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Wetherspoons faces costs pressures

by LLB Reporter
4th May 22 9:57 am

Pub chain Wetherspoons’ business model has always been to prioritise volumes over margin performance. So the return of punters as restrictions ease is absolutely critical to the company’s prospects.

“However, there is a difference between not obsessing over margins and dealing with the impact of rising costs of labour, energy and food. Against this backdrop breaking even for the current year, as Wetherspoons aims to do, is a laudable ambition,” said AJ Bell’s Russ Mould.

“The sales picture is improving slowly for the company but remains short of pre-Covid levels. Given its value-based proposition and the fact many competitors have been forced out of the market, Wetherspoons could thrive as one of the survivors.

“While cost of living pressures are acute, people are likely to still want the escape of a trip to the pub and, assuming Wetherspoons can keep its prices keen despite inflationary pressures, it could benefit from people trading down.

“However, it definitely has a tricky period to navigate and its balance sheet is quite stretched. Shareholders will hope Wetherspoons’ ‘cautious optimism’ about a full return to normality in the financial year running to July 2023 proves not to be misplaced.”

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