Fridays owner set to double estate despite profit warning

Hostmore is set to expand its portfolio with the addition of three new sites in FY22, as it outlined its ambition to almost double its site locations from the current 89 over the medium term, subject to an improved trading environment.

The owner of Fridays and 63rd+1st said this growth will be self-funded and achieved through a combination of its Fridays portfolio, a further roll-out of 63rd+1st and, in particular, and the development of the recently launched town centre concept Fridays and Go.

Despite these plans, it noted that sales have been subdued in the 20 weeks ended 22 May 2022. Like-for-like revenue was 6% lower than 2019 amid a more challenging consumer environment, with dine-in sales remaining in line with the market benchmark data.

Hostmore said these lower sales were a result of consumer confidence weakening “significantly” since Russia’s invasion of Ukraine on 24 February 2022, which is contributing to the current cost of living crisis.

Nonetheless, it said its continued cash flow generation, balance sheet strength and liquidity headroom provides a base to almost double the estate in the medium term. It added that the early hedging of gas and electricity costs, both volume and pricing, and success in limiting food and beverage costs increases, has limited the impact on margins.

The group recently welcomed new store openings in Dundee (Fridays and Go) in March and Chelmsford (Fridays) in May, which have both since traded ahead of expectations.  

Looking ahead, amid weaker consumer confidence the group expects LFL dine-in volumes to fall by 8% for the rest of FY22. While good and beverage input cost inflation impacting the sector is currently approximately 10%, it said it has partially mitigated the impact of this cost inflation by fixed utility and supply contracts. 

However, it warned the combination of cost increases and lower volume will result in an EBITDA margin (pre-IFRS) in low double digits for the current year compared with its medium-term targeted level of mid-teens, which is retained.

Robert B. Cook, Hostmore plc’s CEO, said: “We are not where we expected to be, however, I am able to report a financial performance which, regardless of the arduous challenge and extreme economic headwinds being encountered presently, allows us to confidently continue with our development strategy. 

“Our ambition remains that of almost doubling the size of our existing portfolio brands over the medium term as economic conditions improve. Our relationship with landlords, coupled with a prudently managed balance sheet, provides the basis for confidence in the success of our strategy over the longer term.”

He added: “The recent Fridays core brand store opening in Chelmsford, and our world-first “fast casual” Fridays and Go restaurant in Dundee, supports our belief that the Fridays brand has a strong long-term future, and our 63rd+1st brand continues to attract higher than average levels of guest spend and satisfaction which will enable it to consolidate itself in existing and new target locations.”