Today's results show a sales boost from the recent heatwave as well as predicting full year profits, but the market seems to have ignored these positives
Market reacts to poor food sales at Marston’s as shares drop
- World Cup and warm summer provided 3.2% sales boost at Marston pubs
- Share price down in reaction to lower food sales but group give full year profit guidance of c. £104m
- We recommend Marston’s as a ‘buy’ for contrarian investors
A trading update from brewing and pub retail company Marston’s this morning highlighted a boost from the World Cup and warm summer for drinks leading to sales growth at its pubs of 3.2% for the year ended 29 September 2018. Its food operations did not fare as well with customers preferring to stay at home for their food and the shares appear to be reacting to the latter, falling 2.7% in early trading.
Nevertheless, investors should take the positives from this update – including recent signs of an improved performance in the run up to the group’s hugely important Christmas period. There was also news of the group buying 15 pubs from property group Aprirose which will widen its proposition further and most importantly, Marston’s expects underlying profit for the year of around £104m on the back of record revenue.
The reaction of the share price today reflects the lower food sales (where margins are higher), which the group have been growing in recent years in order to provide a better balance to the business and cater for families who want to eat out. There’s no escaping that the sector has been under significant pressure as a result of competition, changing customer demands, increase in minimum wage and food inflation.
Regardless, we maintain our ‘buy' recommendation due to the group's continued expansion and progressive dividend policy. However, the uncertainty around the UK economic outlook in the short term means this remains a contrarian stock and more suitable for medium to high risk investors with an income bias.
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