Prices at JD Wetherspoon could climb this year to battle soaring labour, food and energy costs, but they will still remain lower than competitors, analysts say. The pub giant is expected to report a 3% drop in sales in the three months to the end of June in its fourth quarter trading update on Wednesday.
Yet analysts say the chain would need to see sales hit double-digit growth to return to 2019 profits and offset higher staff, food, drink and energy costs. Inflation reached 9.1% in May and hospitality companies have been forced to raise prices to stay afloat.
Wetherspoon’s added 10p to the price of its drinks in March and food prices were raised in April when VAT – cut during the pandemic – returned to 20%. But the pub chain is known for its competitive low prices and could benefit from punters opting for cheaper nights out as the cost-of-living crisis bites.
Bosses said in May they expect to “break even” this year as the firm returned to profit in the third quarter of the year. They were optimistic about a gradual improvement in sales in the final quarter.
However, analysts suggest the chain’s older clientele are more risk-averse and therefore more likely to be affected by the economic downturn.
Matt Britzman, an equity analyst at Hargreaves Lansdown, said: “With restrictions now firmly in the rear-view mirror, Wetherspoon’s been able to improve sales, albeit slowly. Like-for-like sales in the last couple of weeks of the third quarter were slightly positive.
“The main story will likely focus on inflation, and the group has raised prices already this year to battle rising costs. In March, cautious consumers hadn’t impacted trading. Given the cost-of-living crisis has evolved since then, it’ll be interesting to hear whether that trend has shifted at all.”
On Thursday former Conservative minister Alun Cairns urged the Treasury to further cut duty rates on draught beer to support pubs that are facing significant cost pressures.
A recent study by Altus Group revealed that there are fewer pubs in England and Wales than ever before as 7,000 disappeared from communities in the last decade. Pub groups are appealing to the Government for greater relief to ease the mounting pressures.
