Investors will need to be patient as the recovery story isn't going to play out overnight
Thursday 05 Sep 2019 Author: Daniel Coatsworth

Restaurant Group (RTN) 137.2p

Gain to date: 21.2%

Original entry point: Buy at 113.2p, 11 April 2019


Investor expectations were possibly too high in the run up to Restaurant Group’s half year results on 3 September. The shares took a big hit when it reported £115.7m in one-off charges and very slow sales growth of 0.2% in the past six weeks, leading to modest earnings downgrades from analysts.

Prior to the results the stock had raced up to 156.9p and they’ve now pulled back to roughly the level at which we last said to buy (4 July).

The obvious temptation is to get out now, particularly as management have become more cautious about Frankie & Benny’s and Chiquitos. However, there is merit in sticking with the shares as there is still a lot more that management can do with turning around the business.

Earlier this year it identified 76 Frankie & Benny’s sites considered to be in unfavourable locations. It has now earmarked 42 more sites, most of which are understood to be Chiquitos. It will consider closing them once their leases are up for renewal.


SHARES SAYS: There is a clear plan how to improve earnings and the customer proposition. The difficult part is waiting for the plan to be executed. We will sit tight for now, but nervous investors may want to take some profit.

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