B pointed to “significant market share gains” during the period, saying its value formats such as Pub & Carvery, where the average main meal price is £3.96, and Sizzling Pub Co, which has an average price of £4.94, gave “particularly powerful” performances.
The group’s Vintage Inns and Premium Country Dining formats also saw strong growth.
M&B said in a trading update: “Market conditions continue to be characterised by robust demand for good value pub food and associated sales of drinks while on-trade beer market volumes have continued to fall by about 10 per cent over the past quarter.’’
“With around two-thirds of total sales now generated by a food-driven visit and beer accounting for only approximately a quarter of sales, the repositioning of the estate and its offers has ensured that Mitchells & Butlers is well placed to benefit from these long term, structural trends.”
The company said its decline in drink sales had been limited to 0.2 per cent in the 10-week period. M&B said its “robust trading performance” had generated strong operating cash inflow and added it had realised £82 million in proceeds from disposals, including £11 million from SCPD, M&B’s property development unit.
But the group said it expected market conditions to remain challenging amid weakening consumer spending.
“Therefore our focus remains on continuing to generate profitable market share gains from the value and volume sales strategy, the strength of the brand portfolio and the quality of the estate.”
M&B added: “Our leadership position in value for money eating out, serving over 110 million meals a year, is enabling us to benefit from the increasing customer focus on value.
“This strategy will place us in a resilient position should general economic pressures increase.”M&B said strong productivity gains and cost management measures would continue to help offset the increasing cost pressures.
But the firm expected higher food and energy prices to intensify these pressures, saying the precise outlook was still unclear.
It expected earnings for this year to be in line with expectations and added the firm remained confident in its “continued competitive out-performance”.
Growth at neighbourhood pubs – locals – which account for three-quarters of group turnover, rose two per cent over the period.
Town centre pub sales fell 0.1 per cent, although central London bucked the trend with good growth, providing more evidence euro-based tourists are spending heavily.
In response, Cazenove said the group’s like-for-like growth year-to-date is in line with the broker’s full-year assumption.
It noted that food growth remains strong and said the drinks decline of 0.2 per cent suggests the company continues to take market share.
This performance is materially better than most of the peer group, Cazenove added.
But the broker said it considers the most important news to be that M&B has refinanced its short term borrowings due to expire in 2009 into a three year unsecured facility to November 2011. Cazenove believed this could be key to an eventual rerating of the company.
Mitchells & Butlers is continuing to work on plans to switch to tax-efficient REIT status and spin off its property assets into a separate business.
Shares were up 2.25p at 264.75p.