JD Wetherspoon has shared a trading update revealing a 5.1% increase in like-for-like sales for the 25 weeks ending 19 January 2025. Sales during the second quarter showed a steady 4.6% growth, with the three-week Christmas period performing particularly well, achieving a 6.1% rise.
Despite this positive momentum, the company faces significant challenges as labour-related costs are expected to rise by approximately £60 million annually starting 1 April.
Wetherspoon chairman Tim Martin said:
“From 1 April 2025 labour-related costs at Wetherspoon will increase by around £60 million per annum.
“Government-mandated wage increases have a significantly bigger impact on pub and restaurant companies than supermarkets. Please see an article on this subject in a recent edition of pub-trade publication, Propel (appendix 1).
“As previously highlighted, supermarkets pay no VAT in respect of food sales, whereas pubs pay 20%. This tax advantage allows supermarkets to subsidise the price of beer they sell.
“A direct consequence, as Morgan Stanley have recently calculated (please see appendix 2), is that beer volumes in the on-trade (mainly pubs, clubs and restaurants) have decreased by an incredible 52% between 2000 and 2023.
“It is a clear principle of taxation that taxes should be fair and equitable, as between different types of companies. The VAT distortions that exist today will inevitably create more supermarkets and less pubs.
“Given the public’s love of pubs, the only possible explanation for this tax discrepancy is that prime ministers and other legislators, in the 45 years since Wetherspoon started trading, have been dinner party goers, rather than pub goers.
“Food at dinner parties is VAT-free, subsidised by the legendary “man on the Clapham omnibus”, who has fish and chips at his local pub.
“Wetherspoon therefore calls upon Sir Kier Starmer to redress this imbalance, thereby striking a blow for tax equality and ending discrimination in favour of dull (yawn, yawn) dinner parties.
“The company is confident of a reasonable outcome for the year, although forecasting is more difficult, given the extent of the increased costs.”
Industry analysts have noted that while Wetherspoons’ ability to attract and retain customers through competitive pricing and a no-frills approach remains strong, the broader economic pressures are intensifying.
Julie Palmer, partner at Begbies Traynor, said:
“After an impressive performance for most of 2024, it seems the mood music has changed at JD Wetherspoon, as it delivered a lacklustre Christmas performance that lagged behind peers and highlights a greater sense of uncertainty as we enter 2025.
“The beloved pub chain still saw strong growth in like-for-like sales over the all important festive trading period, but this remains below the double-digit growth many peers have reported and may call into question the durability of their well-loved low cost model at a time when other pubs are planning to raise prices to offset the impacts from Labour’s high-tax budget.
“It is little surprise that outspoken Chairman Tim Martin has called upon the government to level the VAT playing field, though missing among his tirade is a sense of how Wetherspoons will grapple with an extra £60m in costs and continue to offer cash strapped customers cheap pints.
“With almost 800 pubs across the UK and Ireland, Wetherspoon’s clearly has the scale to ride out the storm, but the iconic pub chain is not immune to the harsh headwinds facing the hospitality sector, and it must think carefully about its strategy if it is to emerge relatively unscathed from this higher cost environment.”