Wetherspoon said that sales soared compared to last year and it has cut losses significantly, but the company is still not back to where it was before the pandemic. The pub chain said that it is proving “a momentous challenge” to persuade pubgoers back into its bars across the country after they started stocking up their fridges during lockdown.
Total sales rose from £773 million to more than £1.7 billion in the year to the end of July. But sales were still behind the over £1.8 billion the company recorded in 2019. The same story could be seen on pre-tax losses, which were cut from £167 million before exceptional items last year, to just £30.4 million this year.
Before the pandemic the company made a profit of £132 million.
Three months ago, JD Wetherspoon warned over annual losses after hiking staff wages and ramping up spending on repairs and marketing amid a slow recovery in bar trade. Wetherspoon – which has more than 800 pubs across the UK and Ireland – had previously said in May that it expected to break even over the full year, having cheered a return to profit in March.
It comes as the group said the recovery for many pub firms had been “slower and more laborious” than expected, while the sector is also grappling with soaring costs and a pull-back in consumer spending due to rising inflation.
Sales of draught ales, lagers and ciders – previously the biggest driver of pub trade – were 8% below 2019 levels, it revealed.
“Many people predicted a boom in pub sales when lockdowns and restrictions ended due to pent-up demand, but recovery for many companies has been slower and more laborious than was anticipated,” the group said.
Wetherspoon said staff costs were far higher than before the pandemic, with firms across the sector having to increase wages to overcome recruitment difficulties.
It added that it is now “with minor exceptions, fully staffed”.
Repair costs have also soared, with the group saying it will have spent about £99 million on this in the current year, compared with £76.9 million in 2018-19, due to “catch-up” work since Covid restrictions lifted.
Chairman Tim Martin said earlier this year: “Wetherspoon has tried to take a long-term approach to these issues, investing heavily in the workforce, in buildings, in marketing and in contracts with landlords and suppliers, which will hopefully create a solid base for future growth. The company remains cautiously optimistic about future prospects.”
Matt Britzman, equity analyst at Hargreaves Lansdown, said: “It looks like the older demographic’s still cautious to get out and about and that comes through in the numbers.
“Lagers and ales were replaced by spirits and cocktails as sales in lively city locations, with music on the weekends, performed much better than quieter, suburban, pubs.
“The difficulty now, for the entire pub sector, is that drinking and eating at home looks to be sticking around longer than first thought.
“That trend’s likely to continue, as the cost-of-living crisis looks poised to accelerate the tightening of purse strings.”
Charlie Huggins, Head of Equities at Wealth Club, 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.
"Wetherspoon's business model is 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.
"It's not all bad news. 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 9 weeks of the year. Growing sales are vital in an inflationary environment, giving greater scope to shoulder cost increases.
"Nevertheless, 2023 is shaping up to be yet another challenging year for Wetherspoon's. Higher interest rates and inflation are strangling the economy, and will lead to significantly higher costs for the group. Combine this with Wetherspoon’s low margins and low price strategy, it could leave investors nursing a hangover."
