Greene King sales still lacking fizz

Pub company sales at Greene King remained lower over third quarter, though the Christmas period saw them froth higher briefly and management remain confident of cutting costs over the year.

Like-for-like sales in the core managed pub company fell 1.4% in the 37 weeks to 14 January, which was unchanged from the first half of the year.

Over the two weeks around Christmas and New Year's Eve was up 1.6% despite the snow, with record Christmas day sales of £7.6m, up 2.6% on the previous year, as 154,000 turkey dinners and nut roasts were sold.

Either side of the two Christmas weeks sales were slower, reflecting the tough underlying trading environment and additional snow impact, though fellow pub company Wetherspoons has just recorded LFL growth of 6.0% in the past 12 weeks.

Greene King's drink and room LFL sales were ahead of last year while food LFL sales remained behind last year.

Pub partners, where the company owns pubs that are operated by independent licensees running their own businesses, LFL net profit for the first 36 weeks of the year was up 0.2% while own-brewed volume was down 0.9%, though this was better than the 3% decline in the wider ale market.

The target of cutting £40-45m of costs this year was said to be on track, while the 'brand optimisation' programme has delivered returns of 25% and the refreshing of the pub estate saw six new pubs opened and 40 disposals completed in the year-to-date.

"Our additional investment to enhance the customer experience, including being more competitive on price, having more team members available at key trading times and strengthening local marketing activity, will help to improve our competitiveness and relative trading performance," the company said.

Shares in Greene King were slightly the red on Thursday morning.

Broker Shore Capital said the update was consistent with its expectations and so a PBT forecast of £243m and earnings per share of 63.7p has been retained.

"Following a series of modest downgrades it is encouraging to retain our full year estimates and going forward we would expect the LFL gap with a number of peers to close," said analyst Greg Johnston.

"Despite the trading performance we continue to see opportunities to improve the operating performance and see significant value in the balance sheet especially through refinancing the Spirit Debenture."