Wetherspoon’s issues fourth profit warning in seven months

Pub chain blames worse-than-expected sales on rising costs for workers, food, energy and property taxes

JD Wetherspoon has issued its fourth profit warning in seven months, with the pub chain blaming worse-than-expected sales, despite the World Cup, as it struggled with rising costs for food, workers, energy and property taxes.

Shares in the pub chain tumbled 10% on Wednesday morning as its chair, Tim Martin, warned that profits would fall short of forecasts when it reports full-year earnings in October.

“Profits for the year are likely to be below market expectations, with marginally lower sales than anticipated in the final quarter, combined with higher costs in the areas of food, labour, repairs, energy and business rates,” he said in a statement.

It marks the fourth profit warning this year from the company, which operates 793 pubs across the UK and Ireland.

In a short trading update on Wednesday, JD Wetherspoon said like-for-like sales rose only 4% over the 12 weeks to 19 July. That is despite hopes for an uptick in sales linked to customers heading off to pubs to watch Fifa World Cup games.

While pubs can usually count on the World Cup to boost demand for food and drinks, the late kick-off times dictated by the event having North American hosts made the tournament more challenging for some owners compared with previous years.

Richard Hunter, the head of markets at the investment platform Interactive Investor, said: “While others in the sector have been hailing a boost to sales from the impact of the World Cup and generally warm weather, Spoons has apparently not joined the party.”

Those lower-than-expected sales have compounded continuing pressures, including the recent rises in the UK minimum wage and business rates, which came into effect at the start of April. The hospitality sector has also been grappling with a jump in food and heating bills, resulting from higher energy prices pushed up by the US-Israel war on Iran.

However, Wetherspoons is now expecting its net debt to hit £720m, in line with the end of the last financial year, down from previous forecasts of £740m to £760m.

Hunter said: “Spoons has been dealt some difficult hands over the years, which, for the most part, it has been resolute in turning into profit. However, this year has compounded some earlier difficulties … The different tax treatment of alcohol sales in supermarkets is a case in point, alongside wrongly applied business rates.

“Wetherspoon’s dogged determination to fight its corner has won the brand many friends, but from an investment perspective the jury remains out on prospects.”