Shares in pub group JD Wetherspoon (JDW) dropped 7% after the firm warned on the outlook for earnings. Despite solid trading, chair Tim Martin said higher costs mean this year’s profit may be lower than last year.
| Share price: 688.5p (-6.7%) | PE: 12x |
| Market cap: £737m | Yield: 1.6% |
COSTS TO CRIMP PROFITS
For the 25 weeks to 18 January, pub operator JD Wetherspoon posted a 4.7% increase in like-for-like revenue. Bar sales were up 6.9%, food up 1.3% and slot/fruit machines up 9.1%, but hotel sales dipped slightly.
Encouragingly, like-for-like revenue increased at a faster rate in the second half of the period. Over Christmas, like-for-like sales were up 8.8% or getting on for double the H1 average.
However, higher labour costs due to rises in the minimum wage and NI contributions will eat into profits. Also, in the first 25 weeks, energy, repair costs and business rates were higher than anticipated.
As a result, H1 earnings will likely be lower than the same period the previous year. If the current sales momentum continues, the FY26 trading outcome may be slightly lower than FY25, cautioned chair Martin.
On the whole, pub groups have reported positive trading in the run-up to Christmas. Hospitality, together with holidays, seems to be an area where consumers are happy to keep spending
Fullers (FSTA) posted an upbeat trading statement last week showing strong like-for-like sales growth over Christmas. Chair Simon Emeny cheered the firm’s ‘strong growth’ in sales and profits and there was no hint of cost pressures.
Yet, as a value-focused player, Wetherspoons is one of the leanest operators in the pub sector. Therefore, it has let ‘fat’ to offset higher business rates and higher wage costs.
Admittedly the shares have had a good run since the buyback started in November, but today’s sell-off feels overdone.
Read the press release here: https://www.investors.jdwetherspoon.com/
You might Also like:
Vistry falls despite confirming full-year guidance
Investors toast Fuller’s interims
DFS shares hit 3-year high on raised outlook
Disclaimer: This content is for information only and is not investment advice. Always do your own research before investing. Click here to see full disclaimer.
