Wetherspoon's fourth profit warning hits shares as cost pressures mount
Profit Warning and Financial Impact
By Yamini Kalia
July 22 (Reuters) - British pub chain J D Wetherspoon issued its fourth profit warning this fiscal year on Wednesday, saying annual earnings would likely miss expectations due to weaker sales and mounting costs, sending its shares down nearly 12%.
Mounting Cost Pressures in the Hospitality Industry
Rising energy costs linked to the Iran war have squeezed margins across Britain's hospitality industry, which was already grappling with high taxes, labour costs and weak consumer spending, even as a brief wartime truce offered interim relief.
The group, recognised for its relatively low prices, has sought to limit price increases for customers despite the mounting cost pressures, weighing on profit margins.
Company Strategies to Counteract Challenges
"Wetherspoon is trying hard to boost volumes," Chair Tim Martin told Reuters via text message, adding that the group has been introducing new products, including the low-cost, high-strength BuzzBallz drinks, while running promotions on ales.
Shares were down 9.5% at 682 pence by 0719 GMT. The stock has fallen about 6% so far this year.
Sales Trends Amid External Pressures
Impact of Weather and Sporting Events
SALES PICK UP DESPITE PRESSURES
Europe's recent heatwave has also emerged as a challenge for pubs as studies showed drinkers are less inclined to reach for a chilled beer when temperatures exceed 32 degrees Celsius, though Martin said it had boosted bar sales while weighing on food.
The group also recorded an uplift in sales from the soccer World Cup, Martin added, echoing peers such as Marston's and Fuller, Smith & Turner, which credited higher footfall from soccer fans driving sales on match days.
Recent Sales Performance
Wetherspoon reported like-for-like sales growth of 4.0% in the 12 weeks to July 19 compared with the prior year. However, year-to-date sales were up 4.2%, marginally below the 4.3% reported in the previous quarter.
Analyst Perspectives and Market Outlook
Forecasts and Industry Comparisons
Panmure Liberum analyst Anna Barnfather said that while some pressures were industry-wide, Wetherspoon was more exposed, adding that the brokerage could cut its full-year pretax profit forecast for Wetherspoon to the low-to-mid £60 million ($80.23 million) range.
Analysts on average are expecting £69.5 million, according to LSEG data.
Wetherspoon's "value model leaves it continually bumping up against a wall of higher costs, which puts perennial pressure on margins and profits," said Richard Hunter, head of markets at interactive investor.
Additional Information
($1 = 0.7478 pounds)
(Reporting by Yamini Kalia in Bengaluru; Editing by Subhranshu Sahu, Rashmi Aich, Louise Heavens and Sharon Singleton)
