Sales grow at Mitchells & Butlers

Shares in restaurant and pub operator Mitchells and Butlers (MAB), owner of the Harvester and Toby Carvery brands, were broadly flat on Thursday after its eagerly-awaited interim management statement.

The announcement, covering the important Christmas trading period, showed like-for-like sales in the nine weeks to 21 January 2012 up 6.5%.

"These results reflect a successful Christmas sales performance," commented executive chairman Bob Ivell. "Although assisted by better weather, [the figures] show that customers are still keen to treat themselves even in a difficult economic environment."

Despite trading in early January being more subdued, the company has announced that underlying like-for-like sales have been on trend since July 2011 with a 1% gain noted. Growth in food sales continued to outpace that in drinks, with 8.1% and 5.4% growth respectively in the nine weeks ending 21 January.

With the deteriorating economic environment in the UK, investors are becoming increasingly worried about long-term prospects for the share's performance. With the stock having a beta close to one, indicating that it has historically followed market price movements closely, expectations over the direction of the economy as whole are likely to play heavily into trades.

So far the resilience of sales performance has led analysts to suggest that many consumers may be viewing the pub-based meals as an "affordable treat" in a time of overall economic hardship. However, inflation pressures are set to feed through to the company's cost base during the first two quarters with £10 million of incremental energy costs expected, alongside a rise in the price of food, making business conditions harsher.

Mitchells & Butlers said it is set to retain its expansive site acquisitions policy into the year ahead and rumours over good progress on the appointment of a new group chief executive continue to bolster confidence.

"The stock is not expensive" concluded Simon French, analyst at Panmure Gordon, adding that concerns over the lack of a chief executive, absence of dividends and an unhappy major shareholder are solvable, but will require patience. Even so, Panmure retained its 'hold' recommendation on the stock.

Seven Investment Management’s Justin Urquhart Stewart gives his views on the year ahead in: Economic predictions for 2012.