Mitchell’s & Butlers shares sank on the warning of cost inflation on Thursday despite the pub group posting fairly decent sales growth.
The group has produced reasonable sales growth throughout the 51-week period ending September 20, 2025, achieving 4.2% like-for-like sales growth year-to-date and 3.9% total sales growth.
Food sales grew 4.1% and drink sales rose 4.0% for the period.
However, the warning that costs would rise at 6%, outstripping recent sales growth, put the firm on course for margin compression. Investors baulked, and shares were 7% on Thursday.
“Harvester and All Bar One proprietor, Mitchell’s & Butlers has served up a reassuring full-year trading update. Fourth quarter sales growth has slowed, reflecting some hesitation among pub and restaurant goers in the broader market, but the group has extended its track record of outperforming the competition,” explained Derren Nathan, head of equity research, Hargreaves Lansdown.
“It’s set to deliver operating profit growth of around 5% to £328 million, an outcome worth raising a glass to, given the additional cost burden brought about by higher National Insurance contributions and the increase in the National Living Wage. There’s around another £130 million of cost inflation expected next year, which could dampen spirits.”
Nathan continued to explain that while there were some positives for Mitchell’s & Butlers, the challenges related to the UK consumer and the current valuation of the stock made the company an unattractive proposition.
“The group’s diverse brand portfolio, well-invested estate, and focus on efficiency, leaves it well placed to mitigate this pressure, while outgrowing the market. But the shares have more than doubled over the last three years and the valuation broadly reflects recent operational improvements. With consumer sentiment fragile, and the potential for a further tax grab in the November budget, there’s no obvious catalyst for near-term appreciation.”