Top FTSE 250 shares to watch in July 2023

At 19,118 points the FTSE 250 index is essentially flat both year-to-date and over the past year. Despite some significant volatility — the index was worth 20,615 points in early February and as little as 18,397 points in late March — the nil returns are reflective of the uncertainty in the UK economy.

For context, CPI inflation currently stands at 8.7% and the base rate is at 4.5%. Both figures are far higher than most analysts expected a year ago, and the markets are pricing in an increase in the base rate to 5.75% by early next year. If inflation proves even stickier than anticipated, this may still be an underestimate.

While the cost-of-living crisis continues to bite, the beautiful summer weather could see FTSE 250 companies operating in the hospitality, leisure, and travel sectors — many of which suffered through the covid-19 pandemic — experience even more of a bounce back.

Top FTSE 250 shares to watch

1. Mitchells & Butlers (LON: MAB)

Mitchells & Butlers has demonstrated robust financial performance in 2023, reporting recent half-year revenue of nearly £1.3 billion and impressive like-for-like growth of 8.5%. This growth was primarily driven by increased volume in both food and drink sales, indicating sustained and growing demand for the pub chain’s offering.

Despite underlying operating profits declining by £20 million to £100m — a consequence of withdrawn government support and cost inflation — MAB boasts a solid balance sheet supported by substantial property assets, which has seen it survive the pandemic and now look increasingly attractive as other chains struggle with their debt burdens.

MAB also boasts multiple brands at various value points, including Harvester, Toby Carvery, and miller & Carter. This leaves it better able to react to market conditions than competitors, as evidenced by the strong recovery in sales and the shift in trends, with drink sales becoming the main driver of recent volume growth.

Furthermore, MAB's current trading performance is encouraging, with like-for-like sales growing by 8.9% in the first six weeks of the second half. Further, the management decision to withhold dividend payments and instead increase internal investment should help to ensure that the FTSE 250 company remains well-positioned for long-term growth, and even for brand acquisitions should the opportunity arise.

Last month, Jefferies analysts upgraded the share to a buy with a 270p price target, declaring that ‘as a scaled managed pub operator with a well-invested 80% freehold, well-located, food-oriented pub estate, we argue M&B should win material market share as other smaller operators struggle.’

2. JD Wetherspoon (LON: JDW)

Fellow FTSE 250 pub operator JD Wetherspoon has experienced a strong 56% increase in its share price year-to-date, reaching 706p.

In recent quarterly result, Wetherspoon saw like-for-like sales increase by 9.1% in the 13 weeks to 30 April 2023, compared to the same period in the last full financial year before the pandemic. Meanwhile, sales increased by 6.4% when compared to the same metric.

Further, sales in Easter week were the highest-ever for the company, and JDW also anticipates htat sales in the current financial year are likely to hit a new record. Compared to FY22, like-for-like sales increased by 12.2% in the third quarter and by 12.7% YTD. As a highlight, the May bank holiday was ‘exceptionally strong,’ including the company’s ‘busiest-ever Saturday.’

Chairman Tim Martin notes that ‘lockdowns and associated restrictions have had more profound and longer-lasting consequences than most economists, politicians and commentators predicted, (but now) the company expects profits in the current financial year to be towards the top of market expectations.’

Of course, both MAB and JDW are struggling with high inflation, reduced consumer discretionary income, and rising labour and stock costs. But JDW’s value offering could see the company benefit as consumers ‘downshift’ their hospitality visits rather than give them up altogether/

3. National Express (LON: NEX)

National Express shares were worth as much as 476p per-pandemic before national lockdowns sent it sharply south — and it remains depressed at just 113p today.

In recent Q1 results, revenues jumped by 17% on a constant currency basis to £774.4 million, ‘reflecting an overall performance in line with expectations.’ The company saw solid contract wins in North America, including in its Transit, Shuffle, and School Bus sectors.

Further, NEX has seen a ‘strong recovery’ in UK coach and German rail. While the UK bus operation was hit by the six-day driver strike, it’s still seeing ‘continued passenger growth’ amid a 27% increase in revenue in the key market.

Better still, scheduled coach revenue rose by 87% year-over-year in the country — and while the bus strikes saw a settlement ‘higher than expected,’ the settlement was achieved relatively quickly, and the company can now benefit from the continued chaos in rail.

CEO Ignacio Garat enthuses that ‘we have launched a wide-ranging productivity improvement and cost-reduction programme that will start to deliver benefits in the second half of this year. That initiative will also help to ensure we deploy the right resource most efficiently across the business and capitalise on the significant opportunities for growth that we face.’

4. Greggs (LON: GRG)

Greggs is another value chain that could be a quality FTSE 250 share in July. It’s delivered yet another positive quarterly update, whereby like-for-like sales rose by 17.1% to £609 million, as the chain also saw an increase in shops trading by 6%.

Of course, there are concerns that despite the company’s new attempts to tap into the late night market, sales volumes may potentially start to stagnate as food inflation approaches 20%. Additionally, the company saw Q1 growth fall compared to Q4, raising questions about whether growth is finally tapering off.

However, Greggs is comparing Q1 sales to the sudden jump in demand during the same period last year when customers suddenly began returning to work and leisure as normal as pandemic restrictions abated. Demand for Greggs' products remains strong, as evidenced by the company's plans to open more shops and extend opening hours.

The group opened 63 shops in the quarter and is implementing cost-saving strategies while focusing on higher-traffic locations. It’s worth noting that in a high inflation world, value offerings like Greggs have the opportunity to steal market share — and especially from the ‘overpriced’ coffee chains.

Going forward, investors will be concentrating on margins rather than just sales. If Greggs can keep prices high while wholesale food and energy prices fall, margins could actually increase through H2.

The company notes that ‘. Although we expect to see ongoing material cost inflation, we have good forward cover on key commodities. Consumer disposable incomes are likely to stay under pressure, but we remain confident that our outstanding value proposition continues to be compelling.’