JD Wetherspoon PLC (LSE:JDW)'s boss said the “vast disparity in tax treatment between pubs and restaurants and supermarkets” is the biggest threat to the hospitality sector.
In a pre-close trading update, Tim Martin, chief executive of the pub chain, said: "Supermarkets pay zero VAT in respect of food sales, whereas pubs and restaurants pay 20%. This tax benefit allows supermarkets to subsidise the selling price of beer."
"We estimate that supermarkets have taken about half of the pub industry's beer volumes since Wetherspoon started trading in 1979, a process that has likely accelerated following the pandemic,” Martin said.
"Pub industry directors have, in general, failed to campaign for tax equality, which is an important principle of taxation.”
"Unless the industry campaigns strongly for equality, it will inevitably shrink relative to supermarkets, which will not help high streets, tourism, the economy overall, or the ancient institution of the pub."
The trading update for the 25 weeks to 22 January 2023 showed like-for-like sales were up 13.1% compared to a year earlier, and 0.7% below pre-pandemic levels.
Like-for-like sales in the 12 weeks to 22 January were 17.8% higher than a year earlier and 2% below pre-pandemic levels.
In the month of December, Wetherspoon reported a 21.3% uptick in sales compared to 15% for the sector, based on Coffer CGA Business Tracker data, which monitors sales in the hospitality space.
"We are cautiously optimistic about the company's prospects for the financial year," Martin said.
As of 22 January, the company’s net debt stood at £745mln, £60mln lower than in the financial year 2020, before the pandemic.
Financial headroom at the period end, 29 January 2023, is expected to be roughly £225mln.
During the period, Wetherspoon has opened two pubs and sold 10, which has resulted in a cash inflow of £2.9mln. Thirty-five pubs remain on the market. The company has a trading estate of 844 pubs.