JD Wetherspoon has reported slower-than-expected sales growth and warned over profits again, spoiling investor hopes of a World Cup and warm weather boost.
The British pub chain recorded sales growth of four per cent in the three months to July 19, compared with the same period last year.
Susannah Streeter, chief investment strategist at Wealth Club, said: “Wetherspoon’s has been served a toxic cocktail of rising costs which shows little sign of losing its potency.
“It’s forced the pub chain to issue its fourth profit warning of the year, unnerving investors and sending the shares sharply lower in early trade.
“Annual pre-tax profits had been expected to come in around £70 million, already well below last year’s £81 million, but even those forecasts now look too optimistic.
“Customers are still coming through the doors, with like-for-like sales continuing to grow, but the bars weren’t quite as busy as hoped in the final quarter.
“Even cheaper pints can only go so far in luring consumers who remain cautious about everyday spending.
“At the same time, Wetherspoon is having to swallow a bitter mix of higher labour, food, energy, repairs and business rates, which continues to eat away at margins. These pressures are unlikely to disappear any time soon.
“If conflict in the Middle East keeps disrupting global energy supply routes, higher wholesale energy prices will continue filtering through into transport and utility bills, leaving hospitality businesses facing another round of margin pressure just as hopes had been growing that the cost squeeze was beginning to ease.
“While the government’s cost-of-living measures may offer households some breathing space, companies remain exposed to volatile commodity markets and stubborn domestic costs.
“Business rates have long been one of chairman Tim Martin’s biggest gripes, and despite reforms to the system this year, they remain another headwind for large pub operators already grappling with rising wage and energy bills.”
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