Wetherspoon’s ‘reasonable’ year won’t stop it attacking red tape
PUBS business JD Wetherspoon has stepped up its attack on UK government red tape after flagging a “reasonable outcome” for the year thanks to a string of sports events and celebrations.
The group said the Queen’s diamond jubilee and Euro 2012 championship had a positive impact on footfall as like-for-like sales rose 6.1 per cent in the 11 weeks to 8 July. The growth rate is more than three times that reported in the previous quarter.
Chairman and founder Tim Martin said that the Olympics may also provide a temporary boost for the sector, although its impact was hard to predict.
He said the group’s main challenge remained the continuing cost pressure from UK government legislation, such as increases in excise duty, business rates and carbon tax.
It has already warned it will slow the pace of pub openings in the next year to between 20 and 30 sites as it grapples with a £50 million increase in its annual tax bill, including the rises in excise duty.
Wetherspoon’s cut-price drinks and meal offers have made it one of the stronger-performing pub chains through the economic downturn.
While the recent special events have been a major driver of the sales boost, Martin said he was hopeful that people may be starting to return to pubs following the smoking ban.
“Our sales have been growing at about 2 per cent over recent years, which is a little less than inflation, so we are glad to see a pick-up,” he said. “My own theory is that the industry may be starting to see a bit of a rebound after the smoking ban.
“Possibly we are now seeing a bit of a revival as smokers get used to going outside and people who don’t like smoking start to come back.”
Martin added that similar trends had been seen in parts of the United States where bars had taken a while to recover from smoking bans. James Hollins, an analyst at Investec Securities, said Wetherspoon, whose 850 pubs are mainly in town centres, was the “key pick” in the licensed retail pubs arena. He said: “Wetherspoon has had a good quarter and, although it faces continued consumer pressure, high industry taxes and cost input inflation, we have raised our forecasts.”
The brokerage has a “buy” recommendation on the shares.
Numis, meanwhile, issued a “hold” note on Wetherspoon, saying: “We are upgrading our 2012 forecasts by 4 per cent, but are leaving 2013 unchanged due to ongoing margin pressure. Our stance is hold, with share buy backs limiting the downside.”
The upgraded profit forecast for this year equates to £69.4m.
Wetherspoon’s Scottish venues include the Standing Order and Alexander Graham Bell in Edinburgh and the Sir John Moore and Counting House pubs in Glasgow.
In its pre-close trading update, the firm said: “The main challenges for the company have been the continuing cost pressures resulting from government legislation, including increases in excise duty, business rates and carbon tax. We expect to achieve a reasonable outcome for the current financial year.”
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