M&B: value offers lift sales 1%

By Ewan Turney

- Last updated on GMT

M&B: strong Christmas trading
M&B: strong Christmas trading
Mitchells & Butlers pubs appear to be weathering the storm as it announced a 1% rise in like-for-like sales for the 17 weeks to 24 January— chiefly driven by its value food offers and a rise in cask ale volumes.

Mitchells & Butlers (M&B) pubs appear to be weathering the storm as it announced a 1% rise in like-for-like sales for the 17 weeks to 24 January— chiefly driven by its value food offers and a rise in cask ale volumes.

However, the managed operator warned of a tough year ahead with expected declines in both beer volumes and food sales.

M&B said it had experienced a slow build-up in early December followed by a strong two-week Christmas period. Like-for-like food sales were up 2.6% driven by value offers such as a main meal price of £3.50 at Crown Carveries and the £4.99 Harvester Earlybird offer.

Drinks sales also rose as a consequence of the meal offers with sales up 1.2% against a UK beer market down 9.9% in the fourth quarter of 2008. Cask ale sales saw a massive increase with volumes up 18% with M&B now having 700 Cask Marque accredited pubs. Machine incomes, however, continue to struggle with like-for-like sales down 6.1%.

M&B's residential estate, accounting for 76% of sales, continues to lead the way with like-for-likes up 1.7% for the 17 weeks. The High Street estate saw a drop of 0.3%.

Value deals

"We continue to carefully manage pricing to maximise cash contribution in a consumer environment where customers are rapidly becoming more value conscious and price sensitive," said M&B chairman Drummond Hall. "The average price of a meal is now £6 and the average price of a pint of standard lager is over 40p cheaper than the average in leased pubs.

"Combined food and drink prices including VAT have risen by less than 1% which, with increasing duty levels and food cost inflation, has led to a two percentage points reduction in gross margins. The impact of food inflation has been significantly offset by menu management measures.

"Furthermore, strong gains in staff productivity from investment in training and scheduling systems and continuing overhead cost reductions, are mitigating the operational gearing effect on net profit margins."

M&B has now completed 28 conversions of the 44 Whitbread pub restaurants it acquired through an asset swap for Holiday Inn lodges in September. Those converted sites have seen an uplift in sales of 20%. The remaining pubs are expected to be converted by the end of March.

M&B has agreed £52m worth of pub disposals or sale and leasebacks of non core outlets —£20m of which has been received.

Outlook

"Recessionary pressures are intensifying and as a result, we expect continued sizable declines in on-trade beer volumes and a significant contraction in the eating out market," said Hall. "Against this adverse demand background, the quality of our pubs and their value for money positioning underpin our confidence of a further increase in the rate of market share gains.

"As previously disclosed, cost pressures continue to be substantial with £20m of regulatory cost increases and some £30m of food and energy cost increases which are heavily concentrated in the first half. However, forward cost prices in the second half for energy and food are starting to see declines, although these markets remain volatile. To mitigate the cost pressures, we expect to realise some £20m of cost savings in the year."

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