Wetherspoons’ trading update was “ahead of assumptions”, according to analyst Peel Hunt.
The pub operator saw like-for-like sales slow to 5.2% in the 13 weeks to 28 April 2024 – though this was due to “tougher comps” and marks a return to more normal levels, Peel Hunt reports.
During the period, two sites opened and 18 were either sold or surrendered to the landlord, resulting in a cash inflow of £6.8m.
Peel Hunt is upgrading its forecasts for the pub company, which assumes 4.5% LFL sales, 6.4% average sales growth and 27bps margin reduction in the second half of the year.
As JDW approaches its year-end, and analyst expects margin to fully offset any weakness in LFL sales.
The upbeat third-quarter trading update reflects improving conditions across the UK’s pub sector, other analysts report.
Citing strengthening demand for drinks from Guinness vodka and coffee, JDW said on Wednesday that profit for the full year should be at the top end of expectations.
This would mark the pub chain’s second year in profit-making territory since the pandemic after lockdowns dealt a heavy blow to Wetherspoons and rivals.
Analysts noted the update echoed a wider narrative of improving trends across the industry, though.
“Encouragingly, trading conditions appear broadly stable,” Shore Capital analysts commented.
“Recent updates from both Carlsberg and Heineken [have pointed] to modest volume growth in the UK.”
Shore Capital leisure analyst Greg Johnson said Martin’s ‘chipper’ outlook was encouraging and he sees scope to ‘modestly’ lift his full year pre-tax profit estimate of £69 million.
Victoria Scholar, of interactive investor, also highlighted “resilient demand” across the sector, even though cost pressures from wages and energy remain.
JDW, in particular, “has proven that customers still enjoy visiting its pubs and remain willing to spend despite cost-of-living pressures,” she said.
Analysts at Jefferies believe there is scope for upgrades to pre-tax profit which sits at £70m within a range of £67m-£75m. Jefferies’ estimate is £72m.
Jefferies commented: “We argue that Wetherspoon’s low relative price positioning and well-located / well-invested premises will gain market share and benefit from trading down.”
