British Pub Chains Are Drowning Their Sorrows This WeekBy
Industry’s rising costs putting pub companies under pressure
Revolution Bars shares lose about a third of their value
Rising wages and inflationary pressures are catching up with Britain’s pub companies.
After a week in which bar operators such as Mitchells & Butlers Plc have bemoaned the ever-increasing cost of doing business, Revolution Bars Group Plc on Friday warned of a profit standstill, sending its shares plummeting.
The industry is under strain after the pound’s devaluation following the U.K.’s Brexit vote pushed up the cost of imported food and beers. Also having to pay bartenders more as a result of an increased minimum wage could force pub closures, JD Wetherspoon Plc has said. The number of pubs in the U.K. has fallen almost every year for over three decades, according to the British Beer and Pub Association.
For Revolution Bars, newly opened venues are taking longer to reach profitability than originally planned. Earnings before interest, tax, depreciation and amortization will be “broadly at the same level” as last year’s 15.6 million pounds, the company said Friday, causing the shares to lose about a third of their value. Analysts had been estimating profit of about 17.4 million pounds on that basis.
“This is really the first negative news from Revolution since its initial public offering” in 2015, Paul Hickman, an analyst at Edison Investment Research, said in a note. “It may be early evidence in the pubs and bars space of consumers rotating away from premium offers.”
Revolution’s share price slide follows in the footsteps of peers. Mitchells & Butlers stock has fallen about 11 percent this week after the owner of the All Bar One chain reported declines in sales and profit. Consumer confidence has remained fragile, it said Wednesday.
EI Group Plc, formerly known as Enterprise Inns, unveiled stagnant first-half profit and said it’s mindful of the potential for continuing economic uncertainty over coming months.