Wagamama drama

There’s no question about it. (TRG) has a favourite child. Its pride and joy is Wagamama, and can you blame them? The udon chain is doing its very best to nurse the Group back to health.

2021 revenue at Wagamama grew by 15% on pre-pandemic levels. That’s impressive given the year was riddled with lockdowns across the UK. It’s one thing for a retailer to get back to 2019 demand (and encouragingly, many are starting to get there), but it’s another to be exceeding those levels now.

When you look at UK consumer behaviour, things have been changing for a while now.

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High street and retail park footfall crumbled over the last few years. But at some points, retail parks just about recovered. 

Either by luck or design, Wagamama set up shop in retail parks, which have been much faster to regain popularity. Last week, UK retail parks had about 95% of the footfall they had in 2019. The high street, comparatively, had 14% less. 

So Wagamama is in the right place at the right time. It’s capitalising on an existing ecosystem of bowling alleys, movie theatres and arcades which have performed relatively well since lockdowns lifted. They provide experiences that have been sorely missed by families. And that’s why they’re bouncing back - retail parks offer an experience that can’t be simulated in the home.

A game of ten-pin in the kitchen just doesn’t hit the same. But flicking between tabs to find a winter coat isn’t the worst alternative to hours spent hunting the high street for the right size and style. That’s yet another reason sales of goods like electronics and apparel did well during the pandemic. Now that experiences are surging back to life, they’re putting up a good fight.

Wagamama isn’t remaking the wheel here. It’s soup and noodles. But the chain’s proximity to other, less replaceable activities, is probably lending it a big helping hand.

Wagamama’s also winning out in airports. Travellers only have so many options when they’re waiting to jet off. Until Deliveroo gets a fast track pass through security, if you want dinner before a flight, you’ve got a limited array of options at your disposal. For the most part, this means airport restaurants are always busy, and they can jack up prices to take advantage of captive audiences. 

That’s why profit margins for airport locations are usually pretty healthy.

But it’s not all good news. The rest of TRG’s fleet of restaurants aren’t doing so hot, and the Group has a lot on its plate.

For starters, TRG isn’t expecting air travel to fully recover until 2024. So it’ll be a few years until it has completely shaken off the Covid dust. Plus, the Group is expecting cost inflation (wages and ingredients) to grow by 5% this year.

So there might be some turbulence along the way, but Wagamama proves retail isn’t dead. And although delivery is important, it isn’t everything. 

All the looming warnings that digital would kill brick-and-mortar just hasn’t turned out to be true. It’s just about providing something that has tangible, in-person value. 

And maybe Wagamama’s communal benches don’t, but its neighbours do.

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