Pret. A loss on paper, a bill for you.
Pret reported a £525 million loss, but sales are up. Its private equity owners wrote down the paper value by over half a billion pounds, and you pay for it at the till.
THE GIST ON PRET: "Financial storytelling"
Is Pret really losing money?
Not in the way it sounds. Sales are up, but the private equity owners have written down the paper value of the company by over half a billion pounds. They cite weaker footfall, softer brand loyalty and people not wanting to pay premium prices, mainly because we're all working from home.
Why do a write down?
A valuation write down is common private equity practice. It shows a loss, but lets you reduce expectations, tidy the balance sheet and reduce tax liabilities. It's more of an accounting treatment than a picture of day to day trading.
Who ends up paying?
Huw's view: this is financial storytelling. Private equity firms often pay up for brands, then try to make that money back through pricing. Buy it, jack the price up, extract as much as possible in as short a time as possible.
The pressure doesn't fall on the investors. It falls on you and me, overpaying for coffee and spending eight quid on a sandwich.
Is Pret worth it?
Your take. One tap, then see how everyone else voted.
Quick answers
Is Pret's £525m loss real?
It's a valuation write down by its private equity owners, which Huw calls more of an accounting treatment than day to day trading.
Why do private equity owners write down value?
It reduces expectations, tidies the balance sheet and reduces tax liabilities.
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