Wetherspoon loses some fizz as staff costs to hit margins
PUB chain Wetherspoon has warned profit growth will fizzle out as increased staff costs squeeze its bottom line.
Its chairman Tim Martin, who is recovering from a burst appendix, said the company expected “a trading outcome slightly below that achieved in the previous financial year”.
Investors took fright, with plunging 13.2pc to £11.38. With the unemployment at a record low, Wetherspoon will increase pay from this week, Mr Martin said, though declined to say by how much.
“Having had several recent years of record profits, we are not immediately seeking to recoup these increased costs through higher pricing or ‘mitigation’, but will review that during the year,” he said.
The chain, which operates more than 900 venues, reported a 5.5pc rise in like-for-like sales for the three months to October.
Liberum analyst Anna shares Barnfather was “concerned” about Wetherspoon’s ability to drive earnings growth “particularly in a higher interest rate and labour cost environment”. While the FTSE 250 company’s profit margins are some of the lowest in the pub sector, its like-for-like sales growth “is one of the highest”, pointed out Ms Barnfather.
Kate Calvert, at Investec, noted: “Wetherspoon continues to outperform the rest of the UK pub sector, showing the offer continues to resonate with the consumer”, although she reduced her target price on its stock.
Mr Martin said senior independent director Liz McMeikan would chair next week’s AGM. The shareholder adviser Pirc has urged investors to vote against the Wetherspoon founder’s re-election as chairman, citing concerns that Mr Martin – who owns about a third of the Wetherspoon stock – is not sufficiently “independent”.
While convalescing, the Wetherspoon boss took the opportunity to write “a few hundred words … on the advantages of free trade, which greatly outweigh the illusory benefits of a ‘deal’ with the undemocratic EU”.
“Wetherspoon has set an example by swapping EU products like Jägermeister, Courvoisier and German beer for UK or non-EU products of equal or better quality and price. It follows that UK businesses and consumers have the power to reduce EU exports to the UK to zero, or almost zero,” he wrote.