Liberum has chopped its profit forecasts for Restaurant Group PLC (LSE:RTN) in 2023 due to the impact of higher-than-expected inflation.
UK consumer inflation ballooned to nearly 8% in the year through to April and in the food and drink sector, in particular, is expected to hit 9% in 2022.
The broker said it is holding its forecast for the hospitality company for this financial year (2022).
RTN owns 400 restaurants around the UK with its flagship brands Wagamama and Frankie & Benny’s
In a trading update yesterday following the company's annual general meeting, the group said trading in the 19 weeks to 15 May was “better than expected” and that growth in the second financial quarter was “on par” with the previous quarter.
Sales at food chain Wagamama LFL grew 11% despite the inflationary climate and cost of living crisis, which has put pressure on consumer spending.
The restaurateur added it expects that growth and “faster than anticipated” recovery in its concessions to offset higher inflation in the year ahead.
Liberum cut its underlying profit (EBITDA) forecast for the company by 8% for 2023, and pre-tax profit estimate by 19% to reflect growing inflationary pressure on the consumer sector.
The broker said the group's current valuation at 5.2 times EBITDA for fiscal year 2023 reflects the “current macro uncertainty”.
RTN's share price rallied 1% this morning to 53.6p but has halved since mid-February.