- Like-for-like sales accelerating
- Company swings back to first half profit
- Analyst increases earnings estimates
Pubs group JD Wetherspoon (JDW) pleased the market on Friday after like-for-like sales showed increasing momentum, rising 9.1% for the seven weeks to 19 March compared with 2019, up from 5% growth in the first half.
Investors gave the shares the thumbs up with a rise of 9% to 630.25p taking year to date gains to nearly 40%.
Another factor behind the positive reaction today is that earnings expectations have been severely tempered over the past few months, falling by half.
WHAT DID THE COMPANY SAY?
Total first half sales increased by 13.5% to £916 million reflecting easier comparatives against the omicrom disruption in December 2021 and 3% above pre-pandemic.
Drinks sales lagged, with like-for-like’s up a mere 0.8%, while food increased by 12%, slot machines by 44% and hotel rooms by 13%.
The group turned a £26.1 million loss in 2022 into a pre-tax profit of £4.6 million, a long way shy of the £50.3 million delivered in 2019.
Chairman Tim Martin commented: ‘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.’
WHAT ARE THE EXPERTS SAYING?
Leisure analyst at Shore Capital Gregg Johnson said the much-improved performance in the first half and further progress in the second demonstrated a resilient UK consumer.
‘Forecast-wise, we estimate that consensus PBT estimates of c£30m, requires a further improvement in H2 profitability towards £60m (following £37m in H1). We would see current trading as broadly consistent with such an improvement.
‘Accordingly, we will likely move up our below consensus FY23F PBT estimate of c£20m.’
Investment director at AJ Bell Russ Mould said: ‘Wetherspoons has always been a low margin business, preferring to give customers good value for money and keep things as cheap as possible. Its model is based on achieving high sales volumes so when costs shoot up, there is often only pennies left on the table once accounting for its outgoings.
‘Wetherspoons has been through plenty of ups and downs during its existence and always seems to be able to survive intact. Founder Tim Martin certainly isn’t afraid of having a grumble, but the company knows what the customer wants and is able to deliver time and time again.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Martin Gamble) and the editor of the article (Ian Conway) own shares in AJ Bell.
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