8th Nov 2023 11:39
(Alliance News) - JD Wetherspoon PLC reported steady sales progress in the early days of its financial year, though muted profit expectations are hurting the view of the pub firm in the eyes of some analysts.
Wetherspoon shares traded 1.4% higher at 685.38 pence each in London on late Wednesday morning.
The Watford, Hertfordshire-based pub company reported that in the 14 weeks to November 5, like-for-like sales were 9.5% higher on-year.
Chair Tim Martin said that while inflation pressure has eased, energy costs remain "at far higher levels than pre-pandemic".
Analysts at Stifel commented: "The cost environment is easing as expected and JDW says it expects a FY24 outcome in line with market expectations. JDW's pub estate has shrunk by nearly 10% since [financial 2019], which potentially flatters like-for-like sales metrics (excludes disposal of presumably weaker pubs). But the business has experienced a decade of margin erosion and pretax profit expectations for this year remain [around] 20% below the pre-pandemic base of GBP85 million (adjusted for IFRS 16) – and the threshold for considering a return to dividend payments. We have a hold rating on the shares."
Shore Capital Markets, which sees Wetherspoon as the "cockroack of the high street" also rates the stock at 'hold'. It sees better value in peers Marston's PLC and Mitchells & Butlers PLC.
It did hail the firm's first-quarter update as "positive", however.
Jefferies rates Wetherspoon at 'buy', believing its valuation to be "undemanding".
"Recent data shows JDW continues to outperform the industry, with September LFL sales up 9.4% versus the industry at +5.9%," analysts at the investment bank said.
Wetherspoon Chair Martin said the firm is upping its investment in existing pubs in the current financial year to around GBP70 million, from GBP46.9 million a year prior.
He added: "Areas of investment include new staff rooms, changing rooms, glass racks above bars and air conditioning. The company currently expects an outcome for the financial year in line with market expectations, and will provide further updates as the year progresses."
By Eric Cunha, Alliance News news editor
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