TGI Friday’s owner shares plunge after revenue sinks amid diners’ tightening purse strings
TGI Friday’s owner Hostmore’s share price has plummeted almost 15 per cent after the restaurant operator posted subdued revenue versus pre pandemic levels.
Hostmore, which also operates the cocktail bar brand 63rd+1st, said like-for-like revenue was six per cent lower than 2019 levels.
In a trading update for the 20 weeks ended 22 May, the hospitality chain said it had been impacted by “a more challenging consumer environment.”
“We believe this is primarily a result of consumer confidence weakening significantly since Russia’s invasion of Ukraine on 24 February 2022 which is contributing to the current cost of living crisis,” the operator explained.
Hostmore made its debut on the London Stock Exchange last year, after the completion of a demerger from Electra Private Equity. Family restaurant brand TGI Friday’s was also re-branded as Fridays last year.
Pressure on consumers meant the company was “taking a more prudent view” on trading for the rest of the year.
Like-for-like dine-in volumes are anticipated to reduce by as much as eight per cent for the rest of the 2022 financial year, as compared to 2019.
However, the company said “appropriate pricing adjustments, in line with broader sector announcements,” would mitigate “approximately half” of the impact of the expected lower volumes.
A cocktail of cost increases and lower volume would result in an EBITDA margin in “low double digits” for the current year, versus the firm’s medium-term targeted level of “mid-teens.”
“[Diners] are definitely spending well and spending more but we are seeing volume subduing mid week,” Hostmore CEO Robert Cook told CityA.M. on Thursday morning. “Spend per head is higher than it has ever been,” he added.
The company’s core base of consumers were likely to be trying to protect savings for “the summer holiday they haven’t had in three years,” while also seeing other costs rise, Cook added.
It comes as inflation was revealed to hit a 40-year high last month, with consumers experiencing bill hikes across the board.
The business has an “under-indexed” presence in the capital, with sites in just Leicester Square, the O2, the Wembley arena and Stratford’s Westfield shopping mall.
“Certainly with the core brand, we find rent levels in London, at this moment in time, unpalatable,” Cook added.
However, the company’s Leicester Square venue was beginning to reap the rewards of tourists’ return to the “honeypot” location. Bosses said they were hopeful of good sales over the summer, buoyed by post-pandemic easing of travel restrictions, in the central London location.
The business has just rolled out a ‘Fridays to Go’ takeaway store brand in Dundee, which Hostmore bosses believe could be a “viable possibility” for “village London,” with the capital’s “peripheral suburbs” in mind.