Wetherspoon sticks to expansion plans

JD Wetherspoon has so far opened 18 new sites in this financial year. Picture: Getty

Like-for-like sales for the 12 weeks to 19 January were up 6.7 per cent, which analysts hailed as an impressive performance against tough comparatives following the previous year’s festive success.

Wetherspoon, which was founded as a single pub in 1979 by chairman Tim Martin and now has almost 900 outlets, also kept up its attack on the UK government over VAT.

It said: “As the company has pointed out on previous occasions, the pub industry continues to pay far higher taxes than supermarkets do, mainly as a result of an unequal and unfair VAT and business rates burden.

“This tax inequality has greatly widened the pricing differential for beer and other products between the on- and off-trade. Approximately 10,000 pubs have shut down in the last decade, about 15 per cent of the total, and these closures are certain to continue unless politicians and governments create a fair tax system.”

The group argues that, since pubs generate much higher taxes and many more jobs per pint or per meal than supermarkets do, tax equality would be beneficial for the wider economy, as well as the pub industry.

Despite the recent sales rise, Wetherspoon highlighted the impact on its margins of “the continued pressure from taxes” as well as increased investment as it prepares to open more pubs.

The firm, whose 40-odd Scottish outlets include Edinburgh’s Playfair and the Corn Exchange in Perth, said its corporation tax bill is also expected to be slightly higher for the full year.

The trading update comes a day after the chain controversially opened its latest pub – at a motorway services station.

Alcohol campaigners and doctors have raised concerns about the Hope and Champion, the first pub sited on a motorway service area, on the M40 in Buckinghamshire, but Wetherspoon says it expects customers will act responsibly, and the majority will be drinking non-alcoholic beverages.

The chain has opened 18 sites so far this financial year and has 11 under development. It expects to open 40 to 50 in its current financial year, which runs until the end of July.

Shore Capital analyst Greg Johnson said Wetherspoon’s latest numbers were significantly ahead of expectations though the margin performance “continues to frustrate”.

Investec’s James Hollins said the programme of pub openings combined with the success in driving sales added to confidence about the prospects of “strong returns in an improving UK consumer environment”.

Hollins said taxation and minimum wage issues remain a risk to the firm’s earnings, but he rates the shares a “buy”.

But Douglas Jack, at Numis, cut his profit forecast by 4 per cent to reflect the fall in margins as well as slightly higher interest costs. He now expects the group to make pre-tax profits of £77.4 million this year, and is holding his forecasts for 2015 and 2016.