Pub chain Wetherspoon is facing “a momentous challenge” to persuade customers back into its pubs after they got used to drinking cheap supermarket beer during the pandemic, the company’s boss has said.
Exeter-based Tim Martin revealed that while his business had cut losses significantly, it has still not managed to return to a profit since the pandemic, and sales remain lower than before 2019.
Total sales rose from £773m to more than £1.7bn in the year to the end of July. But sales were still behind the more than £1.8bn the company made in 2019.
Mr Martin said: “During lockdown, dyed-in-the-wool pub-goers, many for the first time, filled their fridges with supermarket beer – and it has proved to be a momentous challenge to persuade them to return to the more salubrious environment of the saloon bar.”
Pre-tax losses were cut from £167m before exceptional items last year to just £30.4m this year, though the firm previously said this was bigger than expected, after it had to ramp up wages to attract staff and spend heavily on repairs and marketing. The company had made a profit of £132m before the pandemic.
Earlier this year, Mr Martin blamed the Government for causing soaring inflation after the pub company made a six-month pre-tax loss of £13m.
The group opened seven new pubs during the year, and sold, closed or ended the leases on 15 others, giving it a total of 852 pubs across its estate in July.
Mr Martin said: "The company has improved its prospects in a number of ways in recent financial years – we own an increasing percentage of freehold properties; the balance sheet has been strengthened; interest rates have been fixed at low levels until 2031; we have a large contingent of long-serving pub staff and underlying sales are improving,”
But he warned that the business was facing increasing costs. He said: “However, as a result of the previously reported increases in labour and repair costs and the potentially adverse effects of rises in interest rates and energy costs on the economy, firm predictions are hard to make.”
Charlie Huggins, head of equities at Bristol-based Wealth Club, said the Wetherspoons business model was "heavily exposed" to the rise in energy and food bills.
"While it can pass on some of these cost increases, it will be reluctant to push prices too far, for fear of ostracizing its customer base," he said.
“2022 was another annus horribilis for Wetherspoons. The recovery from the pandemic has been slower than the group initially expected, meaning sales and profits are a long way short of where they would want them to be. And while the threat of covid is now receding, another has reared its ugly head - inflation."
But Mr Huggins said it was "not all bad news". He added: "With almost 900 pubs, each massive and serving huge volumes of drink and pub grub, Spoons has a size advantage over pretty much all its rivals. Sales are also on an improving trajectory, up 10.1% in the first nine weeks of the year. Growing sales are vital in an inflationary environment, giving greater scope to shoulder cost increases."
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