JD Wetherspoon has reported a jump in sales at the start of its financial year, offering some positive news for the lossmaking pub chain as it struggles with higher labour, energy and interest costs.
The group said on Friday that like-for-like sales in the nine weeks to October 2 increased 10.1 per cent compared with the same period last year. The sales rise came as Wetherspoons posted a pre-tax loss of £30.4mn in the 53 weeks to the end of July, down from a record pre-tax loss of £154.7mn last year.
Tim Martin, Wetherspoons’ founder and chair, said recent sales were “encouraging but not shooting the lights out” and that customer habits were “reverting to norm, but only slowly” after lockdowns.
Wetherspoons’ share price was up by 11.1 per cent to £4.86 in early morning trading in London.
Martin stressed that fixing interest rates at low levels until 2031 and increasing the company’s proportion of freehold properties had “improved” its prospects.
However, he added that because of an increase in labour and repair costs, and the “potentially adverse effects” of rising interest rates and energy costs, “firm predictions are hard to make”.
In September, Wetherspoons put 32 pubs — about 4 per cent of its 852-site estate — up for sale. The company said on Friday that this was part of a long-term strategy to change its estate “rather than a reaction to trading difficulties in the Covid era”.
It also said it had secured a further covenant waiver until next October from its lenders to help it manage its debt. The company’s net debt, excluding lease liabilities, was £891.6mn at the end of July, up from £845.5mn last year. Martin told the FT that “every hospitality company has had to deal with” covenant waivers.
Analysts at Peel Hunt cut their 2023 profit forecast for Wetherspoons by about 10 per cent to a £60.1mn pre-tax profit “to reflect disposals and higher costs” and said they “expect its earnings recovery to be slow”.
But Julie Palmer, a partner at Begbies Traynor, said she thought the chain was “well placed to ride out the storm with a loyal following and the option of selling further high value sites”.
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