Mitchells & Butlers PLC on Thursday said that year-to-date sales had declined, as it warns that inflationary cost pressures present a ‘major challenge’ to the business and the wider hospitality sector.

The Birmingham-based operator of pubs, bars and restaurants reported that in the 13 weeks to July 16 like-for-like sales increased 0.9%. The main driver of sales was food at 5.5% growth year-on-year. However, drink sales were down 1.3% over the period.

Mitchells & Butlers explained that sales were hit by the Jubilee weekend, industrial action and the recent heatwave.

It added that total sales have declined 1.6% in the year-to-date driven primarily due to Covid-related closures in the first part of the year and site disposals since financial year 2019.

It expects that inflationary cost pressures will continue to be a ‘major challenge’ to the business and the hospitality sector as a whole. ‘Whilst the near-term outlook is unchanged it now seems likely that, particularly in the case of utilities, wages and food costs, these will persist at or above current levels well into the next financial year, increasing and prolonging the medium term impact on margins,’ Mitchells & Butlers explained.

Chief Executive Officer Phil Urban said: ‘The trading environment remains very challenging with inflationary costs squeezing consumer discretionary spending and putting pressure on the industry’s margins.

‘In the face of these challenges, we remain focused on driving sales and efficiency through our Ignite programme and pushing forward with our capital investment plan which we are pleased to see delivering strong sales uplifts,’ Urban added.

Shares in Mitchells & Butlers were down 1.5% to 170.10 pence each in London on Thursday morning.

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