Wetherspoon Shares Tumble Following Profit Warning Over Soaring Costs
Shares in JD Wetherspoon experienced a significant decline on Wednesday after the prominent pub chain issued a stark warning about its profitability. The company attributed the expected downturn to a substantial increase in operational costs, with business rates representing a particularly heavy burden.
Financial Strain from Rising Expenses
The FTSE 250-listed firm reported that costs had surged by an estimated £45 million during the 25-week period leading to mid-January. This alarming figure projects to an annual increase of approximately £94 million. The cost pressures stem from multiple areas, including:
- Escalating energy bills
- Rising wage demands
- Increased repair expenditures
- Substantially higher business rates
Chief Executive Tim Martin acknowledged the challenging environment, stating: "We are pleased with sales growth [but] costs have been higher than anticipated." Following this announcement, Wetherspoon shares dropped by 6.7 per cent in early trading, settling at 688.50 pence.
Broader Hospitality Sector Challenges
Wetherspoon's difficulties reflect a wider crisis within the UK hospitality industry. The sector faces a perfect storm of financial pressures, with business rates bills for hospitality firms projected to increase by 94 per cent over three years. This dramatic rise results from property value reassessments and the conclusion of pandemic-era government support schemes.
Analyst Anna Barnfather from Panmure Liberum expressed ongoing concerns, noting: "We continue to see downside risk to forecasts given the structurally low-margin model and ongoing cost inflation." She further highlighted worries about long-term margin recovery as labour costs increase and opportunities for price adjustments diminish.
Employment and Policy Implications
The sector's struggles extend beyond corporate balance sheets. Recent Office for National Statistics data reveals that hospitality employment decreased by 20,014 people between September and December 2025, a period when staffing traditionally increases for the festive season. This decline underscores the operational challenges facing pubs and restaurants.
The political dimension has become increasingly prominent, with Chancellor Rachel Reeves compelled to promise "temporary support" for struggling pubs following significant backlash from the hospitality industry regarding business rates. Successive government budgets have substantially increased the cost and tax burden on hospitality businesses, with further significant business rate increases anticipated in April.
Contrasting Performance Metrics
Despite the financial headwinds, Wetherspoon reported some positive trading figures. Like-for-like sales increased by 4.7 per cent during the second half of the year, with particular strength in certain areas:
- Bar sales rose by 6.9 per cent
- Food sales increased by 1.3 per cent
- Slot and fruit machine sales grew by 9.1 per cent
The crucial Christmas trading period saw sales rise by 8.8 per cent, though higher-than-expected costs limited the financial benefit of this increased revenue.
Strategic Expansion Amid Financial Pressure
Remarkably, Wetherspoon continued its expansion programme throughout 2025, opening six new pubs including prominent locations at London Bridge station and Paddington. The company plans to open approximately 15 additional pubs during the current financial year.
The chain also completed six property sales, generating £3.3 million, bringing its managed trading estate to 794 pubs. Additionally, eight franchised pubs opened during the period, with plans for ten to fifteen more franchise openings this year, including the company's first Spanish location at Alicante Airport.
This expansion strategy demonstrates Wetherspoon's commitment to growth despite the challenging economic environment, though the profit warning indicates that cost pressures may outweigh the benefits of increased sales and expansion for the foreseeable future.
