The boss of JD Wetherspoon has warned it could be “catastrophic” for pubs and restaurants to hold off raising prices as costs continue to soar, as the pub chain revealed that the “ferocious” impact of inflation has fuelled a dramatic increase in its bills.
Tim Martin said that Andrew Bailey, the governor of the Bank of England, was right to warn companies to be mindful of how much they put up prices to avoid continuing to fuel an inflationary cycle, after the headline annual rate unexpectedly rose to 10.4% last month.
However, the pub chain’s outspoken chairman and founder cautioned that with rapidly increasing costs in sectors including energy, labour and food – where prices are rising at their fastest rate in 45 years – businesses have little choice.
“The two things that keep price rises low are competition and, by definition, low inflation,” Martin said. “If input costs are high, which they are in the hospitality industry, it’s very difficult for pub companies to avoid price rises, and it might produce catastrophic results if Mr Bailey’s advice was taken too literally – although he’s right to say it.”
Martin’s comments came as he said “ferocious” inflation was hitting Wetherspoon’s, even as the pub chain reported a return to profitability and a boost in sales.
Revenues for Wetherspoon’s half-year to 29 January hit £916m, up 3% on the same period in 2019, and 13.5% on last year. In its most recent trading, the seven-week period to 19 March, sales were up 9% compared with 2019.
The company, which runs more than 800 pubs across the UK, reported a small profit of £4.6m in its financial half-year to 29 January. This compares with a loss of £26m in the same period last year and a £50m profit in pre-pandemic 2019.
Profits have been affected by an increase in operating costs, which rose almost £73m in the company’s half-year results to 29 January, from £805m to £878m.
“Inflationary pressures in the pub industry, as many companies have said, have been ferocious, particularly in respect of energy, food and labour,” Martin said. “As for Wetherspoon, all we can really do is try to remain competitive, encourage staff retention and keep standards high.”
Earlier this week, the Office for National Statistics said UK inflation unexpectedly rose to 10.4% in February, from 10.1% in January.
This was driven in large part by an 18.2% rise in the cost of food and non-alcoholic drinks in the year to the end of February, the highest rate since August 1977.
Martin said “supply or delivery issues have largely disappeared, for now” and despite a competitive labour market the company had “a full complement of staff”.
The pubs chain reported strong growth in revenues made from its slot machines, which were up by almost a third in the first half compared with the same period last year.
“It’s been a solid start to the year for Wetherspoon,” said Derren Nathan, the head of equity research at Hargreaves Lansdown. “Its tried-and-tested value offer is holding it in good stead and there’s no sign of punters deserting the boozers despite the continuing cost of living crisis. Looking to the longer term, we see Wetherspoon as a prime example of economic Darwinism. A company whose business model and brand is likely to see it exit a challenging period stronger than before.”
Wetherspoon’s shares were up 8% on Friday, making it the top riser on the FTSE 250.
