JD Wetherspoon has issued its third profit warning of the year, with chairman Tim Martin warning the pub chain could miss expectations due to escalating costs. The company, which operates around 800 pubs across the UK and Ireland, cited rising energy, food, labour, and tax bills as key pressures.
Investors had already anticipated a drop in pre-tax profit to £73m, down from £81m last year. Martin noted that increases in national insurance contributions and wages would cost the business approximately £60m annually, while an additional £1.6m in tax is expected from the extended producer responsibility packaging levy.
The US-Israel conflict with Iran and the resulting surge in energy prices are also expected to drive up food and heating bills, further squeezing margins. Russ Mould, investment director at AJ Bell, said Wetherspoon is highly exposed to the energy price shock triggered by the Middle East war, given its operating profit margin of 6.9%.
Despite the challenges, Wetherspoon reported a 3.4% increase in sales at established pubs for the 13 weeks to 26 April, compared with the same period last year. However, Mould cautioned that the company's heavy debt load, forecast at between £740m and £760m by year-end, could create additional headwinds if interest rates rise.
The warning is the latest sign of strain in the UK hospitality sector, which is also adjusting to higher minimum wage and business rates effective from April. Meanwhile, drinks maker Diageo maintained its profit guidance, citing strong sales ahead of the Fifa World Cup, but remained mindful of geopolitical uncertainty.
