Marston’s PLC's (LSE:MARS) “positive festive update” not enough to make hospitality venues investable, says broker
Marston’s announced it performed strongly over Christmas, but US bank Jefferies remains unconvinced investors are interested in the sector.
“We find limited interest from investors in the pubs/restaurants sector currently as investors worry about an impending consumer squeeze,” said its analysts.
The company, which posted strong sales versus both 2019 and 2021, is unlikely to face any “incremental cost pressures” with electricity hedged until the end of the financial year.
“No material change to consumer behaviour is flagged, with low-ticket leisure pub spend remaining resilient,” the investment bank added.
Marston’s now faces customers downtrading to companies like Mitchells and Butlers, the Harvester owner’s share price has increased by 24% in the last month, ahead of Marston’s 12% growth.
Jefferies also believes that Marston’s debt remains an inhibitor of growth and dividend - the company’s net debt is almost six and a half times greater than underlying profits for the 2023 financial year.
Staff shortages, increased inputting costs and a rising national wage are all issues Marston’s will face.
“With drink sales continuing to outperform food,” the fading buzz of the festive period and the World Cup may slow growth further.
Jefferies has an “underperform” rating and a 27p share price, around 30% lower than the current 43p share price.