Wetherspoons warns on profits, cites higher costs

(Sharecast News) - Pub group Wetherspoons warned on profits again on Wednesday as it pointed to higher costs.

In a trading update for the 13 weeks to 26 April, chairman Tim Martin said: "As many hospitality operators, including Wetherspoon, have reported, there have been substantial increases in costs, which may result in profits slightly below market expectations."

The warning came as Wetherspoons reported a 3.4% rise in like-for-like sales during the period, compared to the same period a year earlier. Year-to-date LFL sales rose 4.3%.

Meanwhile, total sales were up 4.1% in the quarter and 4.9% in the year to date.

The company said it has opened eight pubs and sold eight in the year to date. It currently operates 794 managed pubs, while 21 pubs operate under a franchise agreement. There have been 13 franchised openings in the YTD.

Tim Martin said: "Sales growth was ahead of the 'NIQ RSM Hospitality Business Tracker' for the 43rd month in a row in March 2026, although Wetherspoon's growth for Q3 was slightly below the year-to-date.

"The company has a strong pipeline of new pubs and planned openings include Manchester airport, Heathrow airport, Paddington station, Charing Cross station and Shaftesbury Ave in central London."

At 0945 BST, the shares were down 0.2% at 582p.

Broker Shore Capital, which rates JDW at 'hold', said: "Having downgraded numbers at the recent interim results, primarily on R&M costs, it is disappointing to see further risk to forecasts, given the resilience in the top line and that cost pressures generally appear well understood.

"Our FY26F operating profit estimate of £135m implies a broadly flat H2 outturn over the corresponding period last year (having been down sharply in H1). We will likely to have to nudge our numbers down further by circa £5m."

Analyst Greg Johnson said that at the current price of around 580p per share, Wetherspoons trades on a current year price-to-earnings ratio of 12x, an EV/EBITDA of over 7x and a high single digit free cash flow yield.

"Although such metrics are low by historic standards and for what is a category killer, recent profit momentum has disappointed, with other stocks offering better earnings momentum, higher quality balance sheets, and lower valuations," he said.

Russ Mould, investment director at AJ Bell, said: "Wetherspoons is often compared to a cockroach - not as an insult but instead as a testament to its status as a survivor in what remains a beleaguered hospitality sector.

"The business continues to outperform many peers, and its value credentials should be prized by customers whose own budgets are squeezed. However, to keep prices low, Wetherspoons operates with skinny margins.

"It is heavily exposed to increasing costs and specifically the energy price shock created by the war in the Middle East.

"The market seems relieved this only means profit might fall slightly short of expectations and sales growth suggests demand is holding up well for now.

"A legacy of the pandemic is the heavy load of borrowings the company is carrying. While interest costs are expected to remain broadly unchanged year-on-year as debt ticks up, if interest rates move higher that could create another headwind for the business."

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Wetherspoon (J.D)