Snowfall and challenging market conditions dented Greene King PLC (LON:GNK) sales over the Christmas trading period.
The pubs operator reported like-for-like (LFL) sales growth of 1.6% in the two weeks over Christmas and New Year but it would have achieved a 3.4% increase if it weren’t for the snow deterring customers from leaving their homes.
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The company said sales were slower on either side of the two Christmas weeks, reflecting the tough underlying trading environment and additional snow impact.
In the 37 weeks to January 14 -- the start of the group’s fiscal year -- LFL sales fell 1.4% as weak food sales offset growth in drink and room sales.
LFL net profit at Greene King pubs operated by independent licensees grew 0.2% in the first 36 weeks of the fiscal year.
Its Brewing & Brands own-brewed volume dropped 0.9% for the first 37 weeks, as a result of a 3% drop in ale volumes.
Rebranding of pubs delivers returns
Greene King said it remains on track to achieve its targeted cost savings of £40mln to £45mln this year and its brand optimisation programme continues to deliver returns of 25%.
“Both our new build and disposal programmes are also on track with six new sites opened and 40 disposals completed in the year-to-date,” the company said.
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“Our additional investment to enhance the customer experience, including being more competitive on price, having more team members available at key trading times and strengthening local marketing activity, will help to improve our competitiveness and relative trading performance.”
Greene King ready to take on market challenges
Higher inflation and stagnant wage growth have prompted consumers to tighten their purse strings but the company believes it is well placed to withstand challenging market conditions with a “strong and flexible” balance sheet and a sustainable dividend.
Shares were little changed at 522.9 in morning trading.
"Importantly the dividend was described as ‘sustainable’ given the balance sheet strength," Liberum said, reiterating a 'buy' rating and target price of 690p.
"Finals will be announced on 28 June 2018 when we expect EBIT of £376.6m, pre-tax profit of £245m and earnings per share of 63.2p with dividend per share of 33.2p."
Liberum said Greene King "traded well" over Christmas given the circumstances and is encouraged that trends are stabilising.
"Furthermore, we believe that the weather disruption masks green shoots of improvement following £10m investment in pricing, marketing and service levels."