Wetherspoons shuts 11 pubs as profits hit £4.6m
JD Wetherspoon (JDW.L) has sold or closed 11 pubs and opened two new locations as the chain returned to half-year profit after "ferocious" inflation hit.
Wetherspoon has seen its sales jump ahead of pre-pandemic levels as chairman Tim Martin said he looks forward to "ferocious" inflationary pressures easing up across the pub industry.
The pub chain reported a 5% increase in sales over the six months to 29 January, compared to the same period in 2019, and up 13% compared to the previous year.
Revenue rose to £916m ($1.1bn) in the period compared to £807.4m a year ago.
The firm reported a pre-tax profit of £4.6m compared to a loss of £26.1m last year. However, this is still a 90% drop from the £50m profit it racked in 2019, before the pandemic.
The business, which has been heavily exposed to rising costs for energy, food and labour, said it has opened two pubs during the first six months and sold or closed 11, resulting in a trading estate of 843 pubs at the half year end.
Read more: UK tenants hit by rising rents amid house price increase
“Inflationary pressures in the pub industry, as many companies have said, have been ferocious, particularly in respect of energy, food and labour. The Bank of England, and other authorities, believe that inflation is on the wane, which will certainly be of great benefit, if correct,” chairman Tim Martin said.
“Having experienced a substantial improvement in sales and profits, compared to our most recent financial year, and with a strengthened balance sheet, compared both to last year and to the pre-pandemic period, the company is cautiously optimistic about further progress in the current financial year and in the years ahead,” he added.
The positive half-year results helped JD Wetherspoon shares jump 6% or 35.8p to their highest level since last summer at 616.9p.
Richard Hunter, head of markets at Interactive Investor, said: “Prospects for the group, like its margins, remain finely balanced, with the market consensus of the shares as a hold suggesting that investors will cautiously await more fruitful developments.”
AJ Bell investment director Russ Mould added: “If you go into its city centre pubs today, most will be busy with people having a good time. Sadly, Wetherspoons is only making a fraction of what it was pre-COVID.
“So where does it go from here? It’s a case of waiting for some of the headwinds to subside. Its prices are low enough to be able to push through some further increases if it needs to, and the company continues to put pockets of pubs up for sale to streamline the estate and bring in some extra cash. Despite the pressure on earnings, it continues to invest in its estate and snap up the odd freehold when opportunities arise.
Read more: Inflation rate in surprise jump to 10.4% amid record food costs
“Wetherspoons has been through plenty of ups and downs during its existence and always seems to be able to survive intact. Founder Tim Martin certainly isn’t afraid of having a grumble, but the company knows what the customer wants and is able to deliver time and time again.”
Charlie Huggins, head of equities at Wealth Club, said: “Overall, while there are reasons for optimism, 2023 is shaping up to be yet another challenging year for Wetherspoons.”
Watch: Wetherspoon superfans have visited 323 pubs and are aiming to visit every pub in the UK
Download the Yahoo Finance app, available for Apple and Android.