Pub groups have taken a bashing from the NI and minimum wage rises announced in the Budget, with Mitchells & Butlers PLC (LSE:MAB) down 13%.
The O’Neills and All Bar One owner reports next week having thus far let its peers point out the impact of the additional costs
Ahead of MAB’s numbers next week, Shore Capital said it expects a significant proportion of any potential impact to be mitigated by a combination of underlying momentum, pricing and cost initiatives.
The industry trade body, UK Hospitality, has warned of job losses, slashed investment and higher pricing.
Historically, pubs have had success in passing through cost inflation, notes Shorecap, but "at what point does the consumer become resistant to further price rises?" It adds.
That will be especially pertinent for MAB, which has been copping flak for one of its London O’Neill’s flagships introducing surge pricing of £2 a pint after 10 pm.
For pub shares, Shorecap notes that both Spoons and Marston’s have seen a reduction in market value equivalent to four times the estimated annualised NI impact (net of tax), suggesting the market is pricing in some mitigation.
The ratio rises to over 7 times at Mitchell’s & Butler, despite being similarly positioned to offset the potential impact.
Buy remains the verdict on MAB with a 233p target.