The analysts' perspective

Geof Collyer, an analyst with Deutsche Bank, comments:"In our view, a successful managed pub needs to have an average weekly turnover comfortably above £10,000 and preferably much higher, since the costs of running pubs tend to rise at a higher rate than the uninvested like-for-like sales. Given this scenario, we expect the number of managed pubs in the UK to gradually reduce over time." Collyer continues: "Managed pubs groups have gone through big and, in some cases, very expensive learning curves. Rollouts have been curtailed and not just because of high street saturation." Of Mitchells & Butlers, he says: "It is almost free of the shackles of its beer-supply contracts. In short, the sleeping giant has awoken and looks on track to deliver at long last. M&B is converting lower cash sales than its peers into higher profits. The principal risk is the smoking ban." Collyer has reservations about JD Wetherspoon. He reports: "Its commitment to everyday low pricing makes it difficult to be even cheaper' when its differential is already so great in terms of average pricing versus its peer group. Its food offer has been driven aggressively with scope to keep that programme up and running, though there is a margin risk." Lazard analyst Douglas Jack has doubts about the survival chances of some of the retail concepts seen on the highstreet. In July, Jack reported that the positioning of chameleon bars (outlets that change ambience, price and offering during the different trading periods to suit different customer bases) was deeply flawed. He accused some chameleon concepts of trying to compete unequally with nightclubs onlate-night entertainment. He doubted whether localauthorities would view favourably the vertical-drinking atmosphere created by the removal of tables and chairs plusthe lack of food offered during extended opening hours.Jack says he has recently revised his views on chameleons,but adds that they are exposed to more risk than otherconcepts. Mainstream discount outlets will also come under even more pressure unless they expand their food offering. Even so, he warns: "Competition in this area will intensify as more competitors across the sector target food." Jack remains a fan of entertainment bars such as the Chicago Rock Café and Walkabout chains. "If entertainment bars remain true to their brand values, their differentiation of offer should bring protection," comments Jack. Jack believes style bars offer the most resilience in a competitive market, even though they charge higher prices. These premium bars are less threatened by regulatory change because many are food-led, says Jack.