18th Mar 2022 14:37
(Alliance News) - JD Wetherspoon PLC reported a half-year loss on Friday, with the pub chain struggling from the double whammy of surging inflation and continued Covid restrictions - with sales still unable to catch up to pre-pandemic times.
Revenue for the half-year that ended January 23 came in at GBP807.4 million, nearly double the GBP431.1 million posted a year before. However, sales remain below the GBP933.0 million achieved two years ago, a pre-pandemic period.
Wetherspoon's pretax loss narrowed to GBP21.3 million from GBP46.2 million a year ago, but the bottom line remains far off the profit of GBP57.9 million registered two years ago.
"The boardroom at JD Wetherspoon might need a few reasonably priced drinks to steady some nerves right now as it looks at the current economic backdrop" AJ Bell investment director Russ Mould said.
"On the one hand a cost-of-living crisis could suit Wetherspoon's budget proposition and its survival. The fact other independent competitors did not make it through the pandemic should result in a stronger market position for Wetherspoon. On the other hand if pressures on household budgets become so acute that people stop going out full stop or at least not as much then any hopes for a meaningful rebound could be squashed."
'Spoons' performance remained hindered by the pandemic in the recent half, with sales hit by Covid restrictions and virus-related staff absences.
Interim operating costs almost doubled to GBP806.9 million from GBP451.8 million.
Susannah Streeter, senior investment analyst at Hargreaves Lansdown, said Wetherspoon is among the companies facing an "uphill battle" with mounting costs.
"It's now facing price pressures from food drink and energy suppliers, as the long struggle continues to regain its pre-pandemic form, forcing it to hike the price of pints at its pubs," she continued. "Despite high hopes that punters would once again be elbowing each other to get to the bar, the glass is very much half empty for the company, with pre-Covid levels of profits remaining elusive."
Like-for-like sales were down 12% on two years ago. But Wetherspoon highlighted improving trends, with sales in the three weeks to March 13 down just 2.6% on pre-pandemic levels. It also pointed to cash sales per week during this three-week period have been about 10% above the depressed levels of December 2021 - in normal times its busiest month of the year - indicating an improving trend.
"Following a traumatic two years for many businesses and people, the ending of Covid restrictions has brought a return to more normal trading patterns in recent weeks," the company said.
AJ Bell's Mould added: "The company's business model has been more focused on volume than margins for years. This wasn't such an issue when inflation was low. Now prices are surging, those skinny margins mean it doesn't take much to push the company from a profit into a loss and the debt pile is starting to build too. However, if Wetherspoon responds by putting prices up too much its unique value-based selling point could be undermined.
"Wetherspoon will have to hope that a modest improvement in trading in recent weeks is sustained and that it can weather the storm and, eventually, enjoy a fulsome recovery."
Noting the industry-wide inflationary backdrop, Wetherspoon said there is pressure on input costs from food, drink and energy suppliers, though this mitigated somewhat by a number of long-term contracts. Overall, the company expects the increase in input prices to be "slightly less than the level of inflation".
Looking ahead, Chair Tim Martin said: "The company is confident of a strong future if restrictions are avoided. The readiness of the leaders of all the UK's main political parties to resort to lockdowns, and extreme restrictions, which were not contemplated in the UK's 2019 plans for pandemics, is the main threat to the future of the hospitality industry, but also to the economy."
No interim dividend was recommended, in line with a year ago.
HL's Streeter said: "The company has once again put a big chunk of its troubles firmly at the door of the government, calling restrictions imposed on the sector lockdown-by-stealth. It's described the rules imposed as like kryptonite for the sector and Spoons is now clearly desperate for a superhero level of support from customers, to recover from double blow of the pandemic and soaring commodity prices."
The FTSE 250 stock was up 0.4% at 829.93 pence on Friday afternoon, though it remains down 37% over the past 12 months.
By Paul McGowan; [email protected]
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