Key facts
- JD Wetherspoon issued its fourth profit warning in seven months.
- Profits for the year are likely to be below market expectations.
- Like-for-like sales rose 4% over the 12 weeks to July 19.
- Rising costs include food, labor, repairs, energy, and business rates.
- Net debt is expected to hit £720 million.
JD Wetherspoon has issued its fourth profit warning in seven months, attributing the shortfall to worse-than-expected sales and escalating costs across food, labor, energy, and property taxes. The pub chain's shares fell as much as 10% on Wednesday after Chairman Tim Martin announced that profits would likely fall below market expectations for the full year.
In a trading update, Wetherspoon reported that like-for-like sales increased by only 4% in the 12 weeks leading up to July 19. This performance was despite hopes that the World Cup would boost sales, though the late kick-off times due to North American hosts presented challenges compared to previous tournaments. Richard Hunter, head of markets at Interactive Investor, noted that while other sector players reported sales boosts, Wetherspoon "has apparently not joined the party."
The lower-than-anticipated sales have been exacerbated by ongoing cost pressures, including recent increases in the UK minimum wage and business rates, which took effect in April. The hospitality sector has also contended with higher food and energy bills, influenced by global events. Wetherspoon now anticipates its net debt to reach £720 million, a slight decrease from previous forecasts of £740 million to £760 million.
Hunter added that while Wetherspoon has a history of overcoming difficulties, this year's challenges, compounded by issues like the tax treatment of alcohol sales in supermarkets and business rates, have made prospects uncertain from an investment perspective. The shares later recovered some losses, closing down 5% at 715p.