Riots fail to take bite out of Restaurant Group sales

THE owner of the Chiquito and Frankie & Benny’s restaurant chains yesterday hailed a growth in sales in recent weeks despite the English riots and the squeeze on consumer spending.

Restaurant Group – which operates 387 outlets, including about 40 in Scotland – reported a 3 per cent rise in like-for-like sales in the 26 weeks to 3 July, marking a significant improvement on the 0.5 per cent increase in the first quarter.

Underlying profits were up 8 per cent to £24.4 million as the group refused to take part in “deep discounting”, such as two-for-one offers, which have become common in the industry. This helped it maintain its margins in the face of rising food prices.

The firm said the second half of its financial year had “started well”, with like-for-like sales growth of 2.75 per cent in the year to date, despite August being blighted by the riots and heightened fears of another global recession.

Chief executive Andrew Page said: “Despite the recent raft of downbeat news-flow and the disturbances in early August, we’ve made a good start to the second half.”

However, Page expects the “tough backdrop for consumer-facing businesses to continue”.

About 40 of its sites closed at some point as a result of the riots, although most of its outlets were unaffected because they are largely in out-of-town locations, such as retail parks.

The group, which also owns the Garfunkel’s chain, described its first-half performance as “excellent” given the difficult nature of its market.

It said its Frankie & Benny’s chain put in a particularly strong performance.

The group’s total sales grew 7.5 per cent to £234m in the period, boosted by the opening of seven new sites in the first half. It has since opened a further four outlets and plans between 11 and 16 more by the end of 2011, bringing the number of Frankie & Benny’s restaurants up to 200.

Bottom-line profits were down 32 per cent to £17m after it booked a £7.2m charge from closing five of its sites in the UK and three restaurants in Spain.

Simon French, an analyst at Panmure Gordon, said the City expects the group to report full-year pre-tax profits of £62.1m but he said this may be revised downwards as the group battles rising food costs.

Evolution Securities analyst Nigel Parson described the interim results has having a “sizzling top-line” but a “soggy bottom-line”. He added: “We doubt that consensus forecasts will change materially as costs are now rising towards the top-end of guidance with main issues being food and drink, the minimum wage, utilities and the new carbon tax causing the damage. Restaurant Group may have to absorb a further £12m-£15m of costs next year.”