JD Wetherspoon profits drop 20%
by The PMA Team
Managed operator JD Wetherspoon saw profits drop by 20% to £22.3m in its first half-year, after increased costs and a cut-price booze campaign in the autumn that largely failed.
Bar sales declined by 1.6%, despite prices that were lower than a year before. Last month, February, like-for-like sales fell by 1.9%.
Chief executive John Hutson said: "February was a disappointment but we are not panicking."
Low-margin food sales did increase by 4.9% in the first six months, but the decline in wet sales resulted in a drop of 5.9% in like-for-like profits. Higher costs included rising energy prices and the national minimum wage, which was rising at four times the level of inflation. There was also an exceptional charge of £6m related to the disposal of 16 pubs and £2.2m related to the slightly-botched implementation of a new distribution centre in Daventry. Mar-gins fell 1.4% to 8.5%.
Analyst Doug Jack said this "continued a trend of falling margins every year since 1997". "This trend is likely to continue into the foreseeable future," he added.
The company produced a list of the first 65 pubs that would convert to non-smoking in May.
"Over the last 30 years the number of smokers has halved to about 25% of the population," said chairman Tim Martin. "Customers are generally becoming more health conscious and there is an increasing desire from staff and customers to avoid passive smoking." Hutson added: "What we have to do is make (the smoking ban) work.
Douglas Jack forecast that the smoking ban would increase pressure to raise prices. "JD Wetherspoon's pricing was volatile during 2004, but the company will have to succumb to cost pressure to raise prices.
"This will intensify when the company introduces its unilateral smoking ban, which should have a disproportionate effect on higher margin sales."
l Visionary or gambler p15
