JD Wetherspoon has announced an update on current trading before entering its close period for its interim results, for the six months ending 28 January 2024.
In the 25 weeks to 21 January 2024, like-for-like (LFL) sales were 10.1% higher than they were in the same period a year ago.
Bar Sales
The results show that bar sales increased by 11.8%, food by 7.9%, and slot/fruit machines by 10.4%.
Meanwhile, hotel room sales increased by 3.1%.
“Wetherspoon currently expects an outcome for the financial year in line with market expectations and will provide further updates as the year progresses,” said chairman Tim Martin.
Pub Openings
The company has opened two pubs in the year to date, at London’s Heathrow Airport and at the London Euston railway station.
Five pubs have been sold and eight leasehold pubs have either been surrendered to the landlord or sublet. The disposals and surrenders resulted in a cash inflow of £3.8 million (€4.4 million).
The company currently has a trading estate of 814 pubs.
‘Price Of A Pint’
“Although inflation is, in general, reducing, labour and energy costs are far higher than [they were] pre-pandemic,” said Martin.
“A main issue for the pub trade is that labour costs are around 30% of sales, compared to around 10% for supermarkets.
“The price of a pint in a supermarket is about £1, so a 10% increase in labour costs – which are around ten pence per pint – necessitates a one-pence increase in the selling price, to cover costs.”
Debt Levels
JD Wetherspoon predicts that interest costs for FY24, excluding IFRS 16 notional interest, are expected to be approximately the same as they were in FY23 (£51/€59.6 million).
Debt levels at the end of FY24 are currently expected to be broadly in line with the level reported at the end of FY23 (£642/€750.8 million).
‘Price Disparity’
“For pubs, the average selling price of a pint is around £4.50 [€5.26]. The labour per pint is therefore around £1.35 – 30% of £4.50 – necessitating a 13.5-pence increase in the selling price to cover extra costs,” said Martin.
“The inevitable consequence is that increased labour costs raise the differential in prices between the hospitality industry and supermarkets.”
‘Surely Unfair’
Martin went on to say that the inevitable consequence of the price disparity is that increased labour costs raise the differential in prices between the hospitality industry and supermarkets.
“At the same time, pubs pay far higher VAT and business rates than supermarkets, further exacerbating the price disparity,” said Martin.
“In particular, pubs and restaurants pay 20% VAT in respect of food sales, whereas supermarkets pay almost nothing – a tax differential which is surely unfair.”
