Promotions on traditional ales and seasonal drinks such as Pimm’s helped pubs chain JD Wetherspoon reverse a sales dip during the last quarter, the company said.
The business, which has around 700 pubs and 20,000 staff, reported a 0.4 per cent increase in like-for-like sales for the 11 weeks to July 13. This compares to a 0.1 per cent decline during the quarter to April 27.
During the 50 weeks to July 13, underlying sales declined one per cent, an improvement on the 1.5 per cent fall seen during the group’s first nine months.
Wetherspoon said recent sales had been better due to marketing activities such as Pimm’s and wine promotions, resulting in “a satisfactory performance in the current environment.” Pubs have been struggling amid the consumer spending slowdown and higher costs.
The group also fired a broadside at the Government as it warned of a “considerable” increase in costs, especially for energy, food, labour and tax, during the coming year.
“Although it is widely believed that current inflationary costs stem from external sources, a significant proportion of our cost increases (especially excise duty and labour cost increases) stem from government legislation,” the company said. The group’s founder and chairman Tim Martin - who owns more than 24 per cent of the company - said pubgoers as a whole faced an “inevitable” price rise of between five and six per cent over the next 12 months as operators cope with rising costs.
But the size of Wetherspoon will limit the hike to around half of that, he said. “Just to stand still we have got to cope with this increase in our costs,” he said. “In this environment, people want good service and reasonable prices. If you can do that then you can do well.”
Referring to the group’s performance over the past 11 weeks, he said: “We have worked very hard to make a little bit of progress.”
Sales had been boosted by wine and beer festivals, which saw more drinkers opting for traditional ales, as well as pushing products like Pimm’s which the group now sells more of than anyone else in the UK, Mr Martin said.
Wetherspoon’s has opened 23 new premises since last August – including in Heathrow Terminal 5 – with one further pub opening expected before the end of July.
Broker Blue Oar Securities said the 0.4 per cent rise in like-for-like sales in the past 11 weeks was significantly better than an expected two per cent decline.
“These are very good numbers,” said Blue Oar Securities. “These are numbers that the majority of pub operators would give their eye-teeth for,” it added.
“The like-for-like sales for the period are significantly better than the minus two per cent or so that had been feared by the market, while sales for the 50 weeks are down one per cent against estimates of around 1.5 per cent,” the broker added. It reiterated its ‘buy’ recommendation.
For the year to July 31, 2008, analysts are looking for pre-tax profits of about £56 million compared with £62 million. However, rising costs mean that some brokers have already downgraded their earnings estimates for 2008-09. Last week, Dresdner Kleinwort cut its 2008-09 pre-tax forecast from £60 million to £56 million to reflect the worsening outlook for costs.