JD Wetherspoon has released its Interim Management Statement for the period up to 6 November 2013, incorporating the 13 week period to 27 October 2013, with like-for-like sales up 3.7%, but margins continuing under pressure and down 0.3%. Despite cost and tax pressures, the company remains confident of a reasonable outcome this year.
Current trading
In the first quarter (13 weeks to 27 October 2013),like-for-like sales increased by 3.7% and total sales by 7.6%.
The operating margin was 8.3%, approximately 0.3% lower than the same period in the last financial year, mainly due to increased labour, repairs, marketing and central overheads. The company believes that this increased expenditure will benefit the future performance of the business.
The margin in the quarter is stated to be a possible indicator for this financial year, assuming the achievement of reasonable sales growth.
Property
8 new pubs opened in the quarter and 12 more under development. 40 to 50 pub openings anticipated in total this year, slightly more than previously anticipated, helped by the increased bank facility and a number of recent acquisitions.
Financial position
No significant changes in the Company’s overall financial position, since the publication, on 11 October 2013, of the annual report and accounts for the year ended 28 July 2013.
Outlook
As previously indicated, the biggest danger to the pub industry is the VAT disparity between supermarkets and pubs. Since supermarkets pay almost no VAT in respect of food sales, whereas pubs pay 20%, supermarkets are able to subsidise their drinks’ prices to the detriment of pubs, around 10,000 of which have closed in the last decade. It does not make economic or social sense for the government to favour powerful supermarkets with what amounts to a “tax break”, especially since pubs generate so many more jobs, and so much more tax, per pint or meal, than supermarkets.
In spite of the continued pressure from costs and taxes, the company remains confident of a reasonable outcome for the current financial year.