Leading analyst Sahill Shan at N+1 Singer has said that for JD Wetherspoon’s shares to kick on and warrant a positive stance the company needs to demonstrate a consistently better all round performance.

He said: “It was another curate egg-type update from JDW. One cannot but be impressed by the stellar LFL performance but given the weak margin comments it is clear that LFL profitability is under pressure and the group is effectively generating unprofitable incremental sales.

“Whilst we like the JDW single brand roll-out model and the proven track record on the innovation front, for the shares to kick on and warrant positive stance the company needs to demonstrate a consistently better all round performance.

“The Q1 IMS is a continuation of the trend we have seen for over 18 months now - sector-beating LFL’s but at the expense of margins.”

With respect to the all important margin issue, Shan said there was disappointing news.

He said: “The Q1 showing was 7.7%, implying a 60bps reduction. This reduction appears to be driven by wage / utility cost rises of 5% / 4% respectively and several cost increases from suppliers. Most significantly, full year EBIT margin guidance has once again been lowered.

“The new guidance is 7.2%-7.8% vs. 7.7%-8.1% previously. This is hugely disappointing we feel, especially given the improving food input cost environment.

“We lower our FY15 and FY16 EPS by 4% and FY16 effectively on the back of the lower margin guidance. We assume 35 new openings this year (30-40 guide) and 35 also in FY16 and FY17. Our EBIT margin assumption for this year is now 7.5% vs. 7.9 previously. We make a modest tweak to our 12m TP (776p vs. 772p previously) by rolling our valuation forward to FY15 – blended 14x P/E (5% below sector average) and 8.5x EV/EBITDA.”