Consumers have not shaken psychological effects of Covid-19, says Famous Brands

Famous Brands, which has a network of almost 3,000 restaurants across SA, the UK and the Middle East, says it remains concerned about the psychological and economic effects of the Covid-19 pandemic, which is weighing on its outlook even as summer arrives in SA.

Covid-19 shutdowns severely hit the owner of Mugg & Bean, Steers and Wimpy in the first half of its financial year, with the group saying it is still soon to tell what consumer demand will be like in December. This is partly due to school holidays being later and shorter than usual, while consumers still seem reluctant to dine in restaurants.

International tourism is likely to be muted, and domestic travel and leisure activities will be constrained by reduced disposable income, the restaurant group said. 

Group revenue fell 48% to R2bn in the six months to end-August, with Famous Brands reporting a R1.35bn loss, from profit of R166.7m previously, amid further writedowns in the UK. 

During the period Famous Brands had written off its UK burger chain Gourmet Burger Kitchen, a R1.6bn pretax write down.

The SA owner of Mugg & Bean, Steers and Wimpy spent more than R2.3bn buying the upmarket UK burger chain in 2016, but lost money as UK consumer confidence plummeted after the Brexit referendum, while the pandemic proved to be the final blow.

In April, Famous Brands said it would no longer fund Gourmet Burger Kitchen, and in October it announced it had been placed in administration and there could be an “insolvency sale” of business and assets.

Restaurants shuttered

Covid-19 shutdowns affected restaurants across the group’s operations, with Famous Brands saying outlets on transit routes, in major malls, and those relying on tourist trade were hardest hit.

Those in neighbourhood shopping centres or at local convenience sites fared better, the group said.

About 95% of the group’s store network has reopened, with a small balance temporarily closed, Famous Brands said.

The group said its Leading Brands portfolio, which includes the likes of Steers and Debonairs, outperformed as fast-food restaurants benefited when only deliveries and takeaways were permitted.

Leading Brands’ system-wide sales, which includes new restaurants, declined by 48%. The group’s Signature brands portfolio, which includes restaurants such as Net Café, posted system-wide sales decline 70.1%,

Famous Brands said it remained concerned about the weak state of the economy, as well as the financial and psychological effect of the pandemic, but said it does expect an improved second half, albeit off a low base.

A survey the group commissioned in July showed that two thirds of consumers are reluctant to dine in restaurants. Famous Brands said on Monday that while Leading Brands restaurants had gained momentum, they still lagged behind their fast-food counterparts.