Wetherspoons’ record profits – and rising costs
JD Wetherspoon’s profits rose to record levels in the year to July, but the pub group warned it would need to maintain sales momentum to keep up with rising costs.
Profit before tax was up 4.3% to £107.2m, the group’s highest profit in its 39-year history.
Like-for-like sales, which exclude new pubs, rose 5% in the 52 weeks to July 29. Revenue climbed 2% to £1.69bn, another all-time high.
Chairman Tim Martin said the current financial year had been “reasonable”, with 5.5% growth in like-for-like sales in the six weeks to September 9.
But he warned higher running costs could threaten profit growth, saying: “The company has had a reasonable start to the financial year, but taxes, labour and interest costs are expected to be higher than those of last year, so we estimate that like-for-like sales growth of about 4% will be required for the company to match last year’s record profits.”
Emma-Lou Montgomery, associate director at Fidelity Personal Investing’s share dealing service, said Martin’s comments touched on “the very real pressure facing pubs today”.
“Claiming 50% of beer sales have been lost to supermarkets in the last 35 years, his calls for tax equality, with government treating pubs as ‘leniently’ as supermarkets when it comes to tax, looks much-needed,” she said.
Trade bodies and campaign groups including the Campaign for Real Ale (Camra), Wine and Spirits Trade Association (WSTA) and UK Hospitality have urged the Chancellor to freeze alcohol duty for a second year in a row to lessen the tax burden on pubs.
JD Wetherspoon maintained its full-year dividend at 12p. Shares in the company were flat in early trading yesterday.
Martin, an outspoken supporter of Brexit, said in a statement accompanying the results that there will be a “huge gain” for businesses and consumers if politicians opt for a free-trade approach after leaving the EU.
“Ending tariffs will reduce shop and pub prices, improve living standards and will help non-EU suppliers, currently discouraged by tariffs, quotas and the extensive paraphernalia of EU protectionism,” he said.
Earlier this week the company announced another tranche of changes to its drinks menu, replacing EU-made products with alternatives from the UK and countries outside the bloc.
The pubs will stop serving Jagermeister as well as French brandies Courvoisier VS and Hennessy Fine de Cognac. This followed the chain’s announcement in June that it would stop replace Champagne with sparkling wines from the UK and Australia as well as German wheat beers with those from the UK.
Martin said the new products would be offered at a lower price that those they replace.