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Birmingham Post
Birmingham Post
Business
Andrew Arthur

Pub giant Wetherspoon expects bigger losses due to rising wages

Pub chain JD Wetherspoon has warned annual losses will be bigger than expected after ramping up wages to attract staff and spending heavily on repairs and marketing.

The group said it is now expecting losses of around £30m for the year to the end of July after investing in staff and the business to “strengthen our position” for the new financial year.

Wetherspoon said although sales were now matching pre-pandemic levels, staff costs were far higher than pre-Covid as firms across the sector have had to hike wages to overcome recruitment difficulties. It added it was now “with minor exceptions, fully staffed”.

Repair costs have also soared, with the group saying it will have spent about £99m on this in the current year, compared with £76.9m in 2018-19, due to “catch-up” work since Covid restrictions were lifted.

Wetherspoon’s latest trading update showed that like-for-like sales in the first 11 weeks of its fourth quarter to July 31 were 0.4% below the same pre-pandemic period in 2019 – an improvement on the previous quarter, when they fell 4%.

The group had previously said in May that it expected to break even over the full year, having toasted a return to profit in March.

The group said: “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.”

Exeter-based chairman Tim Martin added: “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. The company remains cautiously optimistic about future prospects.”

Charlie Huggins, head of equities at Bristol-based investment firm Wealth Club, said that a time of record-high inflation Wetherspoons' business model was a “double-edged sword”.

Mr Huggins said: “On the one hand its scale, low prices and brand leave it well positioned to deal with an inflation-led economic downturn.

“With almost 900 pubs, each massive and serving huge volumes of drink and pub grub, Spoons has a size advantage over pretty much all its rivals. This helps it extract great deals from its suppliers, giving it a cost advantage.

“Many companies might be tempted to pocket those savings for themselves, earning juicy margins. That’s not Wetherspoon’s style. For decades, it’s worked to keep prices down. It’s not going to change that now, especially when its customers are really starting to feel the pinch.”

Mr Huggins added that while the firm’s “cult-like obsession with low prices” was good for consumers, it would leave its investors “nursing a hangover” in the short-term.

He added: "In the long-run, it’s probably the right move. Brands take many years to build, but can be destroyed in an instant. Aggressive price increases now risk undoing decades of built-up goodwill.”

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