JD Wetherspoon reports near-eightfold rise in profits

JD Wetherspoon has revealed a near-eightfold uplift in pre-tax profits as price-conscious consumers flocked to drink and dine in at its network of low-cost pubs.

The chain reported on Friday that pre-tax profits in the six months to the end of January had risen to £36m from £4.6m a year earlier and said it expected a “reasonable outcome” for the current financial year.

However, it added that sales growth had slowed at the start of the second half and margins were still below pre-pandemic levels, and its shares fell 7% in early trading.

Tim Martin, the chair of JD Wetherspoon, said like-for-like sales rose by almost 10% in the 26 weeks ended 28 January against the comparable period of 2023, but in the seven weeks to 17 March that pace of growth had fallen to 5.8%.

The chain, which has benefited as cash-strapped consumers have sought better-value food and drinks amid the cost of living crisis, also said it was considering opening more pubs.

It said it had the potential for having about 1,000 pubs in the UK and would also look at expanding some of its existing pubs by adding gardens or increasing the size of the customer areas. It now has 814 pubs, down from 955 outlets in December 2015.

About 71% of its pubs are now freehold, up from 41% in 2010, and since then it has invested £448m in acquiring the freehold “reversions” of pubs where it was previously the tenant.

Derren Nathan, the head of equity research at Hargreaves Lansdown, said the results showed an “impressive recovery” but said “like-for-like growth has taken a step down”.

He added: “At under 7%, margins are still pretty thin and there was little in the statement to help see where an improvement might come from … A lot of capacity has come out of the market and the hint that there might be potential of about 1,000 pubs, compared with a current total of 814, could see the estate start to grow again. That may see the return of dividends kicked further down the road.”

In an unconventional statement accompanying the results, Martin, who in 2021 criticised government restrictions designed to reduce the spread of Covid during the pandemic, cautioned the UK government to not repeat lockdown policies in future – despite there being no indication any are imminent given the decline in the virus’s severity and widespread uptake of vaccines.

“The company continues to be concerned about the possibility of further lockdowns and about the efficacy of the government inquiry into the pandemic which will not be concluded for several years,” Martin said.

The hospitality sector has been struggling to recruit and retain staff since the pandemic. JD Wetherspoon said on Friday it had awarded £21.2m of bonuses and free shares to staff in the first-half period. The average length of service of its pub managers was now 14.6 years compared with 10 years in 2014 and the average tenure of a kitchen manager was 10.7 years compared with 6.1 years in 2014, it said.

It has not declared an interim dividend and will issue its next trading update on 8 May.