Pubs operator Fuller, Smith and Turner (FSTA) is benefitting from demand for premium products such as innovative gin drinks.
Like-for-like drink sales jumped 5.5% in the 26 weeks to 29 September, driven by a 41% surge in gin drinks, which have been supported by a wider range of tonics and other mixers.
Chief executive officer Simon Emeny says the gin market is evolving with 'no signs of slowing down'.
Pink gin is among the most popular gin products while rhubarb and ginger flavours are currently a hit with customers.
It appears Fuller’s is tapping into trends towards healthier lifestyles, as sales for low and no-alcohol drinks have climbed by 56%, although these tipples remain a relatively low proportion of the company's overall drink revenues.
Similar to its rivals Mitchell & Butlers (MAB) and Greene King (GNK), Fuller's food sales growth has been less impressive with a 1.6% rise in like-for-like sales over the same period.
In a bid to drive food sales, the company has been introducing more healthy dishes, with one in ten dishes currently vegan or vegetarian.
Emeny says this trend is likely to gain momentum as people want to 'drink less and eat better.'
EXTENSIVE INVESTMENT HITS PROFITS
Adjusted pre-tax profit fell 1% to £23.6m in the half as Fuller’s focused on major investments and temporarily closed some pubs for refurbishment, impacting profitability by £0.9m.
The decision to invest heavily also impacted earnings per share, down 1% from 34.2p to 33.8p, although there's a healthy 3% dividend hike to 7.8p to sate income-seeking investors.
This is in contrast to Mitchell & Butlers, which prioritised investment over any dividends this year.
Emeny has ruled out a similar decision and flags that food sales growth is being driven by increasing footfall rather than price hikes.
FULLER'S 'MATERIALLY OUTPERFORMS'
Numis analyst Tim Barratt says Fuller’s has continued to materially outperform the market, even after the boost from the summer's heatwave and World Cup ended.
He believes the pub operator can deliver a 3.5% increase in like-for-like sales in the year to March 2019, up from 2.5% growth.
Peel Hunt analyst Douglas Jack argues Fuller’s is making the right decisions for long-term trading, but has cut his annual pre-tax profit forecast by £1m to reflect 92 closure weeks in the current year, up from 29 in the prior year.
