Investor service Moody's has downgraded its rating of PizzaExpress as it warns cost pressures will hit the chain's profit margins.
Cost pressures, the competitive nature of the casual dining sector and challenges in the overseas markets in which PizzaExpress operates have led to a 16.4% year-on-year decline in EBITDA for the first nine months of 2018, dropping to £56.6m.
Moody's has predicted that despite it being likely that like-for-like sales pressures will ease in 2019, EBITDA will fall to £75m in the year, lower than previous estimates of £80m and significantly lower than the £94.6m recorded in 2017.
Overall the outlook on all ratings Moody's use to assess the business is negative.
David Beadle, a Moody's senior credit officer and lead analyst for PizzaExpress, said: "The downgrade to the ratings of PizzaExpress reflects declining profitability and therefore deteriorating credit metrics during 2018.
"While we expect the negative like-for-like sales trend in the company's home market to abate somewhat next year, fierce competition and sustained cost pressure means a turnaround during 2019 is unlikely."
PizzaExpress has been approached for comment.