Fridays owner Hostmore has warned that soaring costs and weaker customer demand will pull down profit margins for the year.

Shares in the company, which only floated on the stock market in November, plummeted as a result.

The group, which also owns cocktail bar and restaurant brand 63rd+1st, said it has changed its outlook for the rest of the year due to the “challenging consumer environment”.

Hostmore told shareholders that like-for-like revenues slipped by 6% over the 20 weeks to May 22, compared with pre-pandemic levels from 2019.

We are not where we expected to be

The hospitality business said it predicts that like-for-like volumes could be 8% lower for the rest of the 2022 financial year as the cost-of-living crisis weighs on household spending.

It added that food and drink cost inflation is currently around 10% but said it has partially offset this impact through fixed utility and supply contracts.

Nevertheless, the business expects higher costs and lower volumes to result in “low double digit” earning margins for the year, having previously forecast levels in the “mid-teens”.

It came as the group hailed progress with new openings, as it launched a new restaurant under the Fridays brand, which was previously TGI Fridays, in Chelmsford this month.

The group also launched a new Fridays And Go site in Dundee earlier in the period and said both have traded ahead of expectations.

Robert B Cook, chief executive of Hostmore, said: “We are not where we expected to be, however, I am able to report a financial performance which, regardless of the arduous challenge and extreme economic headwinds being encountered presently, allows us to confidently continue with our development strategy.

“Our ambition remains that of almost doubling the size of our existing portfolio brands over the medium term as economic conditions improve.

“Our relationship with landlords, coupled with a prudently managed balance sheet, provides the basis for confidence in the success of our strategy over the longer term.”

Shares were 12% lower in early trading.