Wetherspoon is holding its own in the face of the supermarket price war
It may be at a “great disadvantage” to supermarkets, but JD Wetherspoon still managed to report an increase in sales.
The figures
In an interim management statement, the company announced like for like sales were up 1.7 per cent in the 13 weeks to 26 April, and 3.6 per cent for the financial year to date – 39 weeks to the same date. Total sales were also up, by 5.8 per cent (13 weeks) and 7.9 per cent (39 weeks).
The company has bought back 1.6m shares, at a total cost of £12.5 million, since the start of the financial year.
Wetherspoon also announced it had opened 20 new pubs since the start of the financial year, and had disposed of four. It would, it said, take the former number up to 30 for the year, and expected to open the same number next financial year.
The group said that its full-year expectations had not changed, and that it expected the operating margin to be “in the region of 7.3 per cent to 7.7 per cent".
Why it’s interesting
JD Wetherspoon is no friend of cheap supermarket alcohol, and says that:
The Late Night Levy, combined with higher business rates per pint and a huge VAT disparity, mean that pubs continue to trade at a great disadvantage to supermarkets.
With supermarkets feeling the pinch (both Tesco and Sainsbury have both released disappointing results recently, the latter today posting its first loss in nine years) a price war has begun, with low-cost alternatives like Aldi and Lidl forcing prices ever lower.
This has meant the lure of cheaper booze from supermarkets has dragged pubs to the fringes of the conflict.
This issue is not expected to go away any time soon. In March, Wetherspoon announced it would be focusing on coffee options and breakfast deals in order to increase its sales and reduce reliance on alcohol.
What Wetherspoon said
For the next financial year, there are a number of factors which are likely to influence our trading performance, although they are difficult to quantify at this stage.
Positive aspects include an increase in our pub numbers, stable utility prices and slightly lower interest rates.
Other trends include increased competition from supermarkets and restaurant groups, together with additional staff and repair costs. We will provide updates, when appropriate, on these, as next year progresses.
In short
Wetherspoon had a strong second half of the last financial year, and so does not expect to beat those results this time around. This is nothing new, however, and investors have been reassured that results are likely to be in line with expectations.