British restaurant chains gird for sharper sting from inflation

(Reuters) – The owners of British restaurant chains Wagamama and Upper Crust warned on Tuesday inflation would worsen this year as the war in Ukraine exacerbates a rise in food, commodity and energy prices.

The warnings come as British households face a major cost-of-living squeeze from the highest inflation in four decades and restaurant operators attempt to recover from the havoc wreaked by the pandemic.

Restaurant Group Plc, operator of Asian food chain Wagamama and Italian-American-themed Frankie & Benny’s restaurants, projected food and drink inflation to reach 9% to 10% this year, compared with a 5% estimate given in March.

SSP Group Plc, which runs the Upper Crust brand of sandwich shops along commuter routes, said it expected inflation to “step up” through the second half and into next year.

“Where there is low labour availability, this is also resulting in higher labour costs,” SSP said in a statement.

The Ukraine crisis and global supply chain disruptions that began during the pandemic have spurred price increases worldwide, making everything from fuel to food more expensive.

Both SSP and Restaurant Group are taking steps to protect their business from inflation. SSP said it was promoting more profitable menu items, while Restaurant Group said it was working with its supply chain partners to mitigate the impact.

Still, Restaurant Group posted stronger like-for-like sales across its Wagamama and pub locations for the year-to-date period as more diners visited restaurants than a year earlier.

FTSE 250-listed SSP reported a much smaller half-yearly loss and said it expected sales to near pre-pandemic levels in the second half of the year, as people travel more and return to offices.

(Reporting by Sachin Ravikumar and Muhammed Husain in Bengaluru; Editing by Sriraj Kalluvila and Aditya Soni)