8th May 2024 14:12
(Alliance News) - JD Wetherspoon PLC's focus on value continues to pay off, analysts on Wednesday said, after the pub chain reported an increase in first quarter sales.
The Watford, Hertfordshire-based pub operator said like-for-like sales rose 5.2% in the 13 weeks to April 28 from a year earlier, while year-to-date like-for-like sales rose by 8.3%.
Total sales increased by 3.3% in the quarter and by 6.5% in the year to date, it added.
Looking ahead, JD Wetherspoon said it expects profits in the current financial year to be "towards the top of market expectations".
Chair Tim Martin said: "Sales in the period continued the steady recovery from the pandemic. Traditional ales, which were very slow in the aftermath of the lockdowns, are increasing momentum, with Abbot Ale, Ruddles Bitter and Doom Bar showing good growth, as indeed are ales from the many small and micro brewers with which we trade."
Martin also highlighted increased sales of Guinness and Lavazza coffee.
"Free [coffee] refills are thought to be responsible for spontaneous exhibitions of breakdancing among retired customers," he quipped.
Russ Mould at AJ Bell said: "Free refills of coffee, younger people discovering the joys of Guinness and a resurgence in real ale are among the reasons why Wetherspoon says profits could come in towards the top end of market expectations."
"The pub industry has experienced more than its fair share of ups and downs over the years, and the number of pubs has been decreasing steadily for decades. But one name has managed to keep its head above water and show the kind of resilience and stamina that a marathon runner aspires to, and that’s Wetherspoon."
"Its focus on value for the customer has paid off in spades and that's a key reason why it remains one of the last men standing in the sector."
Liberum described it as a "solid" update.
"However, we retain our concerns over long-term margin recovery potential as the scope for price rises and disposals diminishes, and the business becomes more capital intensive," the broker said.
Analysts at Jefferies were more positive on the valuation.
"We argue that Wetherspoon's low relative price positioning and well located/well-invested premises will gain market share and benefit from trading down," the broker said.
Shore Capital said it was an encouraging trading update, noting that Chair Martin sounded somewhat "chipper" in his outlook.
Liberum and Shore Capital have a 'hold' rating on JD Wetherspoon, while Jefferies has a 'buy' rating.
JD Wetherspoon shares were trading 3.0% higher at 749.50 pence on Wednesday afternoon in London. The stock has risen 0.7% over the last 12 months.
By Jeremy Cutler, Alliance News reporter
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