Wagamama owner The Restaurant Group to close sites amid cost-of-living pressures

The Restaurant Group will close dozens of outlets as after annual losses soared by 70 per cent amid worsening inflationary pressures.

The Wagamama and Frankie & Benny’s owner said it would shut about 35 ‘potentially loss-making’ sites over the coming two years, resulting in its leisure division being about 30 per cent smaller.

It intends to achieve this through a mix of sales, lease expirations and break clauses, while another three establishments will be converted into Wagamama restaurants.

Closures: Wagamama’s parent company The Restaurant Group said it would shut about 35 ‘potentially loss-making’ sites over the coming two years

Restaurant Group told investors on Wednesday the measures were being taken in response to a ‘tough macroeconomic environment’ for the hospitality sector.

As well as higher food, drink and energy costs, the firm’s margins have been squeezed by labour shortages, forcing the business to hike wages to try and attract staff, and latest increase to the UK National Minimum Wage.

As the company’s future earnings and trade are expected to remain impacted for the immediate future by cost-of-living pressures, it has taken a £117.5million exceptional charge in its latest results.

Consequently, annual statutory losses at the London-based firm, which also runs Tex-Mex chain Chiquito, jumped from £40.3million in 2021 to £68.5million last year.

This was despite revenues surging by almost £250million to £883million on the back of loosening lockdown rules. 

Restaurant Group saw demand hit in early 2022 by government guidance encouraging people to work from home following the Omicron variant’s emergence. 

But it noted the division’s sales recovered faster than anticipated in the second half of the year after travel restrictions were relaxed again, allowing Britons to fly abroad with greater ease and commute to work more regularly.

Even though rising inflation gradually began to hurt consumer spending, the business said its pubs and Wagamama venues outperformed the wider market.

‘We’ve delivered a strong operating performance for the year in a market which has continued to pose a number of headwinds for casual dining operators,’ said chief executive Andy Hornby.

‘Current trading has been very encouraging to the great credit of our teams who continue to ensure our customers receive the best experience possible.’

Nonetheless, The Restaurant Group shares plunged by 13.4 per cent to 39.2p on Wednesday morning, making it the worst performer on the FTSE All-Shares Index.

Mark Crouch, an analyst at trading platform eToro, said the results ‘would leave a bad taste in the mouths’ of shareholders who have already been reeling from the value of their investment plummeting in the past year.

On the firm’s prospects, he added: ‘Money is tight for a lot of people, and costs remain high, both of which may act as anchors on growth for the foreseeable future.’

Activist investor Oasis Management has called for a major shake-up at The Restaurant Group, including an overhaul of the leadership, which it has accused of presiding over ‘strategic stagnation.’

It wants a strategic review of the business led by an independent bank and a seat on the board. The Restaurant Group has roundly rejected both proposals.

This post first appeared on Dailymail.co.uk