In stark contrast to the constant rain, the UK pub and restaurant sector had a dry start to the year with middling like-for-like (LFL) sales growth amidst challenging weather conditions and sustained cost pressures.
That is Stifel’s read of the market, with the bank pointing to February’s LFL sales edging just 1.4% higher.
After a dry January (in a drinking sense) this makes for a tepid start to 2024,” said Stifel, adding: “As usual, the Spring Budget offered little succour, and we expect operating costs to prove sticky (labour).”
As for stock picks, Stifel analysts called Young’s the “pub industry gold standard”, a “premium 'defensive' with a record of, and appetite for, growth and value creation”.
Analysts said Young’s City Pubs acquisition “brings a quality portfolio of scale, and should be accretive to earnings as cost synergies are delivered”.
Meanwhile, hybrid pub/cafe/restaurant chain Loungers PLC (AIM:LGRS) “has a broad demographic appeal, and the all-day trading proposition and neighbourhood locations play well to evolving consumer behaviours”.
Young’s is a buy with a 1,350p price target, with Loungers also a buy with a 315p price target.