A leading analyst has said he expects JD Wetherspoon’s lfL sales to have slowed during its fourth quarter when it reports next month (24 July) as the group faces tough comps and a number of headwinds.
Jamie Rollo at Morgan Stanley said: “LfL growth was 6.7% in the first 39 weeks, and we expect this to slow to c.3% in Q4 as it begins to lap tougher comps (including the Jubilee and Euro 2012). We expect a total of 30 pub openings in the year, meaning the company needs to open a further 14 pubs in Q4, and it looks on track here, given new openings tend to be back-end weighted.
“The operating margin rose c.40bps to 8.5% in Q3, indicating the first real sign of stability for around four years. If Q2 marked the trough for margins, we could see a period of rising margins that would drive strong profit growth.
“For the full year, we forecast £110m of EBIT (+2%), PBT of £75m (+4%) and EPS of 45p (+8%), slightly ahead of consensus on £108m, £71m and 43p, respectively, and we see modest upside risk to consensus forecasts.
“We forecast flattish margins for the next couple of years, but operational gearing is high and, if the margin begins to improve, it would generate strong earnings growth. However, on 14.2x cal 2013e P/E, the shares already trade at a premium to its pub peers, largely reflecting its position as a leader in the managed pub sector.”
