Good morning!

Sorry I didn't get round to doing any more updates to yesterday's report. I was too tired after a 5-hour drive home, in heavy traffic.

Today is one of my "it's not a small cap, but it is a retailer, and it's interesting" days! I'm talking about this company:

Restaurant (LON:RTN)

Share price: 290p (down 22.5% today)
No. shares: 201.0m
Market cap: £582.9m

(I am actively trading this share today, and at the moment am long, but this may change throughout the day)

Trading update & Board change (profit warning) - key points:

The long-standing FD has left with immediate effect - so clearly some kind of Board Room bust-up has occurred. Not good - and suggests that there could be more problems ahead.

Current trading has been weak:

Since we updated on current trading with the preliminary results on 9th March, we have seen a further deterioration in trading conditions, with our Leisure business, in particular, continuing to be impacted by the structural and business challenges referred to in the March Preliminary results statement. As a result for the 17 weeks to 24 April, total sales are up 4.7% and like for like sales are down 2.7%.

Clearly that's bad news, but it's hardly a disaster. LFL sales down 2.7% over 17 weeks suggests to me problems that are probably fixable.

However, note that the company last reported LFL sales were down 1.5%, for the first 10 weeks of this financial year.

I want to quantify what the LFLs were for the last 7 weeks (not specifically stated today), so have created a very simplistic spreadsheet (see below) which calculates approximately what the LFL might have been in the last 7 week period. Note that I have ignored seasonality, which will skew the figures somewhat, since I do not have any data on the seasonality of the business on a weekly basis.

Here are my workings, which suggest that LFL sales down c.4.5% in the last 7 weeks - so a deteriorating trend.


Sales guidance given today for the full year, is LFL sales down between -2.5% to -5.0%

Revised profit guidance is given today of £74-80m profit, at the PBT level. So still a very substantially profitable business, on an excellent margin too.

Valuation - I've not seen any revised broker forecasts yet today, but using the old figures, and taking them down…

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