All Bar One owner M&B flags early signs of easing cost pressures

All Bar One owner Mitchells & Butlers has said it is seeing “early signs” of easing cost pressures as it revealed a pick-up in recent sales growth.

The group reported an 8.9% increase in like-for-like sales over the past six weeks, boosted by Easter trading, up from 8.5% growth in the half year to April 8.

It said while surging costs remain a challenge, there are “indications that cost inflation headwinds across the supply chain are starting to abate”.

Energy prices have already fallen back significantly, while it said cost inflation in other areas, such as food, are set to slow down soon, according to the firm.

But soaring costs and the absence of Government support seen a year earlier – including the temporary VAT reduction – impacted upon its bottom line, with interim pre-tax profits dropping to £40 million from £57 million a year ago.

It saw underlying earnings drop to £100 million from £120 million a year earlier.

Phil Urban, chief executive of M&B, said: “The trading environment for the hospitality sector remains challenging with inflationary costs putting pressure both on the industry’s margins and disposable income of our guests.

“However, we are encouraged by the resilience of trade to date, including the most recent six weeks at 8.9% like-for-like sales growth, and also by early signs of the medium-term cost outlook improving.”

The group said it now expects inflation to be at the lower end of the 10% to 12% range previously guided for, before cost savings, which should help its profitability recover.

This and the group’s recent sales performance “provides confidence that we are tracking ahead of
management’s previous expectations in both the short and the medium term”, it added.

The group said sales in the first half was buoyed by the return of workers to offices, city centres recovering from the pandemic and tourist trade bouncing back.

The recent increase in sales growth has also given the group “optimism for the future, although we
continue to remain mindful of the cost-of-living challenge facing our guests”, it said.