ii view: London and premium brands are drag on Mitchells & Butlers

Fourth-quarter trading update to 20 September

• Like-for-like sales up 3.1%

Chief executive Phil Urban said:

"We are pleased with our performance over the year, in which we remained consistently ahead of the markets, across all market segments. Sales growth has been broad based, with strong like-for-like performances in both food and drink across our portfolio of brands, supported by cost efficiencies and a capital programme which continues to deliver strong returns."

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ii round-up:

Pub group Mitchells & Butlers (LSE:MAB) today detailed quarterly trading that was below City forecasts, with the owner of brands such as All Bar One and Browns flagging robust mid-market trading countered by weakness in London and premium brands. 

Fourth-quarter like-for-like sales for the nine weeks to 20 September rose 3.1%, down from growth of 5% for the 13-week third-quarter period and below analyst forecasts for growth of around 4%. 

Shares in the FTSE 250 company fell 7% in UK trading having come into this latest news up by a similar amount so far in 2025. The FTSE 250 index is up by close to 5% year-to-date, while budget rival Wetherspoon (J D) (LSE:JDW) has gained 14% over that time.  

Mitchells operates over 1,700 pubs and restaurants with other brands including Nicholson's, O'Neill's, Miller & Carter, Toby Carvery, as well as Innkeeper hotels. 

Given continued sales outperformance of the wider hospitality market, Mitchells continues to expect annual profits in line with City forecasts of £317 million to £330 million. That’s potentially up from last year’s £312 million.

Drinks sales for the quarter rose 1.9%, down from growth of 4.8% in Q3, with food sales up 3.4% slowing from growth of 4.9% in the prior quarter. 

Mitchells offered no sales forecasts for the 2026 year ahead, but reiterated its forecast for a higher level of cost inflation at around £130 million, or 6% of its cost base, hindered by increased employee costs and food inflation.

Full-year results are likely to be announced late November or early December.   

ii view:

Started in 1898 and headquartered in Birmingham, Mitchells & Butlers today employs around 50,000 people. Food generated most sales during the first half to mid-April at 54%, with drink at 43%, and services such as rents from unlicensed properties, a small balance of 3%. As well as other UK brands such as Harvester and Ember Inns, the group also operates the ‘Alex’ chain of bars in Germany, generating just under 5% of overall sales.

For investors, concerns about tax rises in the Autumn Budget and regular political demonstrations in London over recent weeks could be hindering sales. A higher minimum wage and rising food prices now add to costs. The impact of unseasonal weather always warrants consideration, while the halted dividend payment contrasts with forecast yields of over 1.5% for rivals Wetherspoons and Fuller Smith & Turner Class A (LSE:FSTA)

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On the upside, 19 different brands across the mid-to-upper market segments offer diverse consumer exposure. Ongoing management initiatives include the installation of solar panels and sensors to reduce costs, as well the updating of over 200 outlets year-to-date. A refinancing of its unsecured debt facilities has already happened, while a concentration on lowering debt at the expense of the dividend continues to look sensible.   

For now, there are clearly risks around costs and demand should the UK economy deteriorate. However, Mitchells' continuing outperformance of the wider hospitality sector is likely to make it popular among investors interested in the sector.

Positives: 

• Diversity of brands
• Ongoing management efficiency programme

Negatives:

• Uncertain economic outlook
• Potential currency headwinds from Germany business

The average rating of stock market analysts:

Buy