Owner of Frankie & Benny's upbeat while other Italian-style restaurant chains fail

By Justin George Varghese

(Reuters) - As many Italian-style restaurant chains in the UK run into trouble, the upbeat tone by the Restaurant Group Plc (RTN.L) was enough to lift its shares 12 percent on Wednesday despite weaker sales.

The group, with 498 restaurants and pubs including Frankie and Benny's and Chiquito, said underlying pretax profit fell 26.4 percent to 56.7 million pounds in the year ended Dec. 31 and underlying sales fell 3 percent, with revenue falling 4.4 percent to 679.3 million pounds.

Analysts had expected worse.

On Monday, Carluccio's joined a growing list of restaurants under pressure as costs and competition rise - especially among Italian eateries. It has called in advisers to look at options for its 102 restaurants.

Among others, Prezzo is closing 94 outlets, Jamie's Italian is shutting 12 branches and Strada is closing 11 restaurants.

In the face of dwindling sales, Restaurant Group has rolled out new menus, cutting prices and adding cheaper family meals.

"Our performance suggests that we are taking volume share, with market data showing declining restaurant like-for-like sales over the last six months, in spite of significant price increases by our competitors," Restaurant Group said.

The group kept its full-year dividend unchanged at 17.4 pence.

Analysts had expected revenue of 674.6 million pounds and profit of 55.9 million pounds, according to data compiled by Thomson Reuters.

"The fact FY17 has come in marginally ahead of expectations and FY dividend maintained is testament to management's decisive actions," Liberum analysts said in a client note, adding that the company is in a "substantially" better position now than this time last year.

Rising competition from food-focused pubs and a drop in visitors to retail shopping parks, where many of its outlets are located, have hit Restaurant Group's brands over recent years.

The squeeze in spending from Britons on eating and drinking out has also weighed on sales, a trend echoed by FTSE-100 pub group Whitbread (WTB.L).

"We expect to benefit from our strategic initiatives gaining further traction as the year progresses," the company said in a statement.

Shares in the company, which have fallen 24 percent over the last six months, were up 12 percent to 265.8 pence at 1046 GMT.

(Reporting by Rahul B and Justin George Varghese in Bengaluru; Editing by Subhranshu Sahu Elaine Hardcastle)