XP Factory, the company behind the popular Boom Battle Bar and Escape Hunt brands, has issued a stark warning that it will fall short of both sales and profit forecasts due to ongoing consumer weakness. The London-based leisure business has announced it will temper its expansion strategy in light of challenging market dynamics, sending its shares tumbling in early trading on Monday.
Sales Growth Masked by Consumer Weakness
Despite reporting a 2.5% increase in overall sales across its Boom sites, XP Factory has experienced a significant 7.2% decline in like-for-like sales during the 13 weeks ending December 28, compared to the same period last year. The company attributed this downturn to a decrease in consumer spending, particularly affecting its Boom Battle Bar brand, which features attractions such as augmented reality darts and Bavarian axe throwing.
The festive season did not provide the anticipated boost, and although new openings helped to offset some losses, the performance has raised concerns among investors. XP Factory’s chief executive, Richard Harpham, acknowledged that while corporate bookings remained robust, they were insufficient to counteract the slump in consumer sales.
Escape Hunt Shows Resilience
In contrast, the Escape Hunt segment, which comprises escape room venues, has demonstrated more promising results. Total sales for the Escape Hunt brand rose by 10% during the same period, backed by a 6.4% increase in like-for-like sales. This growth was bolstered by new locations in Canterbury, Kent, and Sheffield, South Yorkshire. Nevertheless, XP Factory has indicated a shift in strategy, opting to moderate the pace of new site openings due to uncertainty in the market.
Despite these challenges, the company remains optimistic about the Escape Hunt brand’s potential, projecting growth towards 100 venues across the UK, albeit at a more cautious pace.
Financial Outlook Dims
The firm has revised its revenue expectations for the financial year, forecasting earnings before interest, tax, depreciation, and amortisation (EBITDA) to fall between £5 million and £6 million. This adjustment reflects not only the impact of waning consumer confidence but also the pressures from rising operational costs, including increases in the national living wage and national insurance contributions. Harpham noted that while the company has made strides in outperforming broader trends in the experiential leisure market, the short-term outlook remains challenging.
Shares of XP Factory plummeted by 16.6% to 11.68p in response to the announcement, reflecting investor concern over the company’s revised growth trajectory.
Why it Matters
XP Factory’s struggle highlights a broader trend in the leisure and entertainment sector, where shifting consumer behaviour and economic pressures are reshaping the landscape. As the company recalibrates its growth strategy, the leisure industry must reckon with the reality of changing consumer confidence. XP Factory’s adaptability will be crucial as it navigates these turbulent waters, with potential implications for its market position and the future of experiential entertainment in the UK.
