Wetherspoon's profits under pressure from higher labour and utility bills

By MIKE SHEEN

Updated: 05:31 EDT, 21 March 2025

Wetherspoon’s Earnings Contract as Expenses Outpace Sales Growth

Pub chain JD Wetherspoon has reported a decrease in profits for the first half of the year, as robust sales growth was not sufficient to counteract the company’s increasing operational costs.

Chairman Tim Martin cautioned that elevated tax and staffing expenditures are expected to ‘burden’ the pub sector in the coming months. This announcement follows Wetherspoon’s report of a 4.3 percent decline in operating profits, which fell to £64.8 million for the six-month period ending January 26.

Sales Growth Offset by Rising Costs

While Wetherspoon experienced a 4.8 percent rise in like-for-like sales during this period, the company’s operating margin diminished from 6.8 percent to 6.3 percent. This contraction is attributed to a £30.6 million surge in expenses related to increased labour and utility costs.

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These financial results precede forthcoming adjustments to the minimum wage and national living wage, along with a scheduled increase in employer national insurance contributions, set to take effect next month.

The aforementioned changes are anticipated to inflate Wetherspoon’s annual expenditure by an estimated £60 million – roughly equivalent to £1,500 per pub each week.

Tax Disparities and Industry Impact

Martin, a vocal critic of what he perceives as unequal tax and regulatory treatment between pubs and supermarkets, stated: ‘Given that labour costs constitute approximately 35 percent of revenues for pubs, compared to around 11 percent for supermarkets, these types of increases invariably exert a disproportionate effect on pubs, intensifying the already substantial price gap for consumers between on-trade and off-trade premises.’

‘The combination of significantly higher VAT rates for pubs compared to supermarkets, coupled with escalating labour costs, will significantly strain the pub industry.’

Debt and Expansion Strategy

The pub group’s net debt increased to £703.5 million, up from £664.8 million over the reported period, while its portfolio reduced to 796 locations.

However, the company has expressed its ambition to expand its estate back to 1,000 sites in the foreseeable future.

Dividend Reinstatement and Share Value

Wetherspoon, having resumed dividend distributions in 2024 after a five-year hiatus, also announced a new interim dividend payment.

Conversely, JD Wetherspoon’s stock value experienced a 10 percent drop to 537.5p in early trading, compounding a more than 30 percent decline over the preceding year.

Market Analyst Outlook

Richard Hunter, Head of Markets at Interactive Investor, commented: ‘Wetherspoon is demonstrating apparent further advancement, but a weaker broader market and the pessimistic outlook for the UK economy have overshadowed any positive developments.’

‘Despite demonstrable progress achieved by Wetherspoon, prevailing uncertainty surrounding future prospects has significantly impacted its share price.’

‘Although this situation understandably results in a modest valuation for the shares by historical standards, investor sentiment remains far from celebratory.’

‘The market consensus, rating the shares as a ‘strong hold’, suggests a degree of confidence in Wetherspoon’s capacity to maintain its competitive position but also reflects considerable caution amid persistent challenges and potential future economic repercussions.’

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