- December like-for-like sales up 15.2%, year to date 8.4% ahead
- Full year outcome expected to be inline with expectations
- Wages and energy costs remain key challenge across the industry
Pubs group JD Wetherspoon (JDW) continued its slow and steady recovery from the pandemic putting up a good festive performance as like-for-like sales increased 15.2% in December compared with 8.8% for the market.
For the 25 weeks to 21 January like-for-like sales were up 10.1% compared with 2022 with bar sales up 11.8% and food up 7.9%. Total sales are up 8.4% in the year to date.
Leisure analyst Greg Johnson at Shore Capital estimates first half like-for-like revenues are cumulatively around 15% ahead of the comparative period in 2019.
Recovery in the hospitality sector is now well established and Wetherspoon’s strong festive showing is consistent with recent trading updates from peers Marston’s (MARS) and Mitchell’s & Butlers (MAB).
INLINE GUIDANCE NOT ENOUGH
The shares dipped 0.7% to 834.9p but are up 75% in the last year and have more than doubled from the October 2022 low. In other words, the recovery narrative seems to be well appreciated by investors at this stage.
To make further progress the market will probably need to see management increase their full year and medium-term profit expectations.
Despite signs of cost inflation abating, Chairman Tim Martin neatly sums up the challenge: ‘Although inflation is, in general, reducing, labour and energy costs are far higher than pre-pandemic.’
‘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’, added Martin.
Can hospitality continue its post-Covid recovery?
WHAT ARE THE EXPERTS SAYING?
Greg Johnson said he is likely to maintain his 2024 pre-tax profit forecast of around £69 million which assumes 7% like-for-like sales growth.
Johnson said he sees other stocks better positioned to manage labour cost pressures. In addition, the group reduced the size of its estate which Johnson estimates created a 3% drag on first half revenues.
Johnson is also disappointed that debt levels are expected to be broadly unchanged for the full year at £642 million compared with his estimate which calls for a £46 million reduction.
Julie Palmer, partner at Begbies Traynor said: ‘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.’
