JDW's Tim Martin hits out at lack of trade support for VAT campaign

By Mike Berry contact

- Last updated on GMT

Related tags: Tax equality, Marketing, Tim martin

Wetherspoon's Tim Martin: "Companies that do not speak out about the dangers of tax inequality are likely to be those that suffer most in the future"
Wetherspoon's Tim Martin: "Companies that do not speak out about the dangers of tax inequality are likely to be those that suffer most in the future"
Wetherspoon’s boss Tim Martin has blamed pubco rivals – and the Publican’s Morning Advertiser – for failing to campaign for tax equality with supermarkets, which he said had resulted in flat bar sales and falling margins.

In comments alongside the company’s latest trading update, Martin said the pubco's bar sales - as well as those across the industry - have suffered, reflecting “the dire need for the pub industry to campaign for equal tax treatment for pubs and supermarkets”.

Martin said gross margins across the company were under pressure as result of increased price competition from supermarkets, who pay no VAT in respect of food - whereas pubs pay 20% - “enabling supermarkets to subsidise the price of beer and other products”.

Disparity

He said: “Fewer and fewer customers, outside pockets of affluence, in an accelerating trend, are using pubs for “drinking occasions”, which do not involve eating. The main reason behind this trend is not that people prefer to drink at home, for example, but relates to the huge and growing price differential between pubs and supermarkets.

“A number of major pub companies believe that they can avoid the resulting malaise by investing in out-of-town pubs which are really “quasi-restaurants”. Unfortunately, these businesses too are already starting to suffer the effects of the tax disparity with supermarkets and they will clearly, in our view, be unable to escape the consequences of an unequal tax system.

“Neither these businesses nor the main pub industry newspaper, the Publican Morning Advertiser​ (PMA), have campaigned for tax equality with supermarkets. In the case of the PMA​, the editor has questioned the financial motives of the leader of the tax equality campaign, Jacques Borel, but has utterly failed to campaign himself or through his newspaper for tax equality, which would help to ensure the future of pubs.”

Martin warned: “The companies that do not speak out about the dangers of tax inequality are likely to be those that suffer most in the future.”

Sales

JD Wetherspoon saw like-for-like sales rise 2.8% for the 12 weeks to 18 January with the figure falling to approximately 2% in December and slowing further in the last fortnight. The company said total sales were up 6.8% for Q2 and 9.1% for the year to date. Like-for-like sales in the 25 weeks to 18 January were up 4.6%.

Wetherspoon’s said it expected operating margin (before any exceptional items), for the half year ending 25 January 2015, to be around 7.3% - 0.9% lower than the same period last year.

Analyst reaction

Analyst Nick Batram at Peel Hunt said: “Today’s update is disappointing but the slightly cautious start to 2015 by consumers is not unique to JDW. We do expect things to improve as we move through 2015. However, JDW’s strategy leaves it in a difficult position and if the top line begins to weaken materially there is no fat margin to protect the bottom line.”

Douglas Jack, of Numis, said the slowdown in Wetherspoon’s like-for-like sales increase in Q2, shows that the “downgrade momentum is with those trapped in discounting”.

He said: “With improving consumer cash flow, it is clear that consumers are trading up on the fewer occasions that they venture out. Thus, upgrade momentum is with the restaurants and premium pubs/bars, whereas downgrade momentum is with those trapped in discounting. A premium market position is worth a premium valuation; and a discount market position is worth a discount valuation.”

Related topics: JD Wetherspoon

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6 comments

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Veritas

Posted by Interested Observer,

I think that investment, whether by a pubco or JDW involves spending money (either one's own or borrowed) with the hope of achieving an annual return.

What JDW are claiming with VAT is no more valid than my pension provider saying that it pays PAYE. No it doesn't - I do. Nor does my solicitor pay stamp duty on house purchases just because he writes the cheques - he disburses money already collected from the client.

And, of course, they haven't written any cheques to the authorities for alcohol duty - the second item on the list at £157m.

I find it hard to accept your case that should JDW shut up shop, all their customers would start to drink at home. I would have thought a a sizeable majority would go back to the pubs they came from.

Looking at your comment on supermarket VAT, I would point out that the amount reclaimed is irrelevant to the inflow to the Treasury. That's always 1/6 of the retail price.

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Apples and oranges

Posted by Tax man,

This is like a broken record. Tim Martin is constantly told that he must compare like with like and yet again he keeps on saying the incorrect facts.

Where supermarkets serve meals to eat in the supermarket, they pay 20% VAT. If I buy the ingredients I pay no VAT. That is because the VAT is because of the SERVICE element, the ambience, chairs, serving staff, music, etc.

Under TM's twisted view of the world, it would be more fair if supermarket customers pay 20% VAT. The comparisons are just not the same.

Could it possibly be the case that the state of pubs is more to do with brewing company greed (They ain't suffering), business rates, rent costs, employment costs, etc etc.

Any Government that gives credence to this is mad. MP's are stupid, but this stupid?

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Veritas

Posted by ken nason,

JDW, and all other pubs, only pay tax on their generated profits. The rest, as quoted by IO are merely collected for the government.

Whos to say that the generated business by the likes of JDW would not be spent equally else where thereby generating the same vat for the government.

It isn't a given that everyone automatically rushes to the supermarket when they cannot have their needs fulfilled by a pub.

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