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Greene King sales dented by tough market conditions and snowfall

Last updated: 09:46 25 Jan 2018 GMT, First published: 08:46 25 Jan 2018 GMT

Greene King
Greene King says it is well placed to withstand a challenging trading environment

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. 

READ: Greene King's profits and revenues fall in 'challenging' first half as Brexit pushes up costs

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.

READ: Stiff drink needed for investors in Greene King and Marston's as Berenberg downgrades ratings

“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."

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