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Greene King warning sends pub stocks tumbling

Greene King warning sends pub stocks tumbling

by Daniel Grote Sep 08, 2017 at 11:04

Shares in Greene King (GNK) have tumbled, dragging other pub stocks with it, after reporting a drop in sales and warning of persistently weak consumer confidence.

Shares in the pub group fell 11.9% to 576.5p after it announced a 1.2% fall in like-for-like sales in the 18 weeks to 3 September, hurt by the poor weather in the second half of July.

'We remain cautious about the trading environment and expect the challenges of weaker consumer confidence, increased costs and increasing competition to persist over the near term,' it said.

The bleak outlook also hit shares in rival FTSE 250 pub groups. Marston's (MARS) fell 7.2% to 105.4p, Mitchells & Butlers (MAB) was down 3.2% at 248.4p and JD Wetherspoon (JDW) dropped 2.9% to £10.21.

Shore Capital analyst Greg Johnson said it was a struggle to see any let-up in the pressure on earnings for the pub sector.

'We see the key for Greene King and the sector will be improving real incomes across the UK economy which are likely to remain squeezed for the remainder of the current calender year and so see little encouragement for the shares on an earnings perspective,' he said.

On the Alternative Investment Market, shares in Safestyle (SFES) fell even further, dropping 29.2% to 166.5p as the double glazing group issued a profit warning, flagging 'accelerating weakness in the market resulting from increasing customer caution'.

AJ Bell investment director Russ Mould said the warnings from both Greene King and Safestyle would add to concerns over the health of the UK consumer.

'It is always tempting to dismisses one company profit warning, or even two or three, as down to "company-specific" problems and Greene King is doing its best to blame the rotten weather,' he said.

'But Safestyle remains convinced that it is still taking market share so this one is harder to explain away and it may be more than a coincidence that two firms which rely heavily on consumer spending have both released weak updates today.

'Add to this picture an ongoing slide in UK car sales and it requires little imagination to build a picture where weak wage growth and lofty levels of credit card debt are combining to depress consumer spending and confidence, to the potential detriment of growth across the wider UK economy.'

The FTSE 100 meanwhile fell 22 points, or 0.3%, to 7,375, with miners weighing as copper prices fell. 

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Comments  (3)

  • Chris Phillips: 

    Consumer confidence (or lack of it) is only part of the story. Successive highly leveraged buy-outs are a significant factor in pub alcohol prices (circa £3.50 for a pint of beer vs £1.80 in a supermarket). And I suspect another factor is the residual effect of the smoking ban, plus the outrageous prices charged for soft drinks for those who want to avoid drink driving.

    17:58 on 08 September 2017

  • Franco: 

    What can you expect after 40 years of squeezing English wages down to Chinese levels and then getting the poorest people to pay for QE as well? congratulations, you have succeeded.

    18:31 on 08 September 2017

  • Vinniw: 

    But Greene King beer is blooming awful! I didnt go to the Oval this year specifically because they replaced Marstons Pedigree with the GK Cat P*ss.

    Marstons now yielding 7% and us Black Country blokes like or Banks's.

    19:09 on 08 September 2017

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