JD Wetherspoon warned it was likely to fall to a “higher than expected” full-year loss of about £30mn, driven largely by increasing labour costs.
The 860-site pub chain said its sales were back to 2019 levels but “labour costs are far higher”.
Staffing shortages have stymied the recovery for the wider hospitality sector. Around one in seven hospitality jobs are currently unfilled, suppressing revenues across the industry by about 16 per cent, according to a separate report published on Wednesday by the industry body UKHospitality.
Wetherspoons pointed to how it had “invested heavily in labour, repairs and marketing” following the end of Covid-19 restrictions in February.
The company had forecast in a trading statement in May that it would break even this year. But on Wednesday it said it now expected to fall to a loss of £30mn for the financial year.
Shares in the London-listed pub chain fell 5.6 per cent to 595p on Wednesday morning.
Like-for-like sales in the 11 weeks to July 10 were down by just 0.4 per cent compared with the same period in 2019. This marked an improvement from the previous quarter when like-for-like sales were down 4 per cent.
Spirit sales were up 4.4 per cent on 2019 levels, while food sales were up 2.1 per cent. Sales for hotel rooms, cocktails and slot machines also performed well.
However sales of draught ales, lagers and ciders — the mainstay of the pub group’s revenues — were down 8 per cent compared with the same period in 2019.
“Many people predicted a boom in pub sales when lockdowns and restrictions ended, due to pent-up demand, but recovery for many companies has been slower and more laborious than was anticipated,” the pub group noted.
Despite facing cost pressures from labour as well as food, drink and energy suppliers, Wetherspoons said its overall costs would increase by below the current rate of inflation for the next financial year.
Chair Tim Martin, who has been vocal in his criticism of the UK government’s lockdown policies, said inflation “has proved to be far higher and more intractable than anyone anticipated”, blaming the government printing money to “finance lockdowns”.
“Wetherspoon has tried to take a long-term approach to these issues, investing heavily in the workforce, in buildings, in marketing and in contracts with landlords and suppliers, which will hopefully create a solid base for future growth,” said Martin. “The company remains cautiously optimistic about future prospects.”
But Julie Palmer, a partner at Begbies Traynor, warned that even though the pub chain’s affordable menu “would seem like an obvious winner as consumers tighten their belts” its margins were very tight.
“Even though the business has long-term contracts for food, drink and energy which mean it will avoid the impact of inflation driving their prices higher for some time, there’s no getting around soaring staffing costs and that means pressure on the business is intensifying,” said Palmer.
Read the full article here