JD Wetherspoon is expected to report further sales growth when it provides a fourth quarter trading update on Wednesday, July 22. Investors are hopeful that warm summer weather and the World Cup will have provided a boost for the UK pub giant, offsetting ongoing consumer pressure.
Share Recovery After Profit Warning
Shares in the company dropped to their lowest in around a year in March after the group issued a profit warning amid increasing costs. However, its share value has steadily recovered ground in recent months amid optimism that the brand is performing ahead of the wider hospitality market.
Sales Growth Slowing
Wetherspoons is expected to report further sales growth, but shareholders will be hoping to see sales momentum swing more positively after a recent slowdown in trade. Like-for-like sales were 6.1% higher in its second quarter of the financial year, but growth pared back to 3.4% in the third quarter of the year – the three months to April.
The wider hospitality and retail sectors have seen pressure on growth in recent months as weak consumer confidence, partly linked to the conflict in the Middle East, has dampened activity. Nevertheless, sunny weather and the World Cup are likely to have given a boost to pubs across the UK.
Analyst Commentary
Richard Hunter, head of markets at Interactive Investor, said: “Wetherspoon’s dogged determination to fight its corner has won the brand many friends, but from an investment perspective the jury remains out on prospects. The World Cup should have provided a spike to revenues as being reported elsewhere in the sector, while access to liquidity and a largely freehold estate valued at £1.4 billion lessen any immediate financial concerns.”
Cost Pressures and Profit Outlook
The group is also likely to report that profits have dipped over the past year, with Wetherspoons having previously guided that Government-linked policy costs would drag on its performance. It predicted that profits for this year would see £60 million of extra costs linked to wage increases and National Insurance contributions, with the packaging levy adding a further £2.4 million.
Investors will be hopeful to see a more positive cost outlook and boss Tim Martin is likely to reiterate his pleas for reduced VAT for the sector as Andy Burnham prepares to take office as Prime Minister.
