Wetherspoons’ fresh profit alert rattles investors but punters keep coming

The group, which operates 793 managed pubs and 23 franchise sites across the UK, recorded sales growth of 4 per cent in the three months to July 19, compared with the same period last year.

In a brief trading update, founder and chairman Sir Tim Martin told investors: “Profits for the year are likely to be below market expectations, with marginally lower sales than anticipated in the final quarter, combined with higher costs in the areas of food, labour, repairs, energy and business rates.”

Shares in the firm, whose Scottish estate includes the likes of the Caley Picture House in Edinburgh and Dunfermline’s Guildhall & Linen Exchange, fell by about 7 per cent in Wednesday morning trading.

While sales across the pub chain increased year-on-year, some investors were hopeful that sales momentum would swing more positively after a recent slowdown in trade. Many pubs have also been reporting a boom in sales thanks to the football World Cup and the recent hot weather spells, with most of Wetherspoon’s pubs showing the matches on TV screens.

Martin’s warning that the company - commonly known as Spoons - could miss profit guidance adds to a caution from the boss in May that UK government-linked policy costs would drag on its financial performance. It previously said it was facing £60 million of extra costs linked to wage increases and national insurance contributions for the year.

In the year to date, Spoons has opened eight pubs and sold nine. In addition, 15 franchised pubs have opened, bringing the total to 23.

Richard Hunter, head of markets at Interactive Investor, part of Aberdeen Group, said: “While others in the sector have been hailing a boost to sales from the impact of the World Cup and generally warm weather, Spoons has apparently not joined the party.

“Wetherspoon’s dogged determination to fight its corner has won the brand many friends, but from an investment perspective the jury remains out on prospects. The group’s value model leaves it continually bumping up against a wall of higher costs, which puts perennial pressure on margins and profits.”

Susannah Streeter, chief investment strategist at Wealth Club, noted: “Wetherspoon has been served a toxic cocktail of rising costs which shows little sign of losing its potency. It has forced the pub chain to issue its fourth profit warning of the year, unnerving investors and sending the shares sharply lower in early trade.

“Annual pre-tax profits had been expected to come in around £70m, already well below last year’s £81m, but even those forecasts now look too optimistic.

“Customers are still coming through the doors, with like-for-like sales continuing to grow, but the bars weren't quite as busy as hoped in the final quarter,” she added. “Even cheaper pints can only go so far in luring consumers who remain cautious about everyday spending.”

The secret of JD Wetherspoon’s success: Let’s raise a glass to the great British institution that is Spoons