Wetherspoon Shares Slide After Fourth Profit Warning This Year

Pub group blames rising costs of food, labour, energy and repairs as full-year profit is set to miss expectations.

Shares in J D Wetherspoon fell sharply on Wednesday after the pub group warned that full-year profit will come in below market expectations, its fourth profit warning so far this year.

Shares in J D Wetherspoon are trading down around 8.5% at 690p on Wednesday morning, having fallen as much as 9.8% to 680p in early dealing. The stock closed at 754p on Tuesday. It remains within its 52-week range of 530.50p to 814.50p, having touched that high in July last year before falling to the low in March.

What Wetherspoon said

Chairman Tim Martin said profits for the year are likely to be below market expectations, “with marginally lower sales than anticipated in the final quarter, combined with higher costs in the areas of food, labour, repairs, energy and business rates.” It is the fourth profit warning J D Wetherspoon has issued in seven months, a hardening of tone from May’s update, when Martin said rising costs “may result in profits slightly below market expectations.”

Wednesday’s pre-close trading update showed like-for-like sales up 4.0% in the 12 weeks to 19 July, taking year-to-date like-for-like growth to 4.2%, down slightly from the 4.3% reported in May. The group now operates 793 managed pubs, having opened eight and sold nine so far this financial year, while its franchised estate has grown to 23 pubs. It repurchased 6.4 million shares this year at an average price of £6.52, and expects year-end net debt of about £720 million, broadly in line with the previous year.

J D Wetherspoon, known for its low prices, has struggled to pass rising costs for staff, energy and repairs on to customers without raising prices further. According to Reuters, hospitality operators across the UK have also been hit by higher energy costs linked to the Iran conflict and by Europe’s early summer heatwave, which has curbed pub visits during hot weather. Analysts expect the group to report pre-tax profit of £69.52 million for the year, according to LSEG data cited by Reuters.

J D Wetherspoon is due to publish preliminary full-year results on 2 October. Markets will be watching closely to see whether cost pressures ease before then or whether a fifth warning follows. For now, the run of downgrades has left open the question of how much further margins can be squeezed before the group’s value-pricing model comes under real strain.