UBS thinks shares in Restaurant Group PLC (LON:RTN) - owner of the Frankie & Benny's and Garfunkel’s brands - are looking less tasty, with the Swiss broker downgrading its rating to ‘sell’ from ‘neutral’.
In late morning trading, Restaurant Group shares were down 4.2%, or 14.1p at 322.5p, topping the FTSE 250 fallers list.
In a note to clients, UBS’s analysts pointed out: “Core to the turnaround strategy for Frankie & Benny's is a new menu, aimed at improving the value proposition.”
They added: “After its recent menu launch, we have analysed the new F&B proposition along with 20 key competitors, with our analysis indicating that, while prices have fallen (c.6% on average), a value gap remains versus the branded pub chains which are on average 22% cheaper. “
The turnaround for F&B looks challenging
The analysts said: “Given these brands also focus on the family value orientated market, we see risk that the F&B price cuts will not drive the required footfall increase from the core family value orientated customer F&B is looking to attract to offset price reductions.”
As a result, they have cut their earnings per share estimates for Restaurant Group by 4% for 2017 and by 17% for 2018, and reduced their target price to 275p from 310p leading to its rating downgrade after a strong recent share price performance.
The analysts concluded that in “our view that the turnaround for F&B looks challenging based on changes implemented so far.”