JD Wetherspoon shareholders await impact of cost of living on budget pub chain’s pint sales
Investors will be eager to see if the cost of living crisis has made any dent to JD Wetherspoon sales in the budget pub chain’s quarterly update this week.
Analysts said a wider downturn in consumer spending could be mitigated by the chain’s cheaper prices enticing drinkers but thin margins risked a gloomy verdict.
The chain has been anticipated to post a three per cent drop in sales in the three months to the end of June.
Broker Liberum said the London-listed firm was one of its least favoured stocks last week, forecasting “weak post-Covid sales momentum, high labour intensity and narrow margins.” on Wednesday.
“Furthermore, the estate size is shrinking, and the balance sheet leverage is one of the highest in the sector,” the note added.
Pubs have been hammered by scorching increases in energy and labour costs in recent months all while recovering sales momentum after the Covid pandemic restrictions.
However, Wetherspoons’ like for like sales in the last couple of weeks of the third quarter were “slightly positive,” with it remaining to be seen whether this has continued, noted Matt Britzman, equity analyst for Hargreaves Lansdown.
He added: “In March, cautious consumers hadn’t impacted trading. Given the cost-of-living crisis has evolved since then, it’ll be interesting to hear whether that trend has shifted at all.”
At a trading update in May, the firm’s chairman Tim Martin said it “anticipates a continuing slow improvement in sales, in the absence of further [Covid] restrictions, and anticipates a “break-even” outcome for profits in the current financial year.”
The business hiked its drink prices by 10p in March and food prices also went up in April, as the pub sector has seen pandemic tax relief expire.
The budget pub chain’s share price has fallen 45 per cent in the past year.