Wetherspoon issues fourth profit warning this year as rising costs squeeze margins
Wetherspoon has issued its fourth profit warning this year as the popular pub chain battles weaker-than-expected sales and mounting cost pressures across its estate of hundreds of outlets.
The company, led by outspoken chairman Sir Tim Martin, reported like-for-like sales growth of 4 per cent in the 12 weeks to 19 July compared to the same period last year, with year-to-date sales rising 4.2 per cent. However, the figures missed analyst forecasts and failed to match the stronger performances reported by rival chains including Marston's and Fuller's, which benefited significantly from the World Cup football tournament.
While customer footfall remains steady, profit margins are under severe pressure from rising business rates, energy bills and labour costs. Martin acknowledged the challenging environment, stating that profits for the year are likely to fall below market expectations due to marginally lower sales in the final quarter combined with higher costs across food, labour, repairs, energy and business rates.
The warning represents a significant deterioration from the group's cautious tone in May, when Martin suggested costs may result in profits slightly below the then-market expectation of £73m. Analyst forecasts have now been slashed to £45.1m in pre-tax profits, down sharply from last year's £81.4m.
Share price tumbles on latest warning
Shares in Wetherspoon fell 8.42 per cent to 690.50p on Wednesday morning as investors digested the latest update. The pub boss has previously highlighted the substantial financial impact of government policy changes, warning that the company faces £60m in additional annual costs from increases to national insurance contributions and minimum wage rates, alongside an extra £7m in energy expenses.
During the financial year, Wetherspoon opened eight managed pubs while selling nine, leaving it with a total of 793 managed sites. The group expanded its franchised estate more aggressively, opening 15 pubs to bring the total to 23.
The company also repurchased 6.4m shares at an average price of £6.52 during the period and acquired the freehold reversions of four pubs for £12.2m. Year-end net debt is expected to reach £720m, an improvement on the previously forecast range of £740m to £760m and broadly in line with last year's level.
Market reaction and outlook
Garry White, chief investment commentator at Raymond James, said the update would disappoint investors, particularly given elevated expectations ahead of the statement due to favourable summer weather conditions. He noted that the reporting period only captured the opening days of the World Cup, meaning any meaningful uplift from the tournament would likely be reflected in first-quarter trading figures.
The struggling performance stands in contrast to the broader pub sector, where many operators have reported robust trading conditions. Wetherspoon's business model, which has long focused on offering customers good value food and drink at competitive prices, is proving particularly vulnerable to the current cost inflation environment.
The chain's challenges highlight the difficult balancing act facing hospitality businesses as they attempt to maintain customer appeal through affordable pricing while absorbing substantial increases in operating expenses across multiple fronts.
