- Rail strikes cause profits to miss of expectations
- Activity back to within 3% of pre-Covid levels
- Company optimistic on sales growth this year
Premium pubs and hotels group Fuller, Smith & Turner (FSTA) said full year earnings to 23 March are expected to be below market expectations after rail strikes reduced sales in the run-up to Christmas.
Although the news wasn’t totally surprising, the shares fell 2.4% to 482p or around half the price they traded at before the pandemic.
Chief executive Simon Emeny said he was reassured by the sales trajectory of the business outside the industrial action periods.
‘While ongoing strike action will dampen sales, demand from customers remains good and we are optimistic that 2023 will deliver further sales growth through a busy calendar of events, and as office workers and tourists continue to return to the Capital.’
WHAT WERE ANALYSTS EXPECTING?
The company estimates the strikes cost around £4 million in lost sales which consequently impacted profit. The consensus expectation from analysts prior to today’s warning was for sales to grow 29% to £327 million and for net profit to double year-on-year to £14 million.
Over the 43 weeks to 21 January the company said it experienced ‘positive’ sales momentum and despite a challenging consumer backdrop like-for-like sales are within 3% of pre-Covid levels.
In the four weeks covering Christmas and New Year, sales were up 38% against a disrupted prior year and 4% below the comparative period in 2019.
Emeny highlighted the inflationary operating environment and said while some of the pressures are temporary, some, such as the increase in the national living wage which is due to rise by 10% to £10.42 from April, are more permanent. The company is taking actions to mitigate these costs.
EXPERT VIEW
AJ Bell investment director Russ Mould commented: ‘With more train strikes on the cards, there is little Fuller’s can do apart from hope there is an imminent resolution to the fight over transport worker pay.
‘There is a chance of catching up with some of the lost earnings later this year. The King’s Coronation in May will add another bank holiday to the calendar and give the public a reason to get out of the house and celebrate with friends and family, a day that is likely to be a major tailwind for Fuller’s earnings.
‘But beyond that event, the pub company will be hoping for lots of sunny weather in 2023 so that its beer gardens are full. It will also hope that the UK doesn’t fall into a nasty recession so that people can still afford to go to its pubs or feel confident enough to spend money on a pie and a pint.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Martin Gamble) and the editor (Ian Conway) own shares in AJ Bell.
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