Pub chain JD Wetherspoon has issued a profit warning, cautioning that it may fall short of market expectations due to "substantial increases in costs." The warning comes as the hospitality sector faces surging energy and shipping prices linked to the Iran conflict and the blockage of the Strait of Hormuz.
Cost Pressures Mount
Chairman Sir Tim Martin stated: "As many hospitality operators, including Wetherspoon, have reported, there have been substantial increases in costs, which may result in profits slightly below market expectations." The company highlighted that the widely anticipated consequences from the Strait of Hormuz blockage have started to impact businesses.
Sales Growth Outpacing Market
Despite the challenges, Sir Tim noted that Wetherspoon's sales growth has outpaced audit firm RSM's hospitality business tracker for the 43rd consecutive month. Like-for-like sales rose by 3.4% in the three months to April, and year-to-date sales increased by 4.3%. However, growth during this period was marginally slower than in previous quarters.
Share Buybacks and Freehold Acquisitions
Wetherspoon has acquired 3.8 million shares in the year to date at £6.80 per share and purchased the freehold rights to four of its pubs for a total of £12.2 million.
Previous Profit Decline
In March, shares fell after pre-tax profit for the first half of the financial year dropped by 32% to £22 million, missing analysts' revised expectations. Sir Tim attributed the decline to rises in national insurance and the minimum wage, which are set to cost Wetherspoon £60 million annually, along with a £7 million green levy.
Industry-Wide Challenges
Sir Tim warned that these cost increases would add to underlying inflation, though Wetherspoon aims to keep price increases to a minimum. He noted "considerable pressure on consumer finances" combined with higher taxes, wages, and energy costs for the hospitality industry.
Other pub operators, such as Shepherd Neame, have also cautioned about rising costs. According to trade body UK Hospitality, two-thirds of pubs, bars, and restaurants may need to reduce staff numbers, while one in seven could close entirely. Earlier this week, figures revealed that two pubs closed every day during the first three months of the year, resulting in 161 business closures and 2,400 job losses.
