Pub group Mitchells signals cost concerns as sales recover

British pub and restaurant company Mitchells & Butlers (LON:MAB) said on Thursday its sales in recent weeks have been higher than before the coronavirus pandemic but warned of challenges ahead due to rising costs for staff and utilities.

Announcing a jump in full-year operating profit to 81 million pounds ($108 million) from 8 million last year, the owner of the O’Neill’s, Harvester and All Bar One brands said Brexit had compounded risks around the supply and cost of products as well as labour shortages.

In the eight weeks since the end of its financial year on Sept. 30, however, it said sales had climbed 2.7% on a like-for-like basis to surpass levels before the pandemic thanks to pent-up demand and lower taxes on some alcohol.

The company’s shares, which have lagged the broader FTSE 250 midcap index so far this year, jumped as much as 8% in early trading before slipping back for a gain of 1.4%.

“Demand for our well-loved brands has been demonstrated by an encouraging return to sustained like-for-like sales growth since restrictions have been lifted, and we are confident in our ability to continue our recovery as a market-leading operator,” Chief Executive Phil Urban said.

The company said its pretax loss for the year narrowed to 42 million pounds from 123 million pounds.

It said it was factoring in lower operating margins in the current financial year compared to pre-pandemic levels, with notable cost inflation across food, utilities and labour.

The company, which employs 44,000 people in its 1,700 restaurants and pubs, said it was buying ahead to sidestep the potential lack of availability of products while reviewing and updating key contracts with its suppliers.

($1 = 0.7496 pounds)