Restaurant operator Tasty (TAST:AIM) is struggling to whip up investor appetite after warning that the weak trading environment is continuing to impact sales and margins.
Pre-tax profit before pre-opening costs and non-trade items has plummeted from approximately £1.6m to £210,000 in the 26 weeks to 2 July 2017.
Sales increased 11.8% to approximately £24.4m, but that is only after opening several new outlets. Like-for-like sales declined.
SLOWDOWN IN CONSUMER SPENDING TO CONTINUE
The owner of the Wildwood chain of restaurants says the sector as a whole has been suffering due to a slowdown in consumer spending since the beginning of the year.
Management believes it is a nationwide problem that is ‘particularly evident in London’. Unfortunately, the slowdown is set to continue into 2018, which is why the stock has tumbled 10% to 37.8p.
In March, Tasty downgraded profit guidance to below headline operating profit in 2016 (£3.9m) and cut the number of new openings by 50% in 2017.
The company plans to improve its performance by disposing underperforming restaurants, as well as slimming the menu and remaining competitive through promotions.
WIDESPREAD STRUGGLES
Signs of stagnation have been evident in the sector, including Frankie & Benny’s owner The Restaurant Group, The Real Greek owner Fulham Shore (FUL) and Comptoir (COM).
Last week, Fulham Shore warned that headline earnings before interest, tax, depreciation and amortisation for 2018 will likely be less than current market expectations. This was blamed on a slowdown in trade in July and August, primarily in London.
Despite the bad news, The Restaurant Group and Fulham Shore have remained resilient, but shares in Comptoir have dipped 1.2% to 16.8p.
