Running hard but moving ever slower

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Related tags: Jd wetherspoon, Government

Sales only slightly up while fixed costs leap ahead. For JD Wetherspoon, the bellwether of the managed sector, those have been the realities of life...

Sales only slightly up while fixed costs leap ahead. For JD Wetherspoon, the bellwether of the managed sector, those have been the realities of life in the pub trade for the past 12 months. Innovative development of the food offer ­ breakfasts at 10am and children's meals throughout the day ­ has ensured a 14% surge in food sales. Increasing numbers of kids ­ 1m this year, eating cut-price meals as dad watches on with a pint in his hand ­ may be the sole reason that beer sales are nudging ahead at a modest but worthwhile 2% to 3%. Meanwhile, the Government has slipped its hand into Wetherspoon's backpocket and disappeared with £5m in alcopop taxes and £1m in NI. This was enough to deprive the company of 80% of its first half profits increase ­ it managed 3% when it otherwise could have achieved 16%. No wonder Tim Martin was sniping at the Government at his results announcement this week (the changing profile of Martin's business ­ with food ever more important ­ is, to be fair, also racking up increased labour costs and nibbling at his margins). But JD Wetherspoon's experience applies to the whole managed sector. And at least its sales are still in positive territory, unlike a number of others. The end result for many managed operators is a painful pincer affect on profits. Declining like-for-likes combined with massively-increased costs can only have a negative impact. And in a sense, of course, the entire UK pub industry is managed. The tenanted sector comes down to individuals trying to manage businesses to produce a decent living ­ for themselves and their pubco landlords. And what unites the entire industry is a Government taxing hard so it can spend hard. For 65,000 pub businesses, the harsh reality is that the Government has decided that business can, for now, be milked hard to fund improved services. The result in the wider economy, as in the pub sector, is that investment, and therefore future wealth, becomes a victim ­ JD Wetherspoon will drop its openings from 87 to 50 in a single year and your patio extension or new carpet may have to wait.

Related topics: Other operators

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