Wetherspoon flags third profit warning as costs bite and growth slows
JD Wetherspoon Faces Profit Pressure Amid Rising Costs and Slowing Growth
By Yamini Kalia
May 6 (Reuters) - JD Wetherspoon issued its third profit warning in five months on Wednesday, as rising costs weighed on the British pub chain and third-quarter sales growth slowed from previous months.
Cost Pressures in the Hospitality Sector
Surging energy prices linked to the Iran war have added to cost pressures across Britain's hospitality sector, already struggling with weak consumer spending as households face higher prices for essentials from food to fuel.
Sales Outlook and CEO Commentary
Asked whether its warning that profits may be "slightly lower than market expectations" reflected higher costs or weaker demand, CEO John Hutson said the cautious outlook was driven by sales, not costs.
"Sales in the quarter were below the first half and where we thought that as the year overall might be about similar ... I think now it's probably better to err on the side of caution given everything that's going on," Hutson said.
Reluctance to Hike Prices
RELUCTANCE TO HIKE PRICES
Wetherspoon is well-placed to benefit in times of economic stress due to its focus on low drink and food prices, but this strategy also makes it difficult to pass on cost increases, which can squeeze margins.
Margin Pressure and Analyst Insights
Margin pressure is unlikely to abate in the near term due to the company's "reluctance" to hike prices, Robinhood UK analyst Dan Lane said.
Management declined to comment on pricing on a call with analysts, saying it prefers to remain competitive.
Sales Performance and Market Reaction
Wetherspoon posted a 3.4% rise in like-for-like sales for the third quarter, below year-to-date growth of 4.3%.
The company's shares were flat at 0932 GMT, suggesting further weakness was already priced in, said Derren Nathan, head of equity research at Hargreaves Lansdown.
Profit Expectations
Analysts expect Wetherspoon to report pre-tax profit of 72.8 million pounds for the year through July, according to LSEG data.
($1 = 0.7361 pounds)
(Reporting by Yamini Kalia in Bengaluru. Editing by Louise Heavens and Mark Potter)
