Shares in Revolution Bars (RBG:AIM) are languishing near all-time lows at 99p as an uplift in Christmas trading failed to offset the impact of declining sales and higher costs, prompting a profit warning.
The company, which owns the Revolution and Revolucion de Cuba brands, has warned that adjusted earnings in the year to 30 June 2019 are expected to fall to £12m against consensus forecasts of £16m.
Approximately £2m of the earnings decline has emerged in the six months to 31 December with spiralling costs partially taking a toll.
Part of the problem is that people weren't partying as hard in October and November as they did to the run up to Christmas and New Year.
Sales in December excluding New Year’s Eve jumped 2.6% but they were down 5% over the full 26 weeks to 29 December.
‘FURTHER WORK TO BE DONE’
Revolution Bars is also blaming the performance of its student-focused Revolution brand as it has disappointed on trading over the same period.
‘There is still further work to be done on the Revolution brand and therefore the board is taking a cautious approach to trading in the second half given the economic and political uncertainties at this time’, says the company.
In an attempt to drive sales higher, the firm is refreshing its food and drinks menus and entertainment to encourage ‘instagrammable moments’.
AJ Bell’s Russ Mould says Revolution Bars has been a favourite among many retail investors who were attracted by its upmarket proposition and by a previous approach from Slug and Lettuce owner Stonegate Pub Company.
‘Unfortunately clinging onto past ‘achievements’ would have been the wrong strategy to pursue, judging by yet another profit warning from the business’, comments Mould.
The investment director argues Revolutions Bars’ weak share price may attract another takeover bid, but nowhere near the 203p per share offered by Stonegate in 2017.
