Strong Food Sales Drive Growth At Wetherspoons

JD Wetherspoons has reported robust half year results, whilst its outspoken Chairman has criticised the government for failing to tackle tax inequalities between pubs and supermarkets.

In the 26 weeks ended 22 January 2017, the budget pub chain saw its like-for-like sales increase by 3.3%, with total sales rising by 1.4% to £801.4m. Like-for-like bar sales increased by 2.4%, whilst food growth accelerated to 5.1% compared to 2.9% the previous year.

Operating profit before exceptional items increased by 31.7% to £65.1m with operating margin up from 6.3% to 8.1%. The group said the improved performance in the period was due mainly to lower utility and interest costs, relatively benign costs in other areas and the sale of some lower-margin pubs. In addition, JD Wetherspoons said it saw little impact, in the period under review, from the ‘living wage’ legislation, having increased pay rates before the government announced its plans in this area.

However, in the six weeks to 5 March 2017, like-for-like sales growth slowed to 2.7%, with the company warning of weaker trading ahead and significantly higher costs in the second half of its financial year. In spite of these pressures, JD Wetherspoons predicts a “slightly improved trading outcome” for the current financial year, compared to its previous update.

Meanwhile, Chairman Tim Martin used the update to criticise the Chancellor’s recent budget, saying it failed to tackle tax inequalities between pubs and supermarkets.

He said: “As previously indicated, we understand the need for the government to raise taxes. However, there should be a sensible rebalancing of the taxes paid by pubs and supermarkets, if the pub industry is to survive in the long term.

“Last Wednesday’s budget was presented by the Chancellor as providing tax relief of approximately £1,000 per pub, for pubs with a rateable value of less than £100,000.

“In fact, that sum is dwarfed by tax and regulatory increases,” highlighting the increased costs facing his business this year including business rates, electricity taxes, excise duty, and the Apprenticeship Levy.

He added: “In addition, the proposed sugar tax will cost approximately £4m from April 2018 and there will be further electricity tax increases of around £5m by 2020.

“Companies like Wetherspoon, on examination of the fine print of the budget, are not, in fact, eligible for the £1,000 per annum decrease in business rates, in any event.

“The company has previously emphasised the far-higher taxes per meal or per pint that pubs pay compared to supermarkets. For example, supermarkets pay less than 2p per pint for business rates, whereas pubs pay around 18p per pint.

“The increase in business rates per pint for pubs from next month will be around 2p, further exacerbating the tax gap.

“Pubs also pay VAT of 20% in respect of food sales, but supermarkets pay almost nothing, enabling supermarkets to subsidise the price of alcoholic drinks.

“Wednesday’s budget will weigh far more heavily on pubs than supermarkets, especially since wage costs per pint or meal are approximately 10 times higher in pubs.

“The Chancellor was less-than-frank in his budget speech, since he did not spell out the duty increases, giving the impression to many that there would be no increase.

“In effect, this was a budget for dinner parties, no doubt the preference of the Chancellor and his predecessor – dinner parties will suffer far less from the taxes outlined above, whereas many people prefer to go to pubs, given the choice.”