Wetherspoon warns business rates and sugar tax will hit second-half performance
The pub chain said ‘significant costs’ would weigh on the rest of the year despite a 6% rise in like-for-like sales in the 25 weeks to January 21.
JD Wetherspoon said profits were ahead of expectations after better-than-expected sales, but warned that “significant costs” would weigh on its performance over the remainder of the year.
The pub chain said like-for-like sales rose 6% in the 25 weeks to January 21, with total sales climbing by 4.3%.
Those figures were mirrored in its second-quarter results on both a like-for-like and total sales basis, helping boost profits for the period.
“As a result of better-than-expected sales, year-to-date underlying profit before tax is slightly ahead of our expectations,” the company said, but warned that growth was likely to slow.
“Similar outperformance in the second half will be more difficult to achieve,” it added.
Chairman Tim Martin said: “We face significant costs in the second half in areas which include labour, business rates and the sugar tax.
“There will also be some uncertainty as to the effects on our business of the Fifa World Cup.
“Nevertheless, given better-than-expected year-to-date sales, we currently anticipate a slightly improved trading outcome for this financial year.”
The pub group said it “remains in a sound financial position”, though year-end net debt is expected to be around £30 million higher than it was at the end of the last financial year.
It shelled out around £15 million on buying the freeholds of pubs where it was previously a tenant and bought £51 million worth of shares from shareholders.
As part of its update, JD Wetherspoon said it had opened three new pubs but sold off 10, with plans under way to open approximately 10 pubs by the end of the financial year.
Mr Martin used the latest trading update to launch fresh criticism against two trade bodies – the Confederation of British Industry (CBI) and the British Retail Consortium (BRC) – over their assertion that food prices are likely to rise in the wake of Brexit.
The Wetherspoon boss has been an outspoken proponent of Britain’s divorce from the European Union, issuing countless stock exchange announcements extolling the virtues of Brexit.
“By refusing to acknowledge the fact that food prices will be reduced post- Brexit, if the UK leaves the EU without a deal and Parliament votes to eliminate taxes which are currently imposed on non-EU food imports, the CBI and the BRC are trying to fool the public and MPs and bringing business into disrepute,” Mr Martin said.
“These factually incorrect scare stories seem to be designed to convince the public that a deal is necessary to avoid a ‘cliff edge’.
“In fact, the cliff edge is a myth. There is almost no action needed, for most companies, if the UK leaves the EU without a deal.”
He asserted that if Parliament takes “sensible steps” that include the scrapping of food taxes, the public would benefit from “lower food prices, from regained fishing rights and from savings of about £200 million per week of EU contributions.”
Wetherspoon pubs made headlines this week after customers were left disappointed over a decision to pull steak from its menu on steak night.
A notice, posted on Twitter by a customer, attributed the absence of steak to a “supplier failure”.