JD Wetherspoon underlined how hard life now is on the High Street with a warning this morning that its full year profits were likely to be down 10% on City expectations as bar sales stay flat.
The company also said it was cutting its new openings campaign back from 80 a year to around 50 or 60, down by a third, as it attempted to renegotiate lower prices for its property purchases in the light of reduced demand for sites from other pub companies.
Wetherspoon said that while in the first quarter to the end of October 2002 like-for-like sales rose 5.3%, in the four weeks to 24 November, like-for-like sales rose by just 3%, all of that coming from a rise in food sales of 14% as bar sales stayed level.
It said the company estimated that the reduction in growth in like-for-like sales, combined with the current ratio of food and "some stronger bar offers", that is, more price cuts, "were they to continue for the rest of the financial year", would reduce expected profits by about 10% - leaving them effectively unchanged from last year.
Jim Clarke, Wetherspoon's finance director, said food sales had a margin about five percentage points lower than bar sales, and were also more labour-intensive. In addition, he said, the company's gross margin on bar sales was currently "a little bit below" last year.
Wetherspoons said as the majority of pub companies had stopped or reduced their acquisitions of new sites, "we therefore feel that pub property prices should fall." As a result, Wetherspoons said, it intended to go back to the companies it is buying sites from, and re-negotiate all the projects currently in the pipeline for which contracts have not been exchanged. Wetherspoon's chairman, Tim Martin, said: "We'll be looking for a reduction of about 15 to 20% off."
Martin said there were signs consumer spending was starting to slow, but it was too early to say whether this was a blip or the start of a trend.
He said: "Business for pubs has clearly got a lot tougher. It's difficult to say whether that will continue. We're just being ultra-cautious." However, Martin said, he was confident Wetherspoons would outperform its rivals.
Wetherspoons opened 87 new pubs during its last financial year, and it reported a pre-tax profit of £53.6m in the year to July 28. Analysts were forecasting full-year profits to rise to £63.8m this year, according to the research firm Multex.
The news saw Wetherspoon's shares crash 71p to 182.5 in early morning trading before recovering slightly to 191.5p, 24.5% down, at 9.30am as almost four million share changed hands in 90 minutes.
Even before today's announcement, Wetherspoon shares had under-performed the UK leisure sector by 31% since the start of the year as investors worried whether it could keep up its expansion.
The company also said it was cutting its new openings campaign back from 80 a year to around 50 or 60, down by a third, as it attempted to renegotiate lower prices for its property purchases in the light of reduced demand for sites from other pub companies.
Wetherspoon said that while in the first quarter to the end of October 2002 like-for-like sales rose 5.3%, in the four weeks to 24 November, like-for-like sales rose by just 3%, all of that coming from a rise in food sales of 14% as bar sales stayed level.
It said the company estimated that the reduction in growth in like-for-like sales, combined with the current ratio of food and "some stronger bar offers", that is, more price cuts, "were they to continue for the rest of the financial year", would reduce expected profits by about 10% - leaving them effectively unchanged from last year.
Jim Clarke, Wetherspoon's finance director, said food sales had a margin about five percentage points lower than bar sales, and were also more labour-intensive. In addition, he said, the company's gross margin on bar sales was currently "a little bit below" last year.
Wetherspoons said as the majority of pub companies had stopped or reduced their acquisitions of new sites, "we therefore feel that pub property prices should fall." As a result, Wetherspoons said, it intended to go back to the companies it is buying sites from, and re-negotiate all the projects currently in the pipeline for which contracts have not been exchanged. Wetherspoon's chairman, Tim Martin, said: "We'll be looking for a reduction of about 15 to 20% off."
Martin said there were signs consumer spending was starting to slow, but it was too early to say whether this was a blip or the start of a trend.
He said: "Business for pubs has clearly got a lot tougher. It's difficult to say whether that will continue. We're just being ultra-cautious." However, Martin said, he was confident Wetherspoons would outperform its rivals.
Wetherspoons opened 87 new pubs during its last financial year, and it reported a pre-tax profit of £53.6m in the year to July 28. Analysts were forecasting full-year profits to rise to £63.8m this year, according to the research firm Multex.
The news saw Wetherspoon's shares crash 71p to 182.5 in early morning trading before recovering slightly to 191.5p, 24.5% down, at 9.30am as almost four million share changed hands in 90 minutes.
Even before today's announcement, Wetherspoon shares had under-performed the UK leisure sector by 31% since the start of the year as investors worried whether it could keep up its expansion.
