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By Malcolm Stacey | Monday 16 April 2018
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Hello, Share Snackers. Before now, I’ve commended shares in Greene King (GNK). Eating out in pub chains is usually cheap and cheerful and ideal for treating families who don’t particularly relish gourmet food. But after seeing its latest set of figures I’ve rather changed my mind.
The company has blamed the late winter snow for a depletion of customers. Without that, it probably would have made a slightly better profit than last time. The shares rose about 8% on reporting day, but I’m not sure why.
Pubs are up against it at the moment. People are staying at home with their big screen tellies, home computers, tablets and play-stations. And have you seen the price of a pint these days?
There is also growing competition among the cheaper dining venues. And I much prefer the Wetherspoons (JDW) business model to most other pub chains which do meals. While Greene King has other brands, like Hungry Horse, Flaming Grill, Loch Fyne and Wacky Warehouse, they don’t seem to me to have a very high profile. Not really household names, are they?
Probably to fend off the opposition, Greene King has been cutting prices. That will bring in more punters, but at the same time profit margins will suffer. It is expecting to save up to £45 million in annual costs but is also expanding - opening 9 new pubs so far this year and pouring money into nearly 300 of its others.
The dividend is tasty with a prospective yield of 7.2%. It’s just that, with wages of ordinary punters so restrained, I cannot see much room for profit improvement in the next year or so. If I had the shares, I think I might sell for better prospects which are out there.
Luckily for Greene King, it doesn’t own the Punter’s Return.
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