JDW to increase food prices by 40p per meal

By Nikkie Thatcher

- Last updated on GMT

Food cost: the increase in the rate of VAT in September will see JD Wetherspoon push its meal prices up (image: Getty/Andrew Brookes)
Food cost: the increase in the rate of VAT in September will see JD Wetherspoon push its meal prices up (image: Getty/Andrew Brookes)

Related tags Jd wetherspoon Food Vat Tax

Pub behemoth JD Wetherspoon will be increasing the price of its food by 40p per meal when the VAT rate increases to 12.5% later this year, it announced in a trading update.

The company also outlined the company’s stance on VAT and that “taxes should be fair and equitable” – something chairman Tim Martin has been vocal on in the past.

It went on to outline how while the Chancellor reduced the VAT rate for hospitality to 5% amid the pandemic, this was still above the rate supermarkets pay, though it was welcome.

The update continued the interim rise to 12.5% in September will mean the pub group will have to push its prices up for meals and said the increase in VAT will mean the entire hospitality industry less competitive.

Furthermore in the results, the company reported it currently has a net debt of £865m and expects it to be about £833m at the end of this financial year.

It has received covenant waivers, up to and including the quarter to July 2021. Normal earnings before interest, taxation, depreciation and amortisation (EBITDA)-related covenants have been replaced with a minimum liquidity threshold of £75m.

Closed venues

On Sunday 4 July 2021, liquidity was £224m and is expected to about £253m at the end of the financial year. JDW has proposed to enter discussions with its lenders regarding waivers for the next financial year in due course.

Also as of 4 July 2021, just 10 of JDW’s 860-strong estate were closed – most of these were airport venues.

For the period Monday 12 April to Sunday 16 May (when only outdoor service was allowed), about 500 of the company’s sites were trading and like-for-like sales compared to the 2019 financial year were down by almost half (49%).

However, from Monday 17 May – when pubs were permitted to trade inside – to Sunday 4 July, like-for-like sales were down 14.6%.

Also from 17 May but to Thursday 10 June – prior to the UEFA Euro 2020 tournament began, like-for-like sales had fallen by 8.1% and from 10 June to 4 July, while the competition has been taking place, like-for-like sales were down by a fifth (20.8%).

During the past six months, the business has opened two new pubs in Headingley, Leeds and Northallerton, North Yorkshire.

Loss expected

The trading update also stated the company’s 75-project pipeline comprising 18 news pubs and 77 extensions and upgrades to existing sites​.

The first phase of the new venues and extensions will be in areas such as Birmingham, Newport Pagnell, Heswall, Sheffield, Felixstowe, Dublin, Haverfordwest, Carmarthen and Glasgow.

Once the 75 projects are finished, the company has estimated it will invest about £750m on a similar range of projects in the following decade, which could result in 20,000 more jobs.

JDW chairman Martin said: “The company continues to expect to make a loss for the year ending 25 July 2021.

“In a trading update of 19 January 2021, the company’s principal ‘scenario’ estimated sales in the financial year starting 26 July 2021 to be in line with financial year 2019, which remains our current best estimate, on the basis restrictions are ended, as the Government currently intends.”

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