Glass half empty? Wetherspoon shares fall as sales slow and net debt creeps up
Wetherspoon insisted it is on track to hit full-year targets today despite net debt creeping up and sales growth slowing after a wage hike hurting profits in the first half of its financial year.
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The pub chain did not mention profits in today’s trading update, but revealed that like-for-like sales have risen 7.6 per cent for the three months to the end of April, slower than the previous period's 9.6 per cent rate.
Total sales have grown 8.4 per cent, or by 7.6 per cent for the year to date.
Brexiter chairman Tim Martin said: “We continue to anticipate a trading outcome for this financial year in line with our previous expectations.”
Wetherspoon also revealed it has spent £71m on buying pub freeholds where it was previously a tenant, and opening three new pubs, as well as two more this year, after closing seven in the last three months.
However, it revealed a three per cent rise in net debt to £746m, up from £724m at the end of its half-year, which it only expects to trim by £6m come the end of its financial year.
Shares fell 4.54 per cent on the update to 1,284p.
John Moore, senior investment manager at Brewin Dolphin, said: “There is some good sales progress in here against a tough economic backdrop; but, in the company’s previous statement, there was a significant drop in profitability, as investment in price and a wider offering was prioritised.
“While these sales go some way towards validating that decision, it remains to be seen if this will translate into comparable growth in profits. JD Wetherspoon has traditionally been a thin margin business – nevertheless, with a well-invested estate, it remains in a better position than many of its peers.”
The update comes after Wetherspoon fell foul of £33m in higher wage costs, sending profits almost 20 per cent lower to £50.3m.
However, Martin maintained the firm’s full-year outlook – though analysts said the pressures would continue to weigh on its margins and dent profitability.
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Speaking to Morning Wire in March, Martin ruled out a cost increase to offset the profit blow, adding that Wetherspoon has enjoyed “very good sales across the board”.