Rising costs hit Wetherspoon profitability
JD Wetherspoon saw like-for-like sales increase by 4% in the 12 weeks to 19 July, however the UK pub chain expects profits to be ‘below market expectations’.
The figures were released in a pre-close trading update, with preliminary results to be released in October.
Year-to-date like-for-like sales also increased by 4.2%.
In the year to date, the company opened eight pubs and sold nine, bringing its total to 793 managed pubs. In addition, 15 franchised pubs have opened in the year-to-date, bringing the total to 23.
Year-end debt is expected to be £720 million (US$962m), in line with the end of the previous financial year.
Chairman Tim Martin said: “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.”
It was a similar story in Wetherspoon’s third-quarter results, when sales grew by 5.7%. Operating profit, however, fell by 18.4%, with the firm citing higher costs, including wages, which increased by £28m, repairs by £10m, and business rates by £9m.
Speaking about the trading update, RSM UK’s Robyn Duffy pointed to the favourable summer weather and World Cup as positives for the chain, as well as its “enduring value proposition”.
She added: “The bigger story, however, is no longer revenue but profitability. Management has been clear that higher labour and operating costs will continue to weigh on earnings, despite resilient sales.
“That reflects the challenge facing hospitality more broadly. Demand has held up better than many might have expected in the current uncertain environment but translating that demand into profit has become increasingly difficult. For Wetherspoons, the question is no longer whether it can attract customers, but how quickly easing cost pressures and operational efficiencies can convert its market-share gains into stronger margin growth.”
Next year could be more positive for Wetherspoon and other UK on-trade businesses, with newly appointed prime minister Andy Burnham announcing a cut in business rates by 20% from April 2027.
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