Wetherspoons expects to break even for the year but warns over costs

(Sharecast News) - Pub chain Wetherspoons posted a dip in third-quarter sales on Wednesday as it warned over rising costs but said it expects to break even this year as sales improve slowly.

In the 13 weeks to 24 April, like-for-like sales fell 4% versus the same period in 2019, while year-to-date LFL sales were down 6.2%. In the last two weeks of the period, LFL sales were "slightly positive", it said.

The company said that since 13 March, it has returned to profitability and to a positive cash flow, and is "cautiously optimistic about the prospect of a return to relative normality in FY23".

Chairman Tim Martin said: "Since Covid restrictions ended, sales have improved, as previously reported. As many hospitality companies have indicated, there is considerable pressure on costs, especially in respect of labour, food and energy. Repairs are also running at a higher rate than before the pandemic.

"The company anticipates a continuing slow improvement in sales, in the absence of further restrictions, and anticipates a 'break-even' outcome for profits in the current financial year."

The pub group said net debt at the end of the third quarter was £906m and liquidity £173m. Debt is expected to be around £870m at the end of the financial year.

At 0820 BST, the shares were down 2.9% at 719.90p.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: "JD Wetherspoon is edging towards glass half full again. The bigger picture shows overall sales are still down on pre-pandemic levels, but zoom in and you can see that trading in more recent weeks has been marginally positive. This is an especially important development for the Spoons brand, thanks to its need to shift high volumes so it can support cheap price tags. Margin accretion is going to be very hard won, but Tim Martin's business is hardly one to shy away from a challenge.

"Exactly how trading is going to shape up from here depends on the extent of the damage to people's discretionary spending. On one hand, Spoons' reasonable price point could entice those slipping down the value chain. On the other, the cost-of-living crisis may well serve as a real blow to the group's core demographic and ultimately drive them away."