JD Wetherspoon has delivered a fresh blow to investors, issuing a profit warning after reporting sales growth that fell short of expectations. The announcement has dampened hopes that the pub chain would benefit significantly from the World Cup and recent warm weather.
The British pub giant, which oversees 793 managed pubs and 23 franchise sites across the UK, saw sales increase by 4% in the three months leading up to 19 July, compared with the previous year. However, this figure was not enough to satisfy market predictions.
Founder and chairman Tim Martin informed 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.”
Following this update, shares in Wetherspoon experienced a sharp decline, dropping by around 9% on Wednesday morning. Despite the year-on-year sales increase, some investors had been optimistic for a more robust sales momentum, particularly after a recent slowdown in trade. This sentiment was fuelled by reports of a sales boom across many other pubs, attributed to the Fifa World Cup and the prolonged hot weather, with Wetherspoon’s own establishments also showing the matches on 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.
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.”