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Lack of drinkers gives Revolution a headache

Emma-Lou Montgomery

Emma-Lou Montgomery - Fidelity Personal Investing

Say the words “challenging” and “drinkers” and your first thought is most likely a town centre you know on a typical Friday night, heaving with revellers, many of whom have had one too many.

Lack of drinkers gives Revolution a headache

But when bar chain Revolution used that word in its latest set of half-year figures it was to describe the headache of having too few punters propping up its town centre bars.

The operator of the Revolución de Cuba and Revolution bars said a slow start to 2019, which is also  the company’s third quarter, means earnings for the full year are now expected to come in below the previously estimated £12 million  at somewhere between £11 million and £12 million. Last year earnings came to £15 million.

The news sent Revolution’s shares crashing 23% to an all-time low.

Revolution, which has 79 bars in the UK, many of which are located in university towns, has long been a favourite of students, with its happy hour, party nights and a £2 privilege card that gives the holder cut-price drinks.

In today’s results announcement it tried to write-off an 8% fall in like-for-like sales in the eight weeks to 23 February as the victim of what it called “inconsistencies”, namely the half-term break falling later than usual and Valentine’s day falling the day before its usual Wednesday student events, all compounded by the closure of three bars for refurbishment.

None of those three “inconsistencies” were surprises surely? Yet Revolution seems taken aback and has pulled its planned new site openings as a result.

You could go on to argue that as Revolution operates bars, which are pretty much akin to pubs (only with louder music, more people downing 2 for 1 shots and an exclusively young clientele) the writing has been on the wall for some time.

It might not look like it in some towns on a Friday night, but we’re drinking less. Certainly in pubs and bars and that’s taking its toll on the sector.

Only 58% of adults in England who responded to a 2017 survey by the National Health Service reported drinking in the previous week, down from 65% in 2007. OK, while people may not always be completely honest when it comes to estimating how much they drink, the industry stats don’t lie.

The latest Office for National Statistics data shows there are 22%  fewer pubs now than in 2008 and turnover in the sector has fallen 11%  in real terms in the period it looked at from 2008 to 2016.

Taking into account the data that shows young people in particular are drinking less than the generation before them, and looking at the continuing fall in consumer spending in the pubs and bars, restaurants and retail sectors that we saw in 2018, the next set of data is unlikely to give the sector anything to raise a glass to.

Retailers are having to adapt to meet changing consumer demand. Pubs already have, with the emphasis now on larger family-friendly venues that serve food. All sort of eateries from mid-range restaurant chains, to bakery chains like Greggs and the fast food giants, are adapting their menus and re-thinking their offerings in order to appeal to today’s increasingly demanding consumers. It looks like Revolution and any others of its ilk need to do the same. And quickly before the hangover gets any worse.

More on Revolution Bars Group

Five year performance

(%) As at 28 Feb 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
Revolution Bars Group PLC - - 23.8 -13.1 -50.9

Past performance is not a reliable indicator of future returns

Source: Fe, as at 28.2.19, in GBP terms with income reinvested

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