Frankie & Benny’s owner Restaurant Group (RTN) transformation programme has so far failed to revitalise sales, making investors nervous about its ability to revive the struggling business.
Like-for-like sales fell by 5.9% in the last three months of 2016, sending shock waves across the market. Its share price slumps by 11.6% and analysts are forced to downgrade their earnings forecasts.
Last August, management admitted the company was struggling as customers avoided its chains due to higher prices and the removal of value offers and popular dishes.
New dishes were added without sufficient testing and the business languished in the face of intense competition from more modern, trendier brands.
Its transformation programme has revealed ‘substantial price and proposition changes’ are required.
Investors should expect a more detailed update on progress of the turnaround plan when Restaurant Group releases its financial results in March.
Broker Canaccord Genuity analyst Nigel Parson has slashed his earnings per share forecasts by 25% for the full year 2017 and by 17% for 2018.
He is still confident the Frankie & Benny’s brand is not broken beyond repair and believes the share price isn’t a true picture of Restaurant Group’s upside potential on recovery. He retains a 'buy' rating; so does Liberum which says the company is about to enter a transformational year.
Stockbroker N+1 Singer analyst Sahill Shan is sticking to his ‘hold’ recommendation as management suggested that price cuts will need to be deeper than expected and it will take time for customers to react.
