Weaker sales growth for UK pub chain

London Pride brewer Fuller, Smith & Turner today vowed to protect its margins in the face of rising ingredients costs and a customer spending squeeze.

Fuller reported a 4% rise in pre-tax profits to £23m (€28.8m) for the year to March 29, but also revealed a weakening trend in underlying sales at its managed pubs and hotels.

Like-for-like sales rose 2.4% during the nine weeks to May 31, down from the 4% increase seen for the 43-week period to January 26.

Chiswick in London-based Fuller described the most recent sales performance as "solid", but warned of industry challenges ahead.

Chairman Michael Turner said: "The current inflationary pressures in the UK, particularly on grain, food and energy, are both pushing up our costs and squeezing our customers' disposable incomes.

"Despite these inflationary pressures, we intend to hold our gross margins across both our retail and brewing operations."

Fuller's full year results for the year showed sales 2% ahead at £181.1m (€227.1m).

Shares in the group were down nearly 6% today.

Fuller did not disclose whether it would raise prices because of the higher overheads. It pointed out it faced spending an extra £1.2m (€1.5m) alone on gas and electricity costs this financial year.

The group operates 360 premises, 203 which are tenanted and 157 managed. Its estate also includes 494 hotel bedrooms.

Like-for-like sales growth in the managed pubs and hotels estate was 3.6% during the whole financial year. Food sales were 8% ahead, and now account for 27% of revenues, with revenue per available room up 8.9%.

Fuller's brewing arm - which produces brands including London Pride, Chiswick Bitter and HSB - saw volumes rise by 4%.

Analyst Douglas Jack from Panmure Gordon said the pub and hotels business' sales increase, although representing a slowdown, was "resilient" during what was a tough trading period. He added that the brewing performance was "above average" for the sector.

Last year the industry was hit by the England and Wales smoking ban, a washout summer and by steep hikes in alcohol duty from British chancellor Alistair Darling's Budget.

Mr Jack said he was cutting this year's earnings forecast by 2% due to Fuller's higher utility costs. "Fuller's should continue to outperform its pub peers," he added.