JD Wetherspoon has reported slower-than-expected sales growth and warned over profits again, spoiling investor hopes of a World Cup and warm weather boost.
The British pub chain recorded sales growth of 4% in the three months to July 19, compared with the same period last year. Wetherspoons operates 793 managed pubs and 23 franchise sites across the UK.
Founder's warning on costs
Founder and chairman Tim Martin told investors: “Profits for the year are likely to be below market expectations, with marginally lower sales than anticipated in the final quarter, combined with higher costs in the areas of food, labour, repairs, energy and business rates.”
Shares in Wetherspoon dropped by around 9% on Wednesday morning following the update.
Seasonal tailwinds not enough
While sales across the pub chain increased year-on-year, some investors were hopeful that sales momentum would swing more positively after a recent slowdown in trade. Many pubs have also been reporting a boom in sales thanks to the Fifa World Cup and the recent hot weather spells, with most of Wetherspoon’s pubs showing the matches on TV screens.
Mr Martin’s warning that the company could miss profit guidance adds to a caution from the boss in May that Government-linked policy costs would drag on its financial performance. It previously said it was facing £60 million of extra costs linked to wage increases and National Insurance contributions for the year. The latest update warns over a plethora of cost pressures also coming from food and energy.
Analyst comment
Derren Nathan, head of equity research at Hargreaves Lansdown, said: “Football mania and a scorching summer haven’t been enough to prevent another profit warning for JD Wetherspoon. “Like-for-like sales growth did pick up from 3.4% in the third quarter to 4.0%, but given the strong seasonal tailwinds, that’s hardly a knockout performance. “Alongside the rest of the embattled hospitality sector, JD Wetherspoon will be hoping for supportive policies from the new Burnham government. “Cuts to business rates, VAT, and employers’ national insurance have all been mentioned as possibilities on his route to number 10. However, none of these measures are guaranteed, and with the Treasury’s debt levels at multi-decade highs, quite where the funding could come from remains unclear.”
