Pub chain JD Wetherspoon has warned of annual losses after increasing staff wages and spending on repairs and marketing amid a slow recovery in the bar trade.
The group said it now expects losses of around £30m for the year to the end of July after investing to attract and retain workers and into the broader business.
Wetherspoon – which has more than 800 pubs across the UK and Ireland – previously announced in May that it would break even for the full year after hailing a return to profitability in March.
The earnings alert sent shares of the group plummeting, down more than 5 percent in Wednesday morning trade.
It comes as the group said the recovery for many pub businesses has been “slower and more struggling” than expected, while the sector also grapples with rising costs and a fall in consumer spending due to rising inflation.
Wetherspoon’s latest trade update showed like-for-like sales for the first 11 weeks of the fourth quarter ended July 31, down 0.4 percent from the same period before the pandemic in 2019 — an improvement from the previous quarter when they were up 4 percent declined.
Sales of draft beers, lagers and ciders – previously the biggest driver of pub trade – were 8 per cent below 2019 levels, it found.
“Many people were predicting a boom in pub sales as lockdowns and restrictions ended due to pent-up demand, but the recovery for many businesses has been slower and more arduous than expected,” the group said.
Wetherspoon said labor costs are far higher than before the pandemic and companies across the industry are having to increase wages to overcome recruitment difficulties.
It added that it was now “fully staffed with minor exceptions”.
Repair costs have also risen, with the group saying they have spent around £99m on them in the current year, compared with £76.9m in 2018-19, due to ‘catching up’ since Covid restrictions were lifted.
Chairman Tim Martin said: “Wetherspoon has sought to address these issues over the long term and has invested heavily in the workforce, in buildings, in marketing and in landlord and supplier contracts which will hopefully provide a solid base for future growth. The company remains cautiously optimistic about future prospects.”
Matt Britzman, equity analyst at Hargreaves Lansdown, said: “It looks like the older demographic is still cautious about making the move and it shows in the numbers.
“Lager and real ales have been replaced by spirits and cocktails as busy city locations with music on the weekends have sold much better than quieter suburban pubs.
“The difficulty for the entire pub sector now is that drinking and eating at home is lasting longer than initially thought.
“This trend is likely to continue as the cost of living crisis appears to be accelerating the tightening of wallets.”
https://www.independent.ie/business/world/wetherspoon-warns-over-losses-due-to-hiked-wages-and-slow-recovery-41836527.html Wetherspoon warns of losses on higher wages and slow recovery