M&B sales feed off an appetite for pub grub

Mitchells & Butlers (M&B) today gave some glimmer of hope to the stricken pubs sector with reports of a moderate sales increase.

For the 10 weeks to 19 July, like-for-like sales at its pubs open for a year or more edged up 1.1%.

However, the owner of the Harvester chain highlighted the shift in people's spending away from booze and into pub grub as food sales drove the growth with a 5.1% increase. Drinks sales, now only a quarter of M&B's revenues, fell 0.2%.

The figures also showed punters trading down. Its budget Sizzling Pub chain performed the best of all its operations.

Analyst Mark Brumby of Blue Oar Securities said the Sizzling success highlighted how other discounters like Wetherspoons were currently in the sweet spot of the market.

He concluded: "Overall, M&B's numbers are very reassuring; someone's suffering out there but it's not M&B."

M&B also hinted at disposals of pub businesses like Hollywood Bowl and Alex in the coming months to bring down debt.

Meanwhile, the company's robust trading has enabled it to generate strong cash inflows, helping it refinance its short-term borrowings to
6.1% until November 2011 - an action that will keep down its interest repayments.

M&B said that the pubs industry as a whole has seen drinks sales fall by about 10% over the past quarter.

Figures out today from Nielsen research suggest that beer volumes are down 9% in the first five months of the year compared with the same period in 2007, while spirits fell 8% and soft drinks are off by 7%. Even wine, which was previously seen as the growth area in the pubs and bars market, is down by 5%.

Neilson reckons that the decline will continue for at least two years.