22
January 2025
J D WETHERSPOON
PLC
Trading Update
Announcement
J D Wetherspoon plc ('Wetherspoon' or
'the company') announces an update on current trading, before
entering its close period for its interim results, for the six
months ending 26 January 2025, which are expected to be announced
on 21 March 2025.
Current trading
In the 25 weeks to 19 January 2025,
like-for-like (LFL) sales were +5.1% higher than the same period a
year ago. Bar sales increased by +4.5%, food by +5.6% and
slot/fruit machines by +11.7%. Hotel room sales decreased by
-6.5%.
LFL sales for the last 12 weeks of
the 25-week period (the second quarter of the financial year) were
+4.6% higher than the same period a year ago.
Total sales have grown by +4.0% in
the year to date - slightly less than LFL sales, due to a small
number of disposals (please see 'Property', below).
LFL sales for the main Christmas
period, the three weeks from 16th December 2024 to 5th January
2025, were +6.1%.
Financing
Interest costs for FY25, excluding
IFRS 16 notional interest, are expected to be around £47 million
(2024: £53 million).
Debt levels at the end of FY25 are
currently expected to be between £680 million and £700 million
(FY24: £660 million).
Property
In the year-to-date, the company has
opened two pubs - in Marlow, Buckinghamshire and at London Waterloo
station.
The company plans to open a total of
nine pubs in the year, including sites at London Bridge station,
Fulham Broadway underground station, Manchester Airport,
Beaconsfield, Wetherby and Bath.
In addition, a further 4 franchised
pubs will open at Haven Holiday Parks, bringing the total number of
franchises to 7.
The four new pubs will be located at
Cleethorpes Beach in Lincolnshire; Devon Cliffs in Devon; Kent
Coast in Kent and Haggerston Castle in Northumberland.
Six pubs have been sold in the year,
giving to rise to a cash inflow of £4.1 million. The company
currently has a trading estate of 796 pubs.
Outlook
Wetherspoon chairman Tim Martin
said:
"From 1 April 2025 labour-related
costs at Wetherspoon will increase by around £60 million per
annum.
"Government-mandated wage increases
have a significantly bigger impact on pub and restaurant companies
than supermarkets. Please see an article on this subject in a
recent edition of pub-trade publication, Propel (appendix
1).
"As previously highlighted,
supermarkets pay no VAT in respect of food sales, whereas pubs pay
20%. This tax advantage allows supermarkets to subsidise the price
of beer they sell.
"A direct consequence, as Morgan
Stanley have recently calculated (please see appendix 2), is that
beer volumes in the on-trade (mainly pubs, clubs and restaurants)
have decreased by an incredible 52% between 2000 and
2023.
"It is a clear principle of taxation
that taxes should be fair and equitable, as between different types
of companies. The VAT distortions that exist today will inevitably
create more supermarkets and less pubs.
"Given the public's love of pubs, the
only possible explanation for this tax discrepancy is that prime
ministers and other legislators, in the 45 years since Wetherspoon
started trading, have been dinner party goers, rather than pub
goers.
"Food at dinner parties is VAT-free,
subsidised by the legendary "man on the Clapham omnibus", who has
fish and chips at his local pub.
"Wetherspoon therefore calls upon Sir
Kier Starmer to redress this imbalance, thereby striking a blow for
tax equality and ending discrimination in favour of dull (yawn,
yawn) dinner parties.
"The company is confident of a
reasonable outcome for the year, although forecasting is more
difficult, given the extent of the increased costs."
Appendix 1 - The strange death of UK pubs by Sir Tim Martin
(Propel Opinion, 14 November 2024)
About a dozen years ago, an intrepid
Frenchman called Jacques Borel arrived in the UK, offering his
services to redress the tax inequality between pubs and restaurants
on the one hand, and supermarkets on the other.
He had previously campaigned, with
great success, in numerous countries, obtaining large tax
reductions for the hospitality industry. Pubs, Jacques said, paid
20% VAT on food sales, whereas supermarkets paid nothing, enabling
supermarkets to subsidise the selling price of beer, wine and
spirits. The result: an ever-widening price disparity.
Indeed, in the previous 40 years,
before Jacques' campaign, pubs' and clubs' share of beer volumes,
for example, had declined from about 90% to about 50% in the UK. In
fact, that decline in market share has continued, as Jacques
foresaw, and market share is now about 40%.
JD Wetherspoon was right behind
Jacques' campaign, and so were the family brewers. However,
revealing a strange and perverse aspect of human nature, most
boardrooms of big pubcos remained neutral - and some were actively
hostile to the tax equality campaign.
For example, I wrote to Rooney
Anand, chief executive of Greene King at the time, asking him to
support Jacques, but didn't even receive a reply - even though
Wetherspoon was probably Greene King's biggest customer, as a
result of our long-term stocking of Ruddles bitter and Abbot
Ale.
Ted Tuppen, of Enterprise Inns,
possibly the UK's biggest pub company at the time, was even more
hostile - he appeared reluctant to join any club of which
Wetherspoon was a member. Even the esteemed then editor of the
Morning Advertiser (not the sainted owner of Propel) refused
support, stating mysteriously that Jacques was "having a bad
game".
Wetherspoon further incurred the
wrath of Anand and Tuppen by commissioning formal market research
among Greene King and Enterprise tenants - unsurprisingly, more
than 90% supported Jacques' campaign. However, without the
vociferous support of the major pubcos, the campaign was doomed to
failure, and it duly petered out after a few years.
In the absence of tax equality,
supermarkets' share of beer, wine and spirit sales will inevitably
continue to increase at the expense of pubs, as Jacques said at the
time. However, a second Sword of Damocles, in the guise of far
higher labour costs, has further eroded the competitiveness of pubs
in the last decade or so.
Today, the average price of a pub
pint is £4.98. If we take off VAT and use the labour percentage of
Mitchells & Butlers, the biggest managed pub company (35%, I
calculate, from its latest annual report), the labour cost per pint
for pubs is about £1.45.
Therefore, a 10% increase in the
labour cost pushes up the price of a pint by about 14.5 pence in a
pub. However, labour increases cause far less customer price
inflation for the supermarket pint.
On the basis of the average pint
price being about £1.20 at supermarkets (Carling is £1.08 a pint at
Tesco and Abbot Ale is £1.55, according to my arithmetic) and,
using Tesco's much lower labour cost of 11% of sales (the ex-VAT
supermarket pint costs £1: labour at 11% = 11p), a 10% increase in
labour costs results in a modest 1.1 pence increase for the
customer.
And that's not all - pubs pay far
higher business rates, at about 25 pence per pint versus about two
pence for supermarkets. This combination of tax inequality and
entrenched labour cost increases is an increasingly heavy burden,
as the years go by, on pubs, restaurants and the on-trade
generally.
The conclusion must be that Jacques
Borel was right all along. Unless tax inequality is eliminated,
pubs and the on-trade will continue to lose market share, as
customers react to the widening price gap.
Unfortunately, it seems clear that
most pubco directors do not understand the basic economics of tax
inequality, or, if they do, they simply cannot be bothered to try
and redress the balance.
In "The Strange Death of the Liberal
Party", George Dangerfield, writing in 1935, reflected on the
reasons behind that party's precipitous decline. Unless pubcos and
trade organisations campaign for, and achieve, tax equality, it is
likely that a similar book will be written about pubs a century
later.
Appendix 2 - Extract from Morgan Stanley research - Economies
of Ale: Best Pubs In a Tough Neighbourhood, 4 December
2024
"Beer remains the largest
individual product for most pub operators at ~40% of industry
sales. On-trade beer volumes have been in consistent decline for
decades, shrinking 52% 2000-2023 (-36% per pub), a -3% CAGR (-2%
per pub), with consumers increasingly preferring to buy beer from
the supermarket where prices are much cheaper."
Ends.
Enquiries:
John
Hutson
Chief Executive
Officer
01923 477777
Ben
Whitley
Finance
Director
01923 477777
Eddie
Gershon
Company
spokesman
07956 392234
Notes to editors
1. J D Wetherspoon owns and operates pubs throughout the UK and
Ireland. The Company aims to provide customers with good-quality
food and drink, served by well-trained and friendly staff, at
reasonable prices. The pubs are individually designed, and the
Company aims to maintain them in excellent condition.
2. Visit our website:
www.jdwetherspoon.com
3. This announcement has been prepared solely to provide
additional information to the shareholders of J D Wetherspoon, to
meet the requirements of the FCA's Disclosure and Transparency
Rules. It should not be relied on by any other party, for any other
purposes. Forward-looking statements have been made by the
directors in good faith, using information available up until the
date on which they approved this statement. Forward-looking
statements should be regarded with caution, because of the inherent
uncertainties in economic trends and business risks.
4. This announcement contains inside information on J D
Wetherspoon plc.
5. The current financial year comprises 52 trading weeks to 27
July 2025.
6. The next trading update is expected to be the Company's interim
results statement on 21 March 2025.
