Pubs group JD Wetherspoon issues second profits warning

Pub giant JD Wetherspoon has warned over profits for the second time in two months after being hit by rising staff costs.

Company chairman Tim Martin said full-year profits were now set to come in at the lower end of City expectations despite an improvement in trade over the festive season.

Wetherspoon, which claims its wage bill makes up around 25%, or 75p, of every pint sold in its pubs, said staff costs were likely to knock around 1.1% off its underlying operating margin for the six months to January 24.

It said this followed moves to increase the starting rates for hourly-paid staff in October 2014 and August 2015, which saw their wages rise by around 13% overall.

The latest profit alert comes after Wetherspoon warned in November that staff costs could see annual profits drop slightly on the previous year.

However, in a second quarter trading update today, Wetherspoon said it saw improved trading during the Christmas period, with like-for-like sales up 3.3% in the 12 weeks to January 17 and total sales 6.3% higher.

So far in the first 25 weeks of its first half, sales in established pubs are up 2.8% with total sales ahead by 6.1%.

Mr Martin said: “Like-for-like sales have improved in the second quarter so far.

“However, as indicated in our November trading update, increased labour costs will be an important factor in the outcome for this financial year. Our current view is profits for this year are likely to be towards the lower end of analysts’ expectations.”

Wetgerspoon added that it had opened five new pubs in the first half, towards a planned total for the year of between 10 and 15, and sold two.