J D Wetherspoon – losses expected higher

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Fourth quarter like-for-like sales were 0.4% lower than 2019 levels. That comes as the recovery for draught ales, lagers and ciders was slower than anticipated, where sales were 8% lower than 2019. Spirits, cocktails, food and hotel rooms were higher than 2019 levels, as sites in city centres performed better than suburban locations.

The group spent £128m buying out 48 pubs that it previously leased, bringing the proportion of freehold pubs to 68.3% of the estate.

Losses for the full year are expected in the region of £30m, higher than previously thought. That comes as staff costs are ‘far higher’ and the group invested more in repairs and marketing. In the next financial year, costs are expected to increase less than the current rate of inflation.

The shares 6.3% following the announcement.

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Third Quarter Trading Update (04 May 2022)

In the thirteen weeks to 24 April, like-for-like (LFL) sales fell 4.0% compared to pre-pandemic levels. Sales trends have slowly improved throughout the quarter and were ”slightly” positive in the last two weeks of the period. LFL room sales in the group’s hotels were up 5.0%.

JD Wetherspoon sold six pubs, a further five were given up at the end of their leases, and three leasehold pubs were closed. These actions resulted in a cash inflow of £6.3m. Net debt was £906m at the end of the quarter and is expected to be £870m at the end of the year.

Chairman, Tim Martin warned of ”considerable pressure on costs, especially in respect of labour, food and energy”. The group expects to break-even for the full year, as sales are expected to keep improving.

Half Year Results (18 March 2022)

JD Wetherspoon reported half year revenue of £807.4m, down from £933.0m compared to pre-pandemic levels. That reflects an 11.8% decline in like-for-like sales. That includes declines in bar, food and slot machine sales, which more than offset a mid-single digit rise in Hotel room sales.

In the three-week period, to 13 March 2022, sales reflected an ”improving trend” and were 2.6% lower than the equivalent period in 2019.

Underlying operating profit came in at £0.5m (2020: £76.6m) as margins were only just in positive territory. The group’s seeing cost pressure from food, drink and energy supplies and expects rising costs ”slightly less than the level of inflation”.

Like-for like (LFL) bar sales fell 12.7% compared to pre-pandemic levels, coming in at £480.5m. Food and slot/fruit machine sales also declined, 11.1% and 9.8% respectively. Hotel room sales increased by 6.6% to £10.4m.

The group opened four pubs during the period and sold or closed six, leaving the estate at 859 pubs at the half year end. 67.8% of the pubs are owned by Spoons, the remainder being leasehold.

There was a free cash outflow of £34.5m (2020: £49.0m inflow). As a result, net debt increased to £920.4m (July 2021: £845.5m).

CEO, Tim Martin, said lockdowns were “kryptonite for hospitality” but remains ”confident of a strong future if restrictions are avoided.”

JD Wetherspoon key facts

Forward price/earnings ratio: 13.6

Ten year average price/earnings ratio: 19.5

Prospective dividend yield (next 12 months): 1.4%

All ratios are sourced from Refinitiv. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.

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