Wetherspoons warns of £30mn full-year loss driven by rising staff costs

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JD Wetherspoon warned it was likely to fall to a “higher than expected” full-year loss of about £30mn, driven largely by increasing labour costs.

The 860-site pub chain said its sales were back to 2019 levels but “labour costs are far higher”.

The decline in staffing has impeded recovery in the entire hospitality sector. A separate report from UKHospitality published Wednesday shows that around 17% of hospitality jobs are unfilled. This has reduced revenues by 16%.

Wetherspoons pointed to how it had “invested heavily in labour, repairs and marketing” following the end of Covid-19 restrictions in February.

In a May trading statement, the company predicted that it would break-even this year. But on Wednesday it said it now expected to fall to a loss of £30mn for the financial year.

The shares of the London-listed pub chain plunged 5.6 percentage to 595p Wednesday morning.

Like-for–like sales were only 0.4% down in the 11 week period ending July 10, compared to the same period last year. This was a significant improvement over the previous quarter, when like-for-likes sales fell 4%.

Spirit sales were up 4.4% over 2019, while food sales were up 2.1%. Hotel rooms, cocktails, and slot machines sales also did well.

However sales of draught ales, lagers and ciders — the mainstay of the pub group’s revenues — were down 8 per cent compared with the same period in 2019.

“Many people predicted a boom in pub sales when lockdowns and restrictions ended, due to pent-up demand, but recovery for many companies has been slower and more laborious than was anticipated,” the pub group noted.

Wetherspoons predicted that the company’s overall costs would rise by less than the inflation rate in the next financial year, despite the fact that it is facing increasing cost pressures from suppliers of food, drinks, and labour.

Chair Tim Martin has voiced his disapproval of the UK government’s lockdown policies, said inflation “has proved to be far higher and more intractable than anyone anticipated”, blaming the government printing money to “finance lockdowns”.

“Wetherspoon has tried to take a long-term approach to these issues, investing heavily in the workforce, in buildings, in marketing and in contracts with landlords and suppliers, which will hopefully create a solid base for future growth,” said Martin. “The company remains cautiously optimistic about future prospects.”

But Julie Palmer, a partner at Begbies Traynor, warned that even though the pub chain’s affordable menu “would seem like an obvious winner as consumers tighten their belts” its margins were very tight.

“Even though the business has long-term contracts for food, drink and energy which mean it will avoid the impact of inflation driving their prices higher for some time, there’s no getting around soaring staffing costs and that means pressure on the business is intensifying,” said Palmer.

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