Pub chain JD Wetherspoon goes back to basics

Sep 12 2009 by Iain Laing, The Journal

PUBS chain JD Wetherspoon has hailed its best ever annual results after the company went back to basics to ride out the recession.

The group reported underlying pre-tax profits up 13.6% to £66.2m and sales of £955.1m in the year to July 26 – a record since the firm was incorporated in 1983, according to Wetherspoon.

The chain, which has 731 pubs, said it took lessons from the recessions of the 1980s and 1990s to combat tough trading conditions, “concentrating on the key ingredients of standard, service, staff training and incentives”. On a reported basis, property devaluations and impairment charges of more than £21m left bottom-line profits 16.9% lower at £45m.

Like-for-like sales held firm over the year, up 1.2% and increasing to growth of 2% in the final weeks, although more recent figures for the six weeks to September 6 show this had eased back to 1.2%.

Wetherspoon gave an upbeat outlook on costs after a year of soaring energy and commodity prices, duty increases and minimum wage rises far above inflation.

Tim Martin, chairman of Wetherspoon, said: “The cost outlook for the company is better than for some recent years, with a minimum wage increase of 1.2% due in October 2009 and food cost inflation at lower levels.” The group has also negotiated better energy prices, which should save £5m in the current year.

Wetherspoon led a series of cut-price promotions to attract hard-up consumers as the recession bore down last year, including a pint of real ale for 99p.

Chief executive John Hutson said the group may seek to introduce “one or two” price increases this year, but said consumer spending was still under pressure.

The past year saw a bounce-back in bar sales as conditions settled following the smoking ban in 2007, with sales up around 2.5% compared to an easing back in food sales, which remained broadly flat, said Mr Hutson.

Wetherspoon has been expanding its offering in recent years to include breakfasts, more food options and coffee to boost trade throughout the week and said it now sells more than 715,000 breakfasts and coffees each week.

The group opened 39 pubs in the year to the end of July and now employs 21,000 people.

It handed out £20.5m in monthly bonuses over the year to all staff, up by a quarter on the previous year, with more than 90% paid to employees below board level.

Leisure analysts at Numis Securities said they were upping their annual forecasts by 5% due to Wetherspoon’s guidance on lower cost pressures.

“The company has emerged successfully from the smoking ban and is now benefiting from bar market supply reduction,” they said.