JD Wetherspoon has announced its pre- close statement for the period up to 23 July 2013, incorporating the 11 week period to 14 July 2013 and showing growth in sales, margin and pub openings. Will Wetherspoon’s prove a bellwether for the wider hospitality sector? Results in the coming weeks will tell.
Current trading
For the 11 weeks to 14 July 2013, like-for-like sales increased by 3.5% and total sales increased by 6.2% – a better than expected performance. In the year to date (50 weeks to 14 July 2013), like-for-like sales increased by 6.0%, and total sales increased by 9.2%.
The operating margin was 9.5% in the 11 weeks to 14 July 2013, including some one-off benefits, and 8.7% in the year-to-date (50 weeks to 14 July 2013). We view the year-to-date margin as a possible indicator for the future, if we were to achieve reasonable sales growth.
Property
The Company has opened 29 new pubs and sold three since the start of the financial year. In our final results announcement, we intend to provide an update on any impairment and onerous lease provisions. It is our present intention to open around 30 pubs in the following financial year.
Outlook
As previously indicated, the company warmly welcomes the reduction in beer duty announced in the March budget (but overall excise duty increased). However, the late night levy, machine gaming duty and business rates taxes have increased, as well as pension costs (see note 6). Continued progress in sales will be required in order to overcome these costs. The biggest dangers to the pub industry are the VAT disparity between supermarkets and pubs and the continuing imposition of stealth taxes.
We are now on track to achieve a slightly better outcome (before any exceptional items) for the current financial year than previously anticipated.
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