THE UK restaurant industry received a strong warning today that trouble lies around the corner after The Clapham House Group said that British consumers are slashing their spending.
Clapham House shares dived almost 50 per cent on the news, and dragged shares in The Restaurant Group and Domino`s Pizza down by about 10 per cent each.
Clapham House, owner of the Gourmet Burger Kitchen and Tootsies chains, warned that sales are falling and revealed it is scaling back plans for opening new restaurants as the costs of food and renting property both rise.
Expansion in the years ending March 2008 and 2009 will now be "significantly below the board`s expectations", the company warned.
The news fuels growing fears that the combination of high interest rates and turmoil in the financial markets are taking their toll on consumers.
The deterioration in the fortunes of Clapham House has not been helped by the delayed release of sites earmarked for a new Gourmet Burger Kitchen and The Real Greek restaurant in Spitalfields, London.
It said that the new restaurants at Spitalfields had been expected to contribute at least £500,000 to this year`s operating profit but, because the schemes had been delayed by the landlord by at least 2 months, they were not likely to open "well into the financial year to March 2009."
It also said that sales at its Tootsies restaurants continued to slow after September when it first warned investors of falls.
A company statement said: "These restaurants are normally the most profitable within the Tootsies estate so any sales shortfall has a disproportionate effect on profits.
"The board attributes this to pressure on UK consumer spending which appears to be affecting these locations in particular."
As a result, Clapham House warned that Tootsies` contributions to this year`s profits would be "significantly below original expectations."
David Page, executive chairman, said: "Despite the current uncertain economic outlook, we remain positive about the medium-term demand trends for the UK eating out market, Clapham House`s formats and, in particular, the national roll out opportunity for Gourmet Burger Kitchen."
The company said that interest charges were £200,000 higher than expected in the six months to September 30, partly due to a higher level of net debt, which was £13.3m at the end of the first half.