Food and drink inflation could hit 10% this year, Wagamama owner warns

Despite the economic outlook, The Restaurant Group maintained it can still expect to meet full-year profit forecasts.

The Restaurant Group (TRG), the owner of Wagamama, Frankie & Benny’s and Chiquito warned that food and drink inflation may reach as much as 10% this year, as Russia's invasion of Ukraine continues to disrupt supply chains.

The company’s latest warning came after it said in March that the soaring cost of gas and electricity would add between six to seven million pounds to its expenses this year.

TRG, which operates about 400 outlets, also flagged rising wage costs as the economy nears full employment with well over a million vacancies in the UK. Despite pressures, it maintained that it expects to meet full-year profit forecasts, citing “robust” trading in its Wagamama restaurants and pubs and a better than expected recovery in its train station and airport outlets that offset inflationary costs.

Sales at established Wagamama outlets were up 11% in the six weeks to 15 May and 6% at pubs, but this was a slowdown from the previous three months as prices rose to reflect a return to 20% VAT compared with a special pandemic rate of 12.5% before 1 April.

Underlying sales at the group’s travel concessions slipped 11% in the six weeks, but was an improvement on a 26% decline in the previous three months.

The company, which closed about 200 restaurants since the pandemic, plans to open at least eight new Wagamama restaurants this year, three specialist delivery kitchens and three new pubs.

“The continued strength of trading of these businesses has reinforced our belief in their long-term rollout potential,” the company said in a statement.