Mitchells & Butlers PLC (LSE:MAB) has grown like-for-like sales compared to pre-pandemic levels but the increase is slowing and, like its rivals, it isn’t enough to counteract rises to energy and labour costs as well as reduced customer spending.
Ahead of its final results on Wednesday, 7 December, the FTSE 250 listed pub company has already revealed that LFL sales in the year ended 24 September were up 1.1% versus 2019, driven by food sales that increased 5.2% whereas drink sales dropped 4.1%.
However, energy and utility costs for the company have risen a massive £70mln since 2019, sitting at £150mln for the 2022 financial year.
"The trading environment for the hospitality sector remains very challenging, with cost inflation putting increasing pressure on margins, and we are also mindful of the pressures on the UK consumer” said chief executive Phil Urban in September.
Furthermore, broker Peel Hunt warned that “the weight of upward cost pressure could now gravitate from energy to labour,”, with analysts predicting the 9.7% increase to the national living wage could increase costs by a further £25mln.
In M&B’s latest trading update LFL sales growth vs 2019 slowed significantly in the second half, where trade was said to be disrupted due to extreme heat and rail strikes.
As the cost-of-living crisis continues, spending is tightening for many Brits with the sector facing huge closures and falls in Christmas bookings with restaurants and bars appearing to be suffering the most.
MAB shares have sunk 45% from this time last year, compared to competitors JD Wetherspoons down more than 50% and Fullers 29% lower.
Sector shares reached lows in October but rallied over the last two months potentially due to U-turns in government policies and the draw of the World Cup, with rival Marston's saying this past week that recent trading was encouraging and that there was "little in our trading performance to suggest that there has been a change to consumer behaviour".