JD Wetherspoon has warned that “ferocious” inflation has hit its business, as the pub chain posted a small profit but sales continued to lag behind pre-pandemic levels.
Like-for-like sales at the pub group were down 0.6 per cent in the 26 weeks to the end of January this year, compared with the same period ending in January 2020, the company said on Friday. Wetherspoons generated £916mn in half-year sales.
The pub chain edged back into the black, posting half-year pre-tax profits of £4.6mn, down 90 per cent compared with the equivalent period in 2019 but up from a loss of £26.1mn in the first half of last year.
“Inflationary pressures in the pub industry . . . have been ferocious, particularly in respect of energy, food and labour,” said Tim Martin, Wetherspoons’ founder and chair.
The Friday trading update from Wetherspoons comes after UK inflation unexpectedly jumped to 10.4 per cent in February, according to the Office for National Statistics, driven by increased food and drink prices in pubs and restaurants.
Food and non-alcoholic drinks inflation rose to 18.2 per cent, the highest level for more than 45 years, while increased alcohol prices in hospitality venues added 0.17 percentage points to the top-line inflation figure, the ONS said on Wednesday.
Earlier this year, Wetherspoons upped prices by 7.5 per cent, increasing the price of a pint by 29p and food by around 75p. But Martin welcomed official projections that “inflation is on the wane, which will certainly be of great benefit, if correct”.
Martin added that “supply or delivery issues have largely disappeared, for now” and despite a competitive labour market the company had “a full complement of staff”.
He added that an improvement in sales and profits compared with the last financial year left the company feeling “cautiously optimistic about further progress in the current financial year and in the years ahead”.
Sales performance improved further in recent weeks, with sales in the seven weeks to mid-March up 9.1 per cent compared with the same period in 2019.
Greg Johnson, an analyst at Shore Capital, said that Wetherspoons is “a heavy discounting, high-volume business, so the fact that sales have strengthened further since the start of the year has to be seen as encouraging.”
“If you look at their customer base and their pricing architecture, you would have thought it was one of the most exposed to the cost of living pressures . . . but the death of the UK consumer was overblown,” he added.
Peel Hunt analysts said in a note that “if customers accept [price increases], as they have done in other parts of the pub sector, a strong recovery could follow. We are not yet assuming this.”
Source: Economy - ft.com
