• Like-for-like sales at troubled restaurant chain continue to slide, down 1.5% year on year
• However shares were up 10% in early trading – possibly helped by a broker upgrade
• The Share Centre recommends Restaurant Group as a 'buy' for investors prepared to take a higher level of risk
As Restaurant Group updates the market Helal Miah, investment research analyst at The Share Centre, explains what it means for investors.
"Troubled restaurant chain owner Restaurant Group produced a trading update that sent its shares up by over 10% in early trading even though like-for-like sales continued their slide, down 1.5% compared to the same period in 2016. However, the share price rise may have been helped along by a broker upgrade.
"Management said that they saw strong performances in their Concessions business, which runs restaurants at airports and railway stations, helped along by good weather conditions. However their core Leisure business, which runs restaurants in leisure and retail parks continued to struggle and management remain focussed on turning this business around. It benefitted from good attendance at cinemas during the latest quarter but this is expected to moderate as fewer blockbuster movies are expected.
"Investors will note that Restaurant Group has kept its profit target for the year, which is in line with current market expectations, and we have stuck with our 'buy' recommendation as we believe that management will be able to address the pricing issues and take on the competition. This is a share for investors playing on a long term recovery and willing to accept a higher level of risk."