Wetherspoon chief feeling 'clucking good' about pub giant
Derren Nathan, head of equity research, Hargreaves Lansdown, said: 'JD Wetherspoon's flamboyant chairman Tim Martin was keen to point out a 'clucking good' performance for chicken in recent weeks, where volumes are now up around 50% compared to pre-pandemic levels. But it's the sunny weather that's helped sales keep tracking in the right direction. Given that June was the warmest on record, some investors may have been hoping for a bit more organic growth than the 5.1% seen in the final quarter of the year.
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'But, despite the impact of increased labour costs, analyst forecasts expect operating profit to land a little ahead of last year at close to £140 million, with the bottom line also benefitting from reduced interest payments. The group has been trimming the tail of its estate by dropping underperforming units and is now leveraging its efficient operating model and brand strength to grab further market share. Its ambitions for new openings next year have risen from 10 to 15, with a similar number planned for the capital-light option of franchised units. Flagging consumer confidence remains a near-term threat but, overall, the JD Wetherspoon looks in good shape with the shares offering reasonable value, compared to the peer group.'
Mr Martin, chairman of JD Wetherspoon, said: 'The company has benefitted from favourable weather in the fourth quarter, so that profits are anticipated to be in line with market expectations, notwithstanding the high tax and labour increases for the hospitality industry, which have been widely reported. In the next financial year, as well as investing in areas such as staff rooms, glass racks for 'branded' glasses, and gardens, the company plans to open approximately 15 new managed pubs and about the same number of franchised pubs.
'Sales volumes, which were very slow post-pandemic, have recently overtaken pre-pandemic levels. Wine, for example, has shown strong growth, with Villa Maria from New Zealand and Prosecco from Italy both shooting the lights out. Spirits have improved in recent months and whisky volumes are significantly above pre-pandemic levels.
'Draught volumes are performing strongly with Guinness being the standout performer. On the food front, breakfasts, terribly slow post-pandemic, have recovered their lustre and are now well ahead. Chicken, also, has put in a clucking good performance and volumes in recent weeks are up by about 50% compared to pre-pandemic levels.'
Wetherspoon will report its preliminary results for the 52 trading weeks to July 27 on October 3.
Shares closed up 2% or 15.5p at 795.5p.
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