Mitchells & Butlers shares lose their fizz as pub group swings to loss

Mitchells & Butlers shares sank on Thursday morning despite the pub and restaurant group saying sales grew in the last year and they had started to see cost pressures subside.

Although the group said like-for-like sales jumped 9.1% in the year to 30th September, adjusted operating profit fell to £221m from £240m and the company swung to an earnings per share loss as cost pressures ravaged the bottom line.

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After a material rally from the October 2023 low to around 195p to 250p, Mitchells & Butlers shares dumped around 6% to 227p on Thursday morning.

“The pub chain behind Harvester and Miller & Carter had no problem filling seats at its tables last year. The focus on meeting punters’ preferences translated to LfL sales and volume growth across all brands. Mitchells & Butlers has something to offer most budgets,” said Derren Nathan, head of equity research at Hargreaves Lansdown.

“The continuing investment in the estate and customer service is translating into impressive outperformance in takings compared to the wider market. That’s likely to continue. And despite a 13.2% decline in pubs and restaurants in business since the outbreak of COVID-19, there could yet be more supply to come out of the market.”

However, investors want to see a profit and Mitchells & Butlers have failed to deliver. Top-line growth is encouraging, given the problems the industry faced during the pandemic, but if this doesn’t translate to greater earnings, shareholders are showing they will not hang around.

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“It’s been more challenging to get the bottom line moving in the right direction. Sales growth wasn’t quite strong enough to offset cost headwinds of £175m faced in the period,” Nathan said.

Should the company secure material cost savings in the year ahead and maintain its strong market position, profit will likely return in the coming periods.

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