JD Wetherspoon has warned that it could miss profit targets due to "substantial increases in costs," as pubs brace for soaring energy and shipping prices triggered by the Iran war. The UK's best-known pub chain confirmed on Tuesday that the much-feared knock-on effects from the blockage to the Strait of Hormuz have begun to hit hospitality firms.
Chairman Tim Martin said: "As many hospitality operators, including Wetherspoon, have reported, there have been substantial increases in costs, which may result in profits slightly below market expectations." Despite rising costs, Martin noted that Wetherspoon is trading ahead of the market, with its sales growth beating audit firm RSM's hospitality business tracker for the 43rd month in a row.
Wetherspoon Growth Stalls
Like-for-like sales rose by 3.4% in the three months to April, and year-to-date sales grew by 4.3%. However, the FTSE 250 pub chain's growth for the period was slightly slower than in previous quarters. Wetherspoon has purchased 3.8 million shares in the year to date at £6.80 per share and bought the freehold rights to four of its pubs, totaling £12.2 million.
In March, shares in the pub firm dipped after pre-tax profit for the first half of its financial year slumped by 32% to £22, missing even analysts' downgraded expectations. Martin said increases to national insurance and the minimum wage were set to cost Wetherspoon £60 million every year, along with a £7 million green levy.
Pubs Battle Higher Tax
Martin stated at the time: "These cost increases will undoubtedly add to underlying inflation in the UK economy, although Wetherspoon, as always, will endeavour to keep price increases to a minimum. There is clearly considerable pressure on consumer finances, combined with higher taxes, wages and energy costs for the hospitality industry."
British pubs had been bracing for higher energy bills as a result of the conflict in the Middle East, with other leading pub firms like Shepherd Neame warning costs will rise. Hospitality firms are also battling employment cost increases and hikes to business rates bills that came into force in April. Two-thirds of pubs, bars, and restaurants will be forced to cut jobs to deal with these new costs, while one in seven will shut altogether, according to trade body UK Hospitality. Earlier this week, it emerged that two pubs shut every day in the first three months of the year, totaling 161 businesses and 2,400 jobs lost.
