Despite significant pressure on family finances from the rising of cost of borrowing and living, Numis analysts Tim Barrett and Richard Stuber believe parts of the leisure sector could soon enjoy a big earnings boost.

They say demand for pubs and restaurants is now above 2019 levels and should improve further now that the Government has removed the remaining Covid restrictions in England.

‘We expect the combination of pent-up demand and lower risk-aversion to be powerful, even in the face of inflationary limits on consumer spending power,’ the analysts comment. ‘Household income growth is lagging non-discretionary expenditure, but we see leisure spending as high up on consumer priority lists.’

The leisure sector has various headwinds including VAT returning to 20% from April, the risk of which is ‘overstated’ according to the Numis duo. Cost inflation is being partially mitigated by greater use of app ordering which means less staff are required. Staff shortages are now less acute than at the end of 2021, add the analysts.

In Shares’ view, little is being said about the potential bumper payday for pubs and restaurants in early June when there is a four-day bank holiday weekend for The Queen’s Platinum Jubilee. Sunny weather could see a big boost to earnings for the sector and investors may soon start to look for potential winners given the event is fast approaching.

‹ Previous2022-02-24Next ›