- Like-for-like growth accelerates
- Takings boosted by better weather
- Share buyback continues
Value-oriented pubs chain JD Wetherspoon (JDW) showcased its resilience by serving up a 5% increase in total sales for the third quarter to 27 April 2025 despite a small number of pub disposals from the Tim Martin-chaired company.
Like-for-like sales rose 5.6% in the quarter, with growth accelerating from the 5% increase seen in the seven weeks to 16 March, taking the year-to-date like-for-like increase to 5.1%.
Despite a headwind from higher wage costs, the FTSE 250 firm continues to expect a ‘reasonable’ outcome for the year, helped by recent favourable weather, reassuring news that nudged the shares up 1% to a six-month high of 693p in early dealings.
BLUE SKIES AHEAD?
In common with the rest of the hospitality sector, JD Wetherspoon trades against a tough backdrop of weak consumer confidence and higher costs following hikes in National Insurance and the National Living Wage.
The good news is the pubs play should have benefited from blue skies and higher temperatures over the past few weeks and the weather forecast for the coming few weeks is certainly on its side.
That said, JD Wetherspoon will need all the help it can get as consumer confidence has been deteriorating.
In the year-to-date, the company has opened two pubs and sold seven. JD Wetherspoon intends to open a further four or five pubs in the current financial year and approximately 10 pubs in the following financial year.
WHAT DID TIM MARTIN SAY?
‘Bearing in mind that recent trading has been helped by favourable weather, the company anticipates a reasonable outcome for the financial year, notwithstanding previously reported wage and tax increases of approximately £1.2 million per week,’ commented Martin, who stressed that JD Wetherspoon’s product range continues to evolve.
‘For example, the company has recently introduced, nationwide, the highly regarded Jaipur traditional ale from the Thornbridge Brewery, as well as renowned international beer brands, Kronenbourg 1664 Biere and Poretti,’ he enthused.
‘As regards the menu, new initiatives include a gourmet burger offer, which has proved extremely popular in the pubs in which it has been trialled.’
Pressing ahead with its share buyback programme, JD Wetherspoon now anticipates year-end net debt of between £720 million and £740 million, up from the previously guided £680 million to £700 million range, with headroom of roughly £200 million.
WAGE COST HEADWIND
Julie Palmer, partner at Begbies Traynor (BEG:AIM), said that while the pub operator’s like-for-like sales continue to impress, there remains a question ‘over whether this will translate into meaningful profit growth, or whether the company will be weighed down by additional labour costs.’
Palmer added: ‘With wage and tax increases creating an eye-watering £1.2 million hit per week, Wetherspoon’s must find a way to balance the books and maintain its hallmark low prices that are one of the cornerstones to its enduring appeal. Despite the ongoing pressures in the hospitality sector, it is clear that pub goers are still finding the time and money to enjoy a drink in the sunshine, and that Wetherspoon’s remains the choice of pub for many.’
Jefferies noted that JD Wetherspoon reiterated a circa £60 million annualised headwind from UK Budget-related labour costs.
Yet the broker anticipates ‘mitigation from increased pricing. With a low price position relative to other operators, and increased wages affecting the whole industry, we argue that Wetherspoon’s is relatively better-placed to absorb the wage inflation.’
AJ Bell investment director Russ Mould warned: ‘Without sunny weather to encourage a trip to the pub beer garden, drinkers might opt for cracking open a can of lager at home as times are tough. April saw a rise in utility and council tax bills, tariffs threaten to drive up the cost of living further, and there are widespread job cuts or hiring freezes amid the uncertain economic outlook.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Steven Frazer) own shares in AJ Bell.