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Investing.com -- Shares of Mitchells & Butlers (LON:MAB) jumped over 4% on Wednesday after it reported strong sales growth during the festive season despite facing cost challenges.
The UK-based pub and restaurant operator saw a 10% increase in like-for-like sales during the critical Christmas period, contributing to a solid start to the fiscal year.
The overall sales growth for the first quarter of FY25 came in at 3.8%, aligning with the company's expectations for the full year.
This performance was achieved even amid adverse weather conditions in recent weeks, which had a notable impact on sales during the final weeks of the quarter.
The company’s festive trading period was especially strong, with sales up 10.4% in the key three-week stretch from October to December.
A breakdown of sales performance showed food sales increased by 4%, while drink sales grew by 3.6%.
Despite these gains, Mitchells & Butlers is still grappling with cost pressures, having previously warned of £100 million in additional costs for FY25, mainly driven by employment-related expenses.
However, M&B remains confident in its ability to manage these headwinds and still anticipates delivering profit growth for the year.
In terms of future outlook, M&B continues to focus on its competitive positioning in a sector facing increasing cost challenges.
The company’s scale, strong market leadership, and diverse product portfolio, including a number of freehold properties, put it in a favorable position to capture market share.
Analysts at Jefferies also noted that M&B’s strong cash generation is expected to contribute to a shift in its debt-to-equity ratio over the next few years, with an estimated 30% reduction in debt over three years and 50% over five years.
Despite the optimism surrounding its growth prospects, there are some concerns about potential short-term volatility, particularly in light of consumer behavior shifts that may follow the UK Budget.
Nevertheless, analysts remain positive on M&B’s long-term trajectory, with consensus forecasts projecting a modest 1% EBIT growth to £314 million and a 6% increase in pre-tax profits to £224 million for FY25.