10th May 2023 12:42
(Alliance News) - JD Wetherspoon PLC pleased investors on Wednesday, after it hailed its "highest-ever" sales in the Easter period in company history.
"If you were picking a survivor from the apocalyptic conditions faced by pubs during the pandemic then Wetherspoons might well be it. It has scale, some balance sheet heft and prominent sites as well as a cheap and cheerful offering with mass-market appeal," said AJ Bell's investment director Russ Mould.
JD Wetherspoon shares rose 5.1% to 782.34 pence each on Wednesday midday in London, the best FTSE 250 performer. In the year-to-date the stock has surged 73%, but in the last 12-months shares are up just 12%.
Mould noted the recent rally of company shares, saying it somewhat suggested that "the business might be kicking into gear."
The Watford, Hertfordshire-based pub and hotel chain said like-for-like-sales in the 13-weeks to April 30 rose 12% from a year ago and were 9.1% higher than in the same period in the last full financial year before the pandemic.
Wetherspoon noted that the first weekend of May "was exceptionally strong" over the bank holiday, though the second weekend, including the May 8 Coronation bank holiday, was slightly weaker.
"With an extra bank holiday in the last quarter, it's likely to finish the year with a flourish," said Derren Nathan, head of equity research at Hargreaves Lansdown.
"There will be a fizz of disappointment after the chain indicated that people preferred to stay at home and celebrate the Coronation rather than watch it in the pub."
Nathan noted that Wetherspoon's "value proposition is holding it in good stead as the cost-of-living crisis continues."
AJ Bell's Mould agreed. "Pressures on household budgets could be a positive tailwind for Wetherspoons as its cheap and cheerful prices appeal to more people," he said.
However, inflation remains a problem for the pub chain.
Chair Tim Martin said: "Sales in the last quarter have continued their positive momentum, although inflation, especially in labour, energy and food costs, remains a more intractable issue."
With inflationary pressures becoming "intractable", Hargreaves Lansdown's Nathan warned that cost pressures may weigh on investors' minds.
"Wetherspoons has been battling with a softening consumer and rising costs amid the backdrop of labour, energy and food inflation. These have been putting further pressure on the business after the pain of the pandemic when lockdowns meant pub chains were forced to close. To offset these headwinds, Wetherspoons has been focusing on streamlining its trading estate, with 21 pub disposals and a further 30 pubs on the market," said Victoria Scholar, head of Investment at interactive investor.
Scholar added that "last year was extremely tough for Wetherspoons", so, overall, Wednesday's news will be welcomed by investors.
Looking ahead, the company anticipates profit in the current financial year, ending July 31, to be towards the top of market expectations.
On the back of this, Peel Hunt upped its own full-year guidance for Wetherspoon. It now expects 2023 pretax profit of GBP42 million from GBP31 million previously. Peel Hunt explained that the upgrade is a result of higher price-driven sales.
In financial 2022, pretax loss before exceptional items narrowed substantially to GBP30.4 million from a GBP167.2 million loss on the year before.
Peel Hunt rates Wetherspoon at 'hold', with a target price of 700.0p.
By Sophie Rose, Alliance News reporter
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