Wetherspoons Reveal Solid Results – But Challenges Remain

J D Wetherspoon has today announced results for the six months ending 29 January 2023:

  • Like-for-like sales were up 13% compared to the same period last year and up 5% versus pre-pandemic levels
  • The group made an operating profit of £37.4m versus a profit of £63.5m pre-pandemic
  • The outlook for the full year strikes a tone of cautious optimism

Commenting on the results, Tim Martin, the Chairman of J D Wetherspoon plc, said: “Trade for the last seven weeks was 9.1% above the equivalent period in FY19 and 14.9% above the equivalent period in our last financial year (FY22).

“As reported last year, the company has a full complement of staff, although the labour market is competitive, with unemployment, in spite of economic problems, at approximately its lowest level in the last 50 or so years.

“Supply or delivery issues have largely disappeared, for now, and were probably a phenomenon of the stresses induced by the worldwide reopening after the pandemic, rather than a consequence of Brexit, as many commentators have argued.

“Inflationary pressures in the pub industry, as many companies have said, have been ferocious, particularly in respect of energy, food and labour. The Bank of England, and other authorities, believe that inflation is on the wane, which will certainly be of great benefit, if correct.

“Having experienced a substantial improvement in sales and profits, compared to our most recent financial year, and with a strengthened balance sheet, compared both to last year and to the pre-pandemic period, the company is cautiously optimistic about further progress in the current financial year and in the years ahead.”

Charlie Huggins, manager of the ‘Quality Shares Portfolio’ at Wealth Club, commented:

“This is a solid performance from Wetherspoons set against an exceptionally challenging trading backdrop. Like-for-like sales have proved robust and have strengthened in the last 7 weeks, despite cost of living pressures on consumers.

Wetherspoon’s commitment to low prices is keeping customers loyal, as evidenced by the robust like-for-like sales growth. These value credentials are critical, and should mean the group is better placed than many of its peers to weather a downturn in consumer spending.

Profitability, however, remains well below pre-pandemic levels. Wetherspoon’s business model is heavily exposed to the rise in labour, energy and food costs. Unfortunately, it doesn’t have the pricing power to fully offset these cost pressures. In the current inflationary environment that means one thing – pressure on margins.

Overall, while there are reasons for optimism, 2023 is shaping up to be yet another challenging year for Wetherspoons. Higher interest rates and inflation are strangling the economy, and leading to significantly higher costs for the group. Combine this with Wetherspoons low margins and low price strategy, it means the group faces an uphill battle in the current environment.”

Julie Palmer, partner at Begbies Traynor, said:

“Wetherspoon’s boss Tim Martin prides himself on running pubs that offer cheap and cheerful food and drink to punters who want value for money, meaning his empire of more than 800 pubs is well suited to the current cash-strapped economy.

“That positioning is working in today’s economic climate, posting sales above pre-pandemic levels, despite what Mr Martin called ‘ferocious’ inflation in the pub industry – meaning rising costs caused a plunge in profits before coronavirus changed the world.

“Struggles with supply chains that previously led to shortages of products did get a mention, with the pub chain saying these have now largely disappeared, and Mr Martin concluding the issues were more like down to the pressure of the economies reopening after lockdowns, rather than Britain leaving the EU.

“Studies have calculated that each week more than 30 British pubs call time for the last time and close for good as they fall victim to high costs, such as staggering electricity bills, rising wages and the fight for staff, compounded by fierce competition from supermarkets with cash-conscious drinkers increasingly cracking open cans at home. In such a tough environment, Wetherspoon’s value-for-money offering and the company’s sheer scale means it is well placed to outlast smaller or more expensive rivals.”