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Cost pressures hit profits at JD Wetherspoon but prices not set to rise

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Cost pressures hit profits at JD Wetherspoon but prices not set to rise

JD Wetherspoon has continued to see profits slip, despite revenue growth of 7.1% in the six months to 27 January 2019 – but increased costs are not set to be passed on to customers.

Revenue reached £889.6m in the period, with like-for-like sales up 6.3% but profit before tax fell by 18.9% to £50.3m before exceptional items.

Tim Martin, chairman of JD Wetherspoon, said: “In the six weeks to 10 March 2019, like-for-like sales increased by 9.6%, helped by excellent weather this year and snow last year, and total sales increased by 10.9%.

“As previously indicated, costs in the second half of the year will be higher than those of the same period last year. The company anticipates an unchanged trading outcome for the current financial year.”

The company’s unchanged trading outcome predicts that increases in sales will offset cost pressures, with Martin expressing caution about rising prices, preferring to look to volume to fill the shortfall.

The number of pubs trading at the beginning of the financial period had fallen by 12 year-on-year. Martin said that cheaper property costs in 2009-10 had tempted the company into some areas that didn’t prove successful. Redressing this has seen 10% of pubs sold and he added “hopefully now there won’t be any more”.

The pub boss believes the brand has the potential to grow to another 300 sites, but at a rate of about 10 a year. He said: “The challenge for us now is to try not to fall into the trap of over-expanding”.

Martin said he was similarly cautious about growing the chain’s 58-site hotel portfolio, which saw a 0.3% increase in like-for-like sales. He explained: “We’ve got quite a lot of buildings with empty spaces upstairs, which sort of grates, so we opened quite a few and they have done well. We are slightly unsure as to how successful it will be in the long run because of the level of investment needed.

“It’s very expensive and we’re keen not to say in five years ‘that turned out to be a massive mistake’.”

Speaking just two weeks before the planned Brexit date, Martin called on MPs to respect the result of the referendum – something he said neither Theresa May’s deal or pursuing policies that can revoke Article 50 would do.

JD Wetherspoon hit headlines in 2018 as it replaced some products sourced from the EU, including Jägermeister and Courvoisier brandy, with non-EU alternatives. Martin said Jägermeister replacement Shooter was proving successful, although sales have showed a slight dip on its predecessor.

He added: “If you can replace Jager and Courvoisier [French brandy] the point it makes is that anything you buy from the EU you can buy from the rest of the world.”

Despite this enthusiasm Martin said the chain would not replacing any other items imminently.

JD Wetherspoon’s profits slip despite sales growth amid escalating costs>>

Gourmet Burger Kitchen saw pre-tax profits fall by £9.9m before CVA>>

 

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