UK: JD Wetherspoon sees costs hit sales rise
16:56 16 January 2013
JD Wetherspoon has toasted an 8% surge in festive sales but warned rising costs would dent profit margins as it faces higher energy bills and wage costs.
The group, which has around 860 pubs and almost 30,000 staff, said half-year margins were expected to be around 1.1% lower than its previous financial year in the face of higher tax, utilities, labour, bar and food supply costs, as well as marketing expenses. Its corporation tax bill was expected to hit 27.5% this year. The group said sales and profits were “resilient, in spite of the continuing taxation and regulation burden on the pub industry and the ongoing pressure on consumer’s disposable incomes”.
It shrugged off severe wet weather and flooding to report the rise in sales over the 11 weeks to January 13, which helped overall like-for-like sales rise 7.6% so far this financial year.
But shares in the group dropped 2% as today’s margin blow overshadowed the sales cheer, with expectations for further cost pressures when this April’s above-inflation alcohol duty increases come into effect.
James Hollins, analyst at Investec Securities, cut his annual profit forecasts for Wetherspoon by 5% after the update, to £70.4million.
He said: “Wetherspoon has reported an exceptionally strong second quarter sales performance, highlighting the strength of its pub offering in any weather.
“However, the top-line growth has come at the expense of higher costs, notably a material uplift in utilities costs.”