Pub chain JD Wetherspoon issues profit warning over ‘substantial increases in costs’

Sir Tim Martin warned the FTSE 250 pub chain could miss profit targets as rising energy costs and hospitality sector challenges mount

JD Wetherspoon has cautioned it may fall short of profit targets due to “substantial increases in costs,” as pubs prepare for surging energy and shipping prices stemming from the Iran conflict. The UK’s most recognisable pub chain confirmed on Tuesday that the widely anticipated consequences from the Strait of Hormuz blockage have started to impact hospitality businesses.

Chairman Sir Tim Martin, who lives in Devon, said: “As many hospitality operators, including Wetherspoon, have reported, there have been substantial increases in costs, which may result in profits slightly below market expectations.”

Despite mounting costs, Sir Tim noted Wetherspoon was performing ahead of the market, with its sales growth outpacing audit firm RSM’s hospitality business tracker for the 43rd consecutive month,as reported by City AM.

Like-for-like sales rose by 3.4 per cent in the three months to April, while sales in the year-to-date increased by 4.3 per cent.

However, the FTSE 250 pub chain’s growth for the period was marginally slower than in preceding quarters, it revealed.

Wetherspoon has acquired 3.8m shares in the year to date at £6.80 per share, and purchased the freehold rights to four of its pubs, totalling £12.2m.

In March, shares in the pub operator fell after pre-tax profit for the first half of its financial year plummeted by 32 per cent to £22m, missing even analysts’ revised expectations.

Sir Tim said rises to national insurance and minimum wage were set to cost Wetherspoon £60m annually, alongside the £7m cost of a green levy.

He said at the time: “These cost increases will undoubtedly add to underlying inflation in the UK economy, although Wetherspoon, as always, will endeavour to keep price increases to a minimum.

“There is clearly considerable pressure on consumer finances, combined with higher taxes, wages and energy costs for the hospitality industry.”

British pubs had been preparing for steeper energy bills as a consequence of the Middle East conflict, with other leading pub operators such as Shepherd Neame cautioning that costs will rise.

Hospitality businesses are also grappling with rising employment expenses and increases to business rates bills which took effect in April.

Two thirds of pubs, bars and restaurants will be compelled to reduce staff numbers to manage these fresh costs, while one in seven will close entirely, according to trade body UK Hospitality.

Earlier this week, figures revealed that two pubs closed every day during the first three months of the year, totalling 161 businesses and 2,400 jobs lost.