Economies Of Ale Data Shows Glass Still Half Empty For Pubs And Bars

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The ONS has released the economies of ale report using data from the Business Impacts and Conditions survey

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  • 100% of all pub and bar businesses surveyed in December said profits had decreased by more than 50%, and a third said profits had decreased by more than 50% at the beginning of May.
  • This compares to 12% for all other businesses in December and around 9% by the beginning of May.
  • Less than a quarter of pubs and bars say they have high confidence that their businesses will survive the next three months (23.9%), while just under half (43.8%) of all other businesses say confidence is high.
  • By May 2nd 19% of pubs and bars still said they have low confidence they will survive the next three months compared to 5.5% of all other businesses.
  • By May 2nd just over half of the pubs and bars surveyed had more than half of staff off on furlough (54.9%), compared to just over 8% for all other businesses.
  • Job uncertainty remains relatively high in pub and bar industry – with 59% saying there were not going to make staff redundant over the next three months, compared to 81% in all other businesses.

Long Way Befor Celebrating With A Cheers To Good Health

  • Share prices of bar and pub restaurants mirror glass half empty attitude.
  • JD Wetherspoon, Revolution Bars, Marston’s and Fuller Smith and Turner languish below pre-pandemic levels.

"The doors may be open, pints are being pulled but there is still a long way to go before the pub and bar sector can celebrate with a cheers to good health.’’

Even though publicans could start serving customers outside from 12th April, by the beginning of May many were still highly unsure what the future will hold despite the rapid vaccine rolls outs. Almost a fifth of bars and pub businesses said they had low confidence that they would still be operating in three months’ time, while less than a quarter said they were highly optimistic about their prospects for survival (23.9%). This compared to just under half (43.8%) of all other businesses who say confidence is high.

It’s not surprising that so many publicans have a glass half empty perspective on their prospects.

In December, as the third wave swept over the country and time was called on the industry, all pubs and bars surveyed said profits have fallen by more than 50%. Even by early May a third still said profits had halved, despite the phased re-opening. Many have had to spend big chunks of revenue they have earned on outdoor seating arrangements to capture outdoor trade and endure the headache of liaising with local authorities for access to roads and pavements.

In November, in the bleak winter of the crisis, 90% of staff were on furlough in bars and pubs compared to 11% on average for all other businesses. Recovery has been slow, even by the beginning of May just over half of the pubs and bars surveyed had more than half of staff off on furlough, compared to just over 8% for all other businesses.

There may be queues now forming outside popular venues, but despite a bounce back in customer demand, job uncertainty still remains relatively high in pubs and bars. 59% of businesses in the sector said they were not going to make staff redundant over the next three months, compared to 81% in all other businesses

Share Prices Need A Splash Of Tonic

"The share price of a string of bar and pub companies is mirroring the muted cheer among publicans as the sector reopens.

JD Wetherspoon is still in need of a good splash of tonic, as it is languishing around 13% below pre-pandemic levels. Social distancing rules continue to disrupt its business model of pulling in high volumes of punters, while trying to keeping prices low. Revolution bars is still down a whopping 65% compared to February 2020, even though it forecast a strong recovery this summer. It’s announced plans to raise through a rights issue to try and reduce its hefty debt pile. Pub chains Marston’s is also 11% lower compared to pre-pandemic levels, after falling to a £105 million pre-tax loss in the 26 weeks to April 3rd, with lockdowns clearly hitting very hard. But it’s counting on staycations and the euros to draw in the seated crowds and boost its fortunes over coming weeks. Fuller Smith and Turner’s shares are also still down 6% compared to pre-pandemic levels and results out on Thursday should give an indication on just how well business is rebounding.

Investors in bar and pub group Mitchell and Butlers and The Restaurant Group, which owns Brunning and Price pubs, appear to have a glass half full attitude with their respective shares prices already having staged a good recovery compared to pre-pandemic levels.

But with staff shortages and potentially higher prices now looming for the sector, the menu ahead for management is one of hard graft and continued uncertainty, trying to cater for changing customer appetites amid confusion over when social distancing rules will finally be relaxed.’’

Share Price
14th Feb 20th March % Change (14th Feb-20th March) 7th June % Change (14th Feb-7th June)
JD Wetherspoons £15.26 £7 -54% £13.28 -13%
Fuller Smith and Turner £9.16 £6.60 -28% £8.64 -6%
Mitchell and Butlers £2.75 £1.09 -60% £3.14 14%
Marston’s £1.04 £0.28 -73% £0.93 -11%
Restaurant Group £1.23 £0.23 -81% £1.29 5%
Revolution Bars £0.63 £0.14 -78% £0.22 -65%
Loungers £2.60 £0.93 -64% £2.60 0%

Article by Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown

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