Restaurant Group PLC (LSE:RTN) has “organic recovery potential” that’s according to Citigroup’s London-based analysts.
Citi, in a note today, stuck with a price target of 52p per share (current price: 38.42p) although revised down forecasts for the 2023/24 financial adjusting for margin guidance, following the Wagamama owner’s wider loss reported on Wednesday.
Earlier this week, the company reported an £86.8mln pre-tax loss, up from £35.2mln in the prior year, and flagged the impact of inflationary and cost-of-living pressures.
Pointing the finger of blame at “the macro-environment” the restaurant operator said it is expecting to close roughly 30% of its leisure locations (which include Frankie & Benny's and Chiquito branded restaurants) by 2024, with some sites being converted into Wagamama units.
Trading, the company said, was “robust” in the casual dining market, with Wagamama, pubs and concessions all out-performing like-for-like sales in 2022 in their respective benchmarks compared to pre-pandemic 2019.
“We continue to have a positive outlook; aside from the speculation over potential disposals triggered by activist Oasis Management (on 16 February),”
The analyst added: “We see the combination of recent dine-in growth in pubs and wagamama and the mid-term margin accretion plan as highlighting the organic recovery potential.
“We are more constructive for 2023 demand than previously, reflecting January industry data and management comments.
“We also are encouraged by the mid-term margin targets; we estimate that 100 basis points (bps) alone is covered by concessions volume recovery and mix (leisure exits and pubs/Wagamama growth) with the remainder sourced from the 450bps labour and F&B cost recovery, and further procurement/overhead savings.”