J D Wetherspoon sales growth slows again
J D Wetherspoon expects like-for-like sales to rise at a slower rate in its pubs over summer as boss Tim Martin warned investors about a £3m non-cash loss this financial year.
Read more: Glass half empty? Wetherspoon shares fall as sales growth slows
Like-for-like sales are expected to grow 6.9 per cent for the 10 weeks to the end of July, and are 6.7 per cent up for the first seven months of the year.
That is slower than the previous quarter’s 7.6 per cent growth rate, which was more sluggish still than the first quarter’s 9.6 per cent like-for-like growth.
Meanwhile total sales grew 6.6 per cent in Wetherspoon’s latest quarter, and are up 7.4 per cent for the year to the end of July, the company said in a trading update today.
The firm also warned investors that: “At this stage, about £3m of exceptional, non-cash losses are expected in this financial year, mainly a result of pub disposals which were below the value in our balance sheet.”
Wetherspoons has spent £71m on buying up pub freeholds and has bought back £5.4m shares.
However, net debt for the year is expected to stand at £745m, up from £724m at the half-year point, though full-year expectations remain unchanged.
JD Wetherspoon’s share price rose 3.5 per cent in early trading to 1,457p, pushing it slightly higher than this time last year, when shares traded at 1,244p.
But analysts saw Wetherspoon’s glass as half empty, with Shore Capital advising shareholders to sell up.
Shore’s Greg Johnson said Wetherspoon’s market value is “elevated given the ongoing net reduction in the estate and peer comparatives”, adding that per pub, its enterprise value of £2.6m is “at an all-time high”.
Alasdair Ronald of Brewin Dolphin questioned whether Wetherspoon’s margins are wide enough to offset its creeping level of debt.
“One issue of specific concern is the company’s ability and willingness to pass on price increases to offset input cost pressure, which has been weighing on its operating margins – in fact, the business has the lowest margins of the large UK pub companies,” Ronald said.
“Its preoccupation with Brexit aside, JD Wetherspoon remains in a better position than many of its peers; but investors will be keeping a close eye on debt levels and profitability in the months ahead.”
Chairman Martin used today’s update to weigh in on Brexit and the perceived risk of a no deal scenario if the UK has not secured an agreement by the departure deadline of 31 October.
He told investors that the UK ought to avoid a “mono-deal” as set out in Prime Minister Theresa May’s withdrawal agreement.
“A complex and overarching mono-deal, agreed under duress, is unnecessary and counterproductive. It would reduce the flexibility of UK businesses and parliament in the future,” he said.
Instead he made the case for a no-deal Brexit, arguing it allows the UK to establish multiple trade deals with various countries.
“The multi-deal approach is simpler, safer and will yield immediate dividends,” he said.
Read more: Wetherspoon shares swing wildly as profit plunges
“”It enables the UK to regain control of fishing and to eliminate tariffs on thousands of non-EU imports, such as bananas, rice, wine and children’s clothes – many of which are not produced in the UK,” Martin added.
“Democratic accountability will also be improved – the most important determinant of economic success.”
Main image source: Getty