JD Wetherspoon posts first annual profit since pandemic

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UK pub group JD Wetherspoon has swung back to annual profit for the first time since the pandemic but founder Tim Martin warned that a “tsunami of costs” could dampen prospects for the year ahead.

The chain, which operates 826 sites nationwide, booked a pre-tax profit of £42.6mn in the year ending July 30, compared with a loss of £30.4mn last year when trading was disrupted by coronavirus restrictions. Full-year revenues were up 10.6 per cent year on year to £1.9bn.

Wetherspoons’ profits were “a touch below” forecasts after adjusting for a £2.6mn windfall from property sales, according to analysts at Shore Capital. Shares were down nearly 4 per cent to £6.69 in morning trading.

Martin, the group’s founder and chair, told the Financial Times that because of inflation it had been “verging on impossible” for the hospitality industry to maintain profitability. Wetherspoons’ full-year operating margin of 5.6 per cent was an improvement from last year but was still down on its 7.3 per cent margin in 2019.

Martin said the pub chain was still receiving “a number of requests for price increases from suppliers, but they’re not as urgent as a year ago”. “It’s been a tsunami of costs really,” he added. “We elected to put our prices up fairly modestly because it’s not possible to reclaim all the costs through price increases.”

In the first nine weeks of the current financial year, like for like sales increased by 9.9 per cent, compared with the same period last year, Martin added. Analysts at Shore Capital said current trading was “tracking above our full year assumptions”.

In the company’s regular going concern statement, Wetherspoons said it forecast “continued high levels of inflation, particularly on wages, utility costs and repairs” for the year ahead, but added that the company “will have sufficient resources to continue to settle its debts as they fall due and operate within its leverage covenants”.

Despite remaining high, inflation has eased across the hospitality sector. Consumer price inflation for restaurants and hotels in August fell to 8.3 per cent, down from 9.6 per cent in July, according to the Office for National Statistics.

In an earlier statement on Friday, Martin said he expected a “reasonable outcome” for the year ahead, adding that any further coronavirus restrictions would constitute the “biggest threat” to the hospitality industry. Martin was a vocal critic of the lockdowns.

Martin told the FT he was “moderately optimistic” for the coming financial year but that there was “everything to play for”. “By and large, it’s been very rare for Wetherspoons to have a reduction in sales year on year,” he said. “I think our sales this time next year will be even better.”

Analysts at Jefferies said Wetherspoons’ competitive prices would appeal to consumers as the cost of living crisis continues to bite. “We argue that [Wetherspoons’] low relative price positioning and well located [and] well-invested premises will gain market share and benefit from trading down,” they said in a note.