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Business News

Wagamama owner warns of price rises as it becomes latest to flag supply chain pressures


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The owner of restaurant brands including Wagamama and Frankie & Benny’s has warned of price rises as it becomes the latest firm to count the cost of supply chain strains and worker shortages.

Andy Hornby, chief executive of the Restaurant Group, told Sky News that inflation was “inevitable”, flagging a lack of drivers as well as revealing difficulties in hiring chefs.

The group, whose shares fell 7%, was one of several listed businesses to disclose similar problems as they delivered trading statements to the stock market on Wednesday.

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‘Inevitable’ that prices will rise – Wagamama owner

Mixer maker Fevertree, house builder Redrow, model train company Hornby, and car dealership Pendragon all highlighted supply chain worries in their latest updates.

They join a series of well-known brands across the economy – from McDonald’s and Nando’s, to Marks & Spencer and furniture firm, to have done so.

Businesses have been struggling with issues linked to both the pandemic and Brexit that are snarling up supply chains and at times resulting in a lack of availability of products.

The cost of dealing with this – for example by paying drivers more money – is squeezing profit margins or being passed on to customers in the form of higher prices.

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Mr Hornby told Sky’s Ian King Live: “It is inevitable given what’s going on in the supply chain that there will be some inflation coming through because it doesn’t matter where you look, there are pressures – whether it be driver numbers, whether it be a number of pickers for suppliers.”

The chief executive said he wanted to pass on as little as possible to customers.

Frankie & Benny's
Image: Frankie & Benny’s is also part of the Restaurant Group

He added that recruitment for the group’s restaurants was “extremely patchy”, with particular problems finding “back of house” staff.

“There is no doubt that there are fewer chefs than the market needs at the moment,” Mr Hornby told Sky News.

The comments come after supermarket Iceland warned earlier this month that the shortage of HGV drivers would result in higher prices.

Mr Hornby was speaking as the Restaurant Group reported a £58.8m loss for the 27 weeks to 4 July, compared to a £234.7m loss a year ago – with the latest results covering a period when it was still held back by pandemic restrictions.

But the group, which operates 400 pubs and restaurants across the UK, pointed to “good progress” as sales recovered after the lifting of lockdown measures.

Elsewhere, Fevertree, which sells upmarket tonic water and other mixers, highlighted pressure on its profit margin thanks to “global logistics disruption and cost pressures”.

It reported a like-for-like global sales increase of 32% for the first half of the year, helped by continued strong trading in the off-trade – sales via retailers including supermarkets and a 17% rise in profits to £25.3m.

But the group said logistic cost “headwinds” and rising prices for ingredients would continue to hold back earnings.

Shares rose 8%.

Fever-Tree, launched in 2005, produces a range of tonics and mixers and has expanded beyond its core UK market. Pic: Fever-Tree
Image: Fevertre highlighted global logistics disruption and cost pressures. Pic: Fever-Tree

Meanwhile, house builder Redrow reported a leap in profits for the year to 27 June to £314m, more than twice as high as the previous year’s earnings, helped by the buoyant property market.

But it revealed that it had been hit by supply interruptions, including shortages of steel, timber and cement-based products – though it expects the pressures will start to ease.

Car dealer Pendragon, whose brands include Evans Halshaw and Stratstone, bounced-back to a half-year profit of £28.4m after a loss of £41.4m a year ago but said it was “anticipating continued shortages” in new and used vehicles.

Global chip shortages are holding back the supply of new cars – a shortfall that is having a knock-on effect on the second-hand market.

Hornby, the model maker, said in a trading statement that sales over the April-August period had been slightly lower than a year earlier but that it had a “very strong” order book.

But the group warned, ahead of the key festive season, that “timing is everything when it comes to Christmas, and we are mindful of the potential supply disruption at the ports continuing”.

Shares fell 8%.

 Sky News

© Sky News 2021

Written by: Rother Radio News

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