Wetherspoon issues profit warning over ‘substantial’ cost hikes
JD Wetherspoon has warned it could miss profit targets over “substantial increases in costs,” as pubs brace for soaring energy and shipping prices due to the Iran war.
The UK’s best-known pub chain confirmed on Tuesday that the much-feared knock-on effects from the blockage to the Strait of Hormuz have begun to hit hospitality firms.
Chairman Tim Martin said: “As many hospitality operators, including Wetherspoon, have reported, there have been substantial increases in costs, which may result in profits slightly below market expectations.”
Despite rising costs, Martin said Wetherspoon is trading ahead of the market, with its sales growth beating audit firm RSM’s hospitality business tracker for the 43rd month in a row.
Wetherspoon growth stalls
Like-for-like sales were up by 3.4 per cent in the three months to April and sales in the year-to-date grew by 4.3 per cent.
But the FTSE 250 pub chain’s growth for the period was slightly slower than in previous quarters, it said.
Wetherspoon has purchased 3.8m shares in the year to date at £6.80 per share, and bought the freehold rights to four of its pubs, to a total cost of £12.2m.
In March, shares in the pub firm dipped after pre-tax profit for the first half of its financial year slumped by 32 per cent to £22, missing even analysts’ downgraded expectations.
Martin said increases to national insurance and minimum wage were set to cost Wetherspoon £60m every year, along with the £7m cost of a green levy.
Pubs battle higher tax
He said at the time: “These cost increases will undoubtedly add to underlying inflation in the UK economy, although Wetherspoon, as always, will endeavour to keep price increases to a minimum.
“There is clearly considerable pressure on consumer finances, combined with higher taxes, wages and energy costs for the hospitality industry.”
British pubs had been bracing for higher energy bills as a result of the conflict in the Middle East, with other leading pub firms like Shepherd Neame warning costs will go up.
Hospitality firms are also battling employment cost increases and hikes to business rates bills which came into force in April.
Two thirds of pubs, bars and restaurants will be forced to cut jobs to deal with these new costs, while one in seven will shut altogether, according to trade body UK Hospitality.
Earlier this week, it emerged that two pubs shut every day in the first three months of the year, totalling 161 businesses and 2,400 jobs lost.