Hi Clark,

Great writeup. Very clearly laid out.

Feedback / my thoughts on the idea:

- Margin increase thesis relies on food and energy prices going down soon. I've got no clue. Also need consumer spending to stay high. I suspect some are still in the delayed pent up demand spending and cost pressures will continue to reduce demand gradually maybe? In short just not confident in this.

- Poor management - makes me think the thesis of selling off pubs / concessions is not very likely. At least I wonder how proactive they will actually be. Time frame at the least is very unknown.

- Rebuffing Activist investors board seat request with statement on undergoing strategic review - is this lip service? It's certainly reactive and not proactive - showing poor management again.

Those 3 are enough for me to think it could get worse before it gets better... So a pass for me. Will keep an eye on it though.

Much less relevantly I was a big fan of Wagamama's but last couple of times I've been I've found it expensive versus alternatives. And food was just less good than I remembered. And service much worse than pre-pandemic. My go to for Asian chain restaurant is now Pho. I still like Wagamama's but don't love it anymore, and I / my family are definitely their target audience.

Hope that's somewhat helpful... sorry it's not super positive from me.

Looking forward to your next writeup!

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Hey thanks so much for the kind words and for the comments, they are much appreciated.

On the margin side, I think cost pressures will start to ease at some point, but hard to say exactly when. I think given the quality of WG and their pubs, they should be able to fare better if demand weakens. But demand for restaurants tends to be more resilient than a lot of other consumer categories during a downturn. And importantly, footfall still remains below 2019 levels.

Management is not great, I do agree on that point. Hopefully the activists can exert some pressure here.

Also, thanks for the color on your WG experience.

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Only found this business last year after they acquired Barburrito, a competitor to a company I own. Thanks for the write up!

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Thank you for the comments!

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Mar 31, 2023Liked by Clark Square Capital

I like the fact they are selling pubs, first thing I thought when I read that is "pubs are a terrible business in the UK".

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