JD Wetherspoon is poised to report further sales growth on Wednesday when it issues a fourth-quarter trading update, with investors betting that warm summer weather and the World Cup have given the pub chain a much-needed lift. The update comes after a turbulent year for the company, whose shares plunged to their lowest in around 12 months in March following a profit warning driven by escalating costs.
Since then, the share price has steadily clawed back ground as the brand outperformed the wider hospitality market. However, the pace of growth has slowed: like-for-like sales rose 6.1% in the second quarter, but pared back to 3.4% in the three months to April. The wider retail and hospitality sectors have struggled with weak consumer confidence, partly linked to the conflict in the Middle East.
“Wetherspoons to report Q4 sales growth but profits expected to dip as £60m costs bite.”
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.”
Despite the expected sales boost, the group is likely to report that profits have dipped over the past year. Wetherspoon has previously guided that government-linked policy costs would drag on performance, with £60 million of extra costs from wage increases and National Insurance contributions, plus a further £2.4 million from the packaging levy. Investors will be looking for a more positive cost outlook in the update.
Founder and chairman Tim Martin is expected to use the occasion to renew his calls for a reduction in VAT for the sector, as Andy Burnham prepares to take office as Prime Minister.