Pub group J D Wetherspoon has reported a fall in profits in its half-year results despite an uplift in sales, with chairman Tim Martin warning that rising labour costs and tax disparities are set to hit the pub industry hard.
Sales over the past six months at the pub company topped £1bn, the first time this has happened in the company’s history.
Total sales for the 26 weeks ended 26 January 2025 were £1,030m, an increase of 3.9% compared to FY24.
In its last full-year financial results (for the 52 weeks ended 28 July 2024), Wetherspoon posted a revenue of £2,035m, breaking the £2bn threshold.
For the half-year number released on 21 March 2025, like-for-like sales increased by 4.8%, bar sales increased by 4.3%, food by 5.4% and slot/fruit machines by 12.4%.
Operating profit, before separately disclosed items, was £64.8m (2024: £67.7m). The operating margin, before separately disclosed items, was 6.3% (2024: 6.83%), which Wetherspoon says is mainly due to labour and utility costs which, in total, were £30.6m higher.
Despite the notable revenue figures, Wetherspoon is preparing for a contentious hike in operating costs next month, as National Insurance Contributions, business rates and the national minimum wage increase take effect.
“Increases in national insurance and labour rates will result in company cost increases of approximately £60m per annum, which amounts to approximately £1,500 per pub, per week,” says Wetherspoon chairman Tim Martin. ““Since labour costs are around 35% of the pub industry’s sales, compared to around 11% for supermarkets, increases of this nature inevitably have a disproportionate impact on pubs, exacerbating the already-wide price differential for customers between the on- and off-trade.”
During the previous six months, Wetherspoon opened two pubs (the Grand Assembly in Marlow and the pictured Lion and The Unicorn in Waterloo Station, London) and sold six, with 796 pubs open at the period end.
Profit before tax and separately disclosed items, was £32.9m (2024: £36m). The pub disposals generated a cash inflow of £3.9m.
“The combination of much higher VAT rates for pubs than supermarkets, combined with increased labour costs will weigh heavily on the pub industry,” adds Martin. “The company currently anticipates a reasonable outcome for the financial year, subject to our future sales performance.
Charlie Huggins, manager of the ‘Quality Shares Portfolio’ at Wealth Club, commented:
“Wetherspoons has delivered a solid like-for-like sales performance in the period and trading in the last seven weeks has been robust. However, its profit margins have fallen due to higher utility and labour costs, meaning profits are slightly down.”
“The extent of cost increases is going to get much worse from 1 April. Labour costs will rise by £60 million which is frankly crippling and will likely eat further into profit margins going forwards.
The cost of a burger and pint will have to rise to help mitigate this pressure, which hardly encourages more punters through the door.”
“In all, aside from the depths of the pandemic, life has probably never been tougher for pub and bar operators. Wetherspoons has scale advantages others lack and a mightily loyal customer base, which really helps. But it is not immune to industry pressures.”