JD Wetherspoon PLC (LSE:JDW) is one of Britain’s go-to destinations for a super cheap pint and pub meal, but the FTSE 250 constituent is facing headwinds that will undoubtedly filter through to the pubco’s punters.
Regarding the wider sector, “the rise in the cost prices of food and drink has resulted in higher prices for customers in bars and restaurants,” Wetherspoon boss Tim Martin told Proactive, while noting that Wetherspoon’s long-term contracts for many bar and food purchases will “moderate the highly inflationary cost increases” for the chain.
“In effect, this means that our prices are going up, but perhaps more moderately than some companies have reported,” Martin noted.
Inflation is undoubtedly a big concern for UK pubcos, “especially since customers are dealing with higher costs themselves,” yet sales in the industry have recovered since restrictions ended, and “the industry hopes that this trend will continue,” noted Martin.
Indicative of Britsh pubcos’ surprising rebound are the recent earnings statements from major chains Marston’s and Mitchells & Butlers.
However, despite both chains posting higher top lines than pre-Covid levels in 2019, the spiralling costs of goods, energy and staff have had a significant impact on profit margins, and customers are likely to see the impact on their drinks tab in the new year.
As for Wetherspoon, Martin said “we will try to remain as competitive as possible”.
Wetherspoon itself returned to pre-pandemic levels in November’s earnings update.
Read more: Brace yourself: A pint and a pub meal is about to get (even) pricier
Asked where revenue growth will be able to keep pace with inflation, Martin commented: “Since 1979, sales have grown by more than inflation, with some individual years which were lower. Our overall ambition is to grow sales at a higher level than inflation, and we have a good track record, but no one can be certain about the future, of course.”
But there are no guarantees that price increases at your nearest ‘Spoons will run less than Britain’s painful inflation levels.
In Martin’s words: “We can’t give guarantees, but we hope that the price of a pint at Wetherspoon will rise by less than the general level of inflation, touch wood.”