Pub group JD Wetherspoon’s has reported like-for-like sales 10.1% higher than the corresponding period a year ago for the 25 weeks to 21 January 2024.
The groups latest financial results show that bar sales rose by 11.8%, food by 7.9% and slot/fruit machines by 10.4%. Meanwhile, room sales increased by 3.1%.
Furthermore, like-for-like sales in the last 12 weeks were 11.1% higher than the same period a year ago, with total sales growing by 8.4% in the year to date.
The company currently has a trading estate of 814 pubs, opening two sites in the year to date, at London’s Heathrow airport and at London Euston railway station.
During the reporting period, five pubs were sold, and eight leasehold pubs have either been surrendered to the landlord or sublet. The disposals and surrenders resulted in a cash inflow of £3.8m.
Wetherspoon chairman Tim Martin said:
“Wetherspoon, like the hospitality industry, has seen a consistent but slow recovery, following the pandemic.
“Although inflation is, in general, reducing, labour and energy costs are far higher than pre-pandemic.
“A main issue for the pub trade is that labour costs are around 30% of sales, compared to around 10% for supermarkets.
“The price of a pint in a supermarket is about £1, so a 10% increase in labour costs (which are around 10 pence per pint) necessitates a one pence increase in the selling price to cover costs.
“However, for pubs, the average selling price of a pint is around £4.50. The labour per pint is therefore around £1.35 (30% of £4.50), necessitating a 13.5 pence increase in the selling price to cover extra costs.
“The inevitable consequence is that increased labour costs raise the differential in prices between the hospitality industry and supermarkets.
“At the same time, pubs pay far higher VAT and business rates than supermarkets, further exacerbating the price disparity.
“In particular, pubs and restaurants pay 20% VAT in respect of food sales, whereas supermarkets pay almost nothing, a tax differential which is surely unfair.
“Notwithstanding these issues, Wetherspoon currently expects an outcome for the financial year in line with market expectations, and will provide further updates as the year progresses.”
Commenting on JD Wetherspoon’s trading update, Julie Palmer, partner at Begbies Traynor, said:
“Today’s update is an impressive display of J D Wetherspoon’s ability to serve up success, as it outperforms the industry for the sixteenth consecutive month with remarkable double-digit growth after the pub group enjoyed a bumper festive period.
“At a time where households are feeling the pressure on their finances, the low-cost offering from the publican powerhouse clearly continues to be a real tonic for cash-strapped consumers in the midst of a cost-of-living crisis.
“With its outspoken Chairman Tim Martin bemoaning business rates, high energy and labour costs, as well as higher VAT versus supermarkets, all of which are plaguing the industry, Wetherspoon’s will face further pain as these costs pile on the pressure in the year ahead.
“Its focus on streamlining the estate and reducing net debt will position the iconic pub chain well to rise to the top of these challenges but it’s the smaller, independent pubs who struggle to drag customers away from the allure of cheap supermarket booze and absorb these costs that will suffer the most in 2024.
“This year, Wetherspoon’s will have to perfect the balancing act between maintaining the low prices that keep its loyal customer base coming back and mitigating the impact of these pressures on its margins.
“With over 800 pubs across the UK and Ireland, Wetherspoon’s has the scale to weather the storm, but it will need to mix the perfect cocktail if it’s going to continue to outperform as it has done for over a year.”