Bleak year looms for owner of Steers, Wimpy

The owner of food brands Steers and Wimpy, Famous Brands [JSE: FBR]has warned that the coronavirus outbreak could negatively impact its sales, with performance for March already taking a knock.

Last week the group issued a trading update in which it said sales across the group rose by 6.4% for the year to end-February. During the period the group battled against a competitive trading landscape, Fin24 previously reported.

The financial results for the period are to be released on 26 May, 2020.

But things are looking bleak for the year ahead, as the group is already projecting lower like-for-like sales (these exclude sales from closed and new restaurants), according to a notice it issued to shareholders on Monday.

"Initial indications are that sales have deteriorated steadily over the first three weeks of March as government measures take effect on restricting consumer activity.

Worrying declines

"Those markets in which the virus has been prevalent for longer have been most affected, including England, Ireland and the UAE," the group said. So far there have been "concerning" declines in sales in South Africa, with some temporary restaurant closures in the country as well as in Mauritius and Kenya.

The group said it is difficult to project with accuracy the impact of Covid-19 on its business, due to the "instability" of trading markets.

"However, the board and management anticipate that trading over the coming weeks will become increasingly difficult and will undoubtedly result in significantly reduced like-for-like sales," the group said.

Famous Brands, like other businesses, have to adhere to new restrictions placed by government in order to contain the spread of the coronavirus. The number of cases in South Africa now stands at 274. Last week, government announced all establishments that sell liquor - this includes bars, clubs, shebeens and restaurants – cannot do so after 18:00. Restaurants can stay open till after 18:00, but they cannot sell alcohol; furthermore, there can be no more than 50 people on the premises, Fin24 previously reported.

Famous Brands said it would enforce the "necessary disciplines and protocols required" but it would have a significant impact on its Signature brands – among these include Tashas, Europa and pub franchise Keg. 

More deliveries, less contact

On the upside, Famous Brands expects its online deliveries to pick up, as lower foot traffic is expected at shopping malls and restaurants. "With regard to our intensified hygiene protocols, we have also implemented a policy of no-contact delivery for orders paid online, in terms of which our delivery drivers will maintain a practical distance when delivering orders and limit any physical contact with customers," Famous Brands said.

Its UK business, Gourmet Burger Kitchen, as well as its Wimpy restaurants in the country, have been closed since Saturday, 21 March. "Selected GBK and Wimpy restaurants will attempt to remain open to service the home delivery market, but the viability of this option is unclear at this stage. Management will monitor the situation closely for both operations," the group said. GBK is currently going through a restructuring programme, as the investment has failed to deliver on its targets.

So far, Famous Brands said its supply chain operations have not experienced significant disruptions.

Famous Brands has instituted a crisis leadership team to respond to the situation as it develops.

The share opened at R27 on Monday, reaching a high of R29.49 at 09:45. By 12:37 it was trading at R24.45, some 13% down.

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