Yahoo Finance Wetherspoons to raise prices amid increased cost pressures
JD Wetherspoons (JDW.L) is set to hike its prices after warning that it was facing cost pressures in food and drink products, and energy supplies.
The business expects to be able to hold the increase in costs to just below the level of inflation, which is currently at 5.5%, but is expected to rise to almost 8% in April.
"There is pressure on input costs from food, drink and energy suppliers, mitigated to an extent, by a number of long-term contracts,” Wetherspoons boss Tim Martin said.
It comes as Wetherspoons will also be hit by a VAT increase on food and non-alcoholic drinks next month, from 12.5% to 20%.
Sales at the UK pub chain have nearly bounced back to their pre-pandemic levels as more Brits are socialising in pubs now that COVID restrictions have lifted.
Revenue in the three weeks to 13 March were just 2.6% below levels before the start of the pandemic, with “more normal trading patterns”.
Read more: JD Wetherspoon's Tim Martin: Pubs are safer than staying home for COVID-19
Although it reported a loss of £21.3m ($28m) in the six month to 23 January, this was more than half its losses in the same period the previous year, which came in at £46.2m.
Like-for-like sales fell 11.8% on a two-year basis, driven by a 12.7% decline in bar sales, while its hotel rooms saw a 6.6% rise.
The Watford-based group admitted on Friday that it felt the effect of the spreading Omicron variant during December, as its usually busy Christmas period saw cancelled bookings and empty pubs as the government advised people to limit contact.
Wetherspoons, which owns more than 850 pubs across the UK, said it was confident of a strong future if restrictions are avoided. It added that it has a full complement of staff and is fully stocked, with some minor exceptions.
Its outspoken chief said the company had benefited from the end of the “draconian measures” brought in due to the pandemic.
Watch: COVID-19: Wetherspoons chief 'breakdancing round the living room' as Plan B rules ease
“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,” he said.
“Draconian restrictions, which amount to a lockdown-by-stealth, are, of course, kryptonite for hospitality, travel, leisure and many other businesses.
“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.”
Shares in the company fell in London on the back of the trading update, down 0.7% at the time of writing.
Read more: What higher inflation means for savers and investors
“JD Wetherspoon is among the companies facing an uphill battle with an onslaught of higher costs,” Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said.
“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.”
She added: “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 the double blow of the pandemic and soaring commodity prices.”
