- First quarter like-for-like sales up 5.9%
- Budget plans adds £60 million to costs
- Industry primed for further price rises
Pub group JD Wetherspoon (JDW) continues to perform better than the hospitality industry with 5.9% like-for-like sales growth in the 14 weeks to 2 November, marking 25 consecutive months of outperformance.
Investors cheered the news, with the shares gaining 3% to 606.5p, although they remain 25% lower year-to-date and significantly below pre-pandemic trading levels around £16.90.
Current trading has been strong across the board with bar sales and food up 5.7% and slot machines up 13.5% while hotel rooms decreased by 2% in the period.
Total sales grew by 4.6%, lower than the like-for-like rate, reflecting the sale of five pubs, resulting in a trading estate of 797 pubs.
WHAT DID THE COMPANY SAY?
Chairman Tim Martin commented: ‘The company achieved record sales in the 14-week period and staff retention continues to be at high levels.
‘Cost inflation, which had jumped to elevated levels in 2022, slowly abated in the following two years, but has now jumped substantially again following the budget.’
The company said the government’s budget on 30 October would raise costs by around £60 million on an annualised basis in calendar 2025. Martin said he believes all hospitality firms plan to increase prices in response to the budget, and Wetherspoon will make ‘every attempt’ to stay competitive.
Shore Capital’s Greg Johnson estimates the rise in national insurance is equivalent to a further 5p on the price of a pint of beer and the industry will likely look to raise prices by more than 3% next year.
‘The unknown is at what point will the consumer become resistant to continued price increases, although we suspect Spoons has more room than most,’ added Johnson.
Johnson is forecasting 2025 pre-tax profit growth of 14% to £84 million based on like-for-like sales growing 4%.
‘The NI measures could be an additional £10m of costs (4 months), although with trading YTD above full year assumptions and potential mitigation measures (mainly price), we see modest downside risk to our (unchanged) full year estimates at this stage’, explained Johnson.
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