Wetherspoons sees solid results despite ‘ferocious’ cost pressures
Wetherspoons boss Tim Martin has said he is “cautiously optimistic” about future profits, with the company reporting a 13% rise in like-for-like sales for the six months ending 29 January 2023.
J D Wetherspoon, which runs more than 800 pubs across the UK, announced results for the six months ending 29 January 2023 on Friday. The outlook for the full year strikes a tone of cautious optimism, as the pub group continues to battle “ferocious” inflationary pressures, Martin said as part of his Chairman’s Statement.
Like-for-like sales were up 13% on figures from the same period in 2022. Sales also saw a 5% increase versus pre-pandemic levels.
However, profits have also been impacted by the drastic increase in operating costs, which rose almost £73m in the company’s half-year results to 29 January, from £805m to £878m.
The group made an operating profit of £37.4m versus a profit of £63.5m pre-pandemic.
Charlie Huggins, manager of the ‘Quality Shares Portfolio’ at investment firm Wealth Club, called it a “strong performance” for Wetherspoons, set against “an exceptionally challenging trading backdrop”.
Huggins noted that the group’s commitment to keeping costs down has enabled it to retain a loyal customer base, meaning “the group is better placed than many of its peers to weather a downturn in consumer spending”.
He said: “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.”