Derren Nathan, head of equity research at Hargreaves Lansdown, said: “JD Wetherspoon’s cautious tone as it entered the festive trading season looks to have been misplaced.
“Revellers were out in force over the key Christmas period where like-for-like sales were up by 8.8 per cent.
“That drove an acceleration in growth to 6.1 per cent for the second quarter as whole.
“But a cocktail of rising expenses including increased wages and business rates have led to £45 million of additional costs in the first half.
“If sales momentum remains unchanged, management now expects a small dip in trading performance this year.
“It’s not entirely clear which line in the income statement weaker trading performance refers to.
“Despite consensus forecasts for operating profit already looking for a small fall, today’s share price reaction suggests investors were hoping for better.
“There’s the potential for some respite if rumours of a U-turn on the business rate changes for the sector materialise.
“Looking further ahead, the pub chain’s still confident enough to invest in a modest expansion with 15 pubs expected to open this financial year.
“There’s also at least 26 franchised units expected to be serving by the year-end including the first Spanish ‘Spoons’ at Alicante airport, an ideal pitstop for holidaymakers en-route to Benidorm.
“It’s a small step for now, but perhaps a sign that the incessant rise in costs for the UK hospitality industry is prompting boardrooms to consider deploying capital elsewhere.”
Contact details are available to account holders.
Create a free account to get in touch with this expert.