Wetherspoon cheers return to profit as pub chain branded 'prime example of economic Darwinism'
The group, which runs more than 840 pubs in the UK and Ireland, including the likes of the Caley Picture House in Edinburgh and Dunfermline’s Guildhall & Linen Exchange, reported a 5 per cent increase in sales over the six months to January 29, compared with the same period in 2019, and up 13 per cent compared with the previous year. It swung back to a profit over the half year after suffering losses following the pandemic when many pubgoers stayed home and lockdowns hit the sector hard.
Wetherspoon generated a pre-tax profit of £4.6 million, compared with losses of £21.3m in the same period a year earlier. But that was still a 90 per cent decline compared with its pre-Covid figure of £50m in the first half of 2019. The group has been heavily exposed to surging costs for energy, food and labour, which have also taken their toll on the wider hospitality industry.
Founder and chairman Martin welcomed the possibility of inflation easing up, which he said would be a “great benefit”. He said: “Inflationary pressures in the pub industry, as many companies have said, have been ferocious, particularly in respect of energy, food and labour. The Bank of England, and other authorities, believe that inflation is on the wane, which will certainly be of great benefit, if correct.”
Supply and delivery issues, which were also exacerbated during the pandemic, have “largely disappeared”, Martin noted. He added that the problems “were probably a phenomenon of the stresses induced by the worldwide reopening after the pandemic, rather than a consequence of Brexit”.
The group said it is “cautiously optimistic” about progress this year having seen a substantial improvement in its sales and profits. Experts said that Wetherspoon could be in a better position than its rivals this year because of its commitment to keeping prices low.
Derren Nathan, head of equity research at investment firm Hargreaves Lansdown, said: “It’s been a solid start to the year for Wetherspoon. Its tried and tested value offer is holding it in good stead and there’s no sign of punters deserting the boozers despite the continuing cost-of-living crisis. Looking to the longer term, we see Wetherspoon as a prime example of economic Darwinism. A company whose business model and brand is likely to see it exit a challenging period stronger than before.”
Mark Crouch, analyst at social investing network eToro, noted: “JD Wetherspoon is making progress but, along with all pubs, is still being clobbered by higher goods, labour and energy costs. With Wetherspoon’s like-for-like sales now running higher than pre-pandemic times, it’s clear that punter demand is no longer a problem for the pub industry. While labour costs are likely to remain high, the supply issues that dogged pubs last year have largely subsided, meaning they will be hoping the cost of food and drink shrinks.”