Mitchells & Butlers recent trading boosted by weather but FY sales down

Pub group Mitchells & Butlers reported a drop in full year sales but a rise in the most recent eight weeks of trading, as it reiterated that full-year margins will be below the previous year.

In a pre-close trading update, the company said total sales in the 51 weeks to 17 September fell by 0.8%, with food sales down 1.4% and drink sales 0.1% lower.

Mitchells said margins will be below last year due to the acceleration of investment in the estate and wage inflation following the introduction of the National Living Wage in the second half.

In the most recent eight weeks of trading, however, like-for-like sales were up 1.8%, with food up 0.4% and drink up 3.7%, supported by favourable weather and improving trends.

The group said it continues to generate good sales growth from its invested sites, now starting to be underpinned by relative improvement in the performance of sites without recent investment.

So far this financial year, it has converted or remodelled 244 sites and opened seven new sites.

Chief executive Phil Urban said: "We are encouraged by our improved trading performance in recent months. Weather in recent weeks has certainly been helpful to sales, but in addition we are starting to benefit from increased investment activity, instilling a commercial culture and a faster pace of execution and innovation in our business.

“We enter the new financial year facing an increasing number of cost headwinds, most notably labour. However, based on recent progress we remain committed to our strategy going forward."

Shore Capital said the trading update was “resilient” but cautioned against lower cash flow from the step-up in investment and the pension deficit.

At 1005 BST, the shares were up 2.4% to 271.40p.