City analysts have cut their 2015 forecasts following a disappointing update from pub chain JD Wetherspoon (JDW). Tough comparative figures meant like-for-like sales slowed from 6.3 per cent in the first quarter, to 2.8 per cent in the second. For the year to date, like-for-like sales are up 4.6 per cent and total sales are up 9.1 per cent.
But Wetherspoon’s margins are the real cause for concern. First-half margins slipped to 7.3 per cent, down 90 basis points from 8.2 per cent this time last year. And in the second quarter alone, margins fell 120 basis points to 6.9 per cent. This reflected a minimal 1.1 per cent increase in average beer prices last year, versus higher increases in labour, utility and supplier costs. Broker Numis believes Wetherspoon’s beer price discount to the sector has grown from 14.5 per cent to 17.6 percent over the last three years, which the broker reckons is “unnecessarily large”.
Reflecting a “lack of margin support”, Numis cut 2015 pre-tax profit forecasts by 4 per cent. The brokerage expects pre-tax profits of £81.2m this year, and aren’t forecasting any margin recovery in 2016 or 2017.
