Yahoo Finance FTSE 250: Wetherspoons to sell 39 more pubs as sales slow and costs surge
Wetherspoons (JDW.L) slumped as much as 8% on Wednesday after it revealed it was selling 39 more pubs across the UK as sales slow and costs surge.
Here's what the no-frills pub chain revealed on Wednesday:
Sales: Up 9.6% in the 14 weeks to 6 Nov year-on-year, but down 1.1% compared to pre-pandemic levels
Costs: Around £10m higher interest costs. Higher costs expected for staff, food and repairs.
Cash flow: In line with expectations for year to end of July
Net debt: Stands at £745m, lower than at the July year end
The pub chain said the closing branches are ones near other Wetherspoons, and that it had also sold five other outlets.
It warned of “substantially higher” costs for staff, food, and repairs as the cost of living crisis took its toll. Interest costs for the current financial year are also expected to be about £10m higher, it said.
Like-for-like sales in the 14 weeks to 6 November came in 9.6% higher than in the same period last year, and 0.4% up from pre-pandemic levels – a decent turnaround compared with its preliminary results.
Over the last five weeks, sales jumped 8.9% year-on-year, but were 1.1% lower than the same period in 2019.
“Trading has been broadly in line with expectations, although October has been a slightly slower month,” outspoken boss Tim Martin said.
“In my comments on the full year results released on 7 October 2022, I set out various threats to the hospitality industry and these continue to apply.
“Those caveats aside, in the absence of further lockdowns or restrictions, the company remains cautiously optimistic about future prospects.”
Last month he warned that the group is facing a “momentous challenge” to persuade punters back into its bars after they got used to drinking cheap supermarket beer during the COVID pandemic.
The firm said it now remained "cautiously optimistic" despite the cost pressures hammering the hospitality sector. It expects positive cash flow for its 2023 financial year ending July.
Net debt stood at £745m, £147m lower than at the July year end after closing out most of its interest rate swaps.
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Adam Vettese, analyst at social investing network eToro, said: “The big concern facing Wetherspoons, like all pubs, is that soaring costs wipe out any profits they make from increased sales.
“Energy bills, food prices and wages are all increasing, putting stress on the whole sector, while the cost-of-living crisis might force people to take fewer trips to the pub.
“There is no doubt pubs are still in a precarious position, but it is at least a positive to see one of the industry leaders demonstrating signs of recovery, even if it will be slow and the road ahead bumpy.”
Meanwhile, Derren Nathan, head of equity research at Hargreaves Lansdown, said: "Generally sales are holding up at JD Wetherspoon, but we will need to hold our breath to find out if the more recent slowdown is a blip or a trend, as customers feel their wallets ever more squeezed. The World Cup may provide some relief, but JD Wetherspoon is not a sports led outlet.
"With an acceleration in pub disposals and efforts to make a dent its debt levels, it feels like the pub chain is battening down the hatches, and that may well be a sensible move as we enter a period of increasing economic uncertainty.”
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