Wetherspoon in fresh profit alert on rising staff costs

Wetherspoon chairman Tim Martin. Picture: Graham JepsonWetherspoon chairman Tim Martin. Picture: Graham Jepson
Wetherspoon chairman Tim Martin. Picture: Graham Jepson
Pubs giant JD Wetherspoon has warned over profits for the second time in two months after being hit by rising staff costs.

Chairman Tim Martin said full-year profits were now set to come in at the lower end of City expectations despite a rise in trade over the festive season.

Wetherspoon – which says its wage bill makes up around 25 per cent, or 75p, of every pint sold in its pubs – said staff costs were likely to knock about 1.1 per cent off its underlying operating margin for the six months to 24 January.

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It said this follows moves to hike the starting rates for hourly-paid staff in October 2014 and August 2015, with wages rising by about 13 per cent overall.

The latest profit alert comes after Wetherspoon warned in November that staff costs could see annual profits drop slightly on the previous year.

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But Wetherspoon said it saw improved trading in its Christmas quarter, with like-for-like sales up 3.3 per cent in the 12 weeks to 17 January. So far in the first 25 weeks of its half-year, sales in established pubs are up 2.8 per cent.

Martin said: “Like-for-like sales have improved in the second quarter so far. However, as indicated in our November trading update, increased labour costs will be an important factor in the outcome for this financial year.

“Our current view is profits for this year are likely to be towards the lower end of analysts’ expectations.”

Martin has been an outspoken critic of the living wage, which will be phased in from next April and means staff aged over 25 must be paid at least £7.20 an hour, rising to £9 by 2020.

He claimed in the summer it would add “considerable uncertainty” to the under-pressure sector, and put pubs at an even greater disadvantage compared with supermarkets, as the industry already shoulders significant staff costs.

Greg Johnson, analyst at Shore Capital, said: “We had expected first-half margins to be lower than the full year as a consequence of staffing costs, however the magnitude of the decline is worse than our expectations.”

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Martin warned that prices overall in the pub industry would have to rise to offset higher wage bills, with the imminent introduction of the national living wage adding to the hit, but he said Wetherspoon has yet to decide on its prices.

“Inevitably in the pub industry, prices will go up,” he said. “But we’re the most reluctant company to put them up.”