J D Wetherspoon’s margin estimates remain unchanged, implying the pub company is coping with higher labour costs despite its value proposition, according to analysts.
The pub company, which operates more than 800 UK sites, reported 5.1% like-for-like sales growth in the 12 weeks to 20 July. Chairman Tim Martin said profits appeared to be in line with market expectations, but did not comment on margin.
”We view this as a good result given that the Budget added 3.3% to the cost base in April, by our estimates,” said analysts at Peel Hunt.
“Rising real incomes should boost consumer spending and some of the higher costs on the wage line will come back to the company through its tills,” analyst Mark Brumby of Langton Capital added.
He also mentioned JDW has outperformed the market and is taking share, with the pace of growth seeming set to continue into FY26.
“Whilst the immediate cost outlook is not without its challenges, JDW should outperform a hospitality market which, as a whole, should grow more rapidly than GDP over time,” Brumby commented.
He pointed out the strengths of the company’s value offer and largely freehold estate comprised of prime assets, but warned of further price rises.
“Prices have risen but, going forward, JDW may be reluctant to test price elasticities too much further as customers may vote with their feet in favour of supermarket beer & pizza, the sofa and Netflix.”
Derren Nathan, head of equity research at Hargreaves Lansdown, highlighted the group’s growth ambitions for next year, which have risen from 10 to 15 new openings.
“The group has been trimming the tail of its estate by dropping underperforming units and is now leveraging its efficient operating model and brand strength to grab further market share,” Nathan explained. “Its ambitions for new openings next year have risen from 10 to 15, with a similar number planned for the capital-light option of franchised units.”
Nathan further said some investors may have hoped for more organic growth, due to the warmest June on record. While the company did not break down sales from volumes and prices, it said a “good proportion” of 5.1% like-for-like growth is volume, according to Brumby.
Julie Palmer, partner at Begbies Traynor, summarised: ““Profits may be weather-assisted, but investment in new pubs, staff facilities, and freehold sites points to a business that remains confident in its future and one that is gearing up for long-term growth and sees that there is room for expansion in the pub trade — not just survival in a very tricky environment.
“With estimates that many pubs are at risk of being lost this year, Wetherspoon’s scale and financial discipline will insulate it from the pressures that are pushing independent operators to close their doors. As such, we may be heading towards a world where pubs have to deliver a strong gastro, unique after-work captive audience offering or become a well-run giant like Spoons.”
