Shares in Frankie & Benny’s owner Restaurant Group (RTN) have suffered another hammering after the £1.1 billion cap reveals the tough trading conditions seen in the fourth quarter have continued into 2016.

Like-for-like sales are down 1.5% in the first 10 weeks of the year, which the group blames on a softening in consumer demand and weaker consumer confidence.

It says these weak trading patterns are likely to persist and that like-for-like sales increases will be difficult to generate. The gloomy outlook sends the shares crashing 16% to 456.4p.

RESTAURANT GROUP - Comparison Line Chart (Rebased to first)

The worst performer is Restaurant Group’s largest brand Frankie & Benny’s, which is predominantly based in retail parks. The group says the brand is most exposed to some of the underlying challenges around retail footfall and the increased number of competitor openings.

This seems at odds with Restaurant Group’s previous comments that its location in retail parks cushions it from the fierce competition experienced by high street-based restaurants.

N+1 Singer analyst Sahill Shan says the fall in like-for-like sales – which compares with a 2.5% rise this time last year – reflects the fact that the casual dining sector is over-supplied with no let-up in new openings.

The positive news in the full year results is that Chiquito and the pub restaurant business are performing extremely well. Chiquito serves sizzling fajitas to young adults while the pub restaurants serve the affluent ‘grey’ market.

Frankie & Benny’s targets families who are clearly choosing to spend their hard-earned cash elsewhere.

N+1 Singer has cut its recommendation from ‘hold’ to ‘sell’ and slashed its target price from 550p to 450p. It says there is a 3-4% downside risk to forecasts for 2016.

Issue Date: 09 Mar 2016