Wetherspoons reports solid trading but mounting cost pressures

JD Wetherspoon has announced a trading update on Wednesday with like-for-like sales rose by 5.1% in the 25 weeks to 19 January 2025.

Like-for-like sales in the second quarter were up 4.6% with 6.1% growth for the 3-week Christmas period and the group is confident of a ‘reasonable’ outcome but notes that labour-related costs will rise by around £60 million per annum from 1 April.

Charlie Huggins, manager of the ‘Quality Shares Portfolio’ at Wealth Club, said, “Wetherspoons sales growth slowed slightly in the second quarter but still remained solid with robust trading over the key Christmas period. Its commitment to low prices and doing the basics well are helping to keep punters loyal.

“However, the extent of cost increases for the sector is crippling. The £60 million annual increase in labour related costs Wetherspoons is facing is almost equivalent to the entire profit it made last year (PBT of £73.9 million).

“Price increases are inevitable, but for Wetherspoons this is a delicate balance. Raise prices too much and it risks ostracizing its loyal customer base. Not enough, and margins could come under serious pressure.

“At least Wetherspoons has scale on its side leaving it better positioned than many in the sector. It will flex these muscles as much as it can to contain costs in other areas. In addition, the share price already incorporates a lot of bad news and may start to attract bargain hunters.

“But it’s hard to escape the conclusion that, increasingly, its destiny seems out of its own hands and at the mercy of politicians.”