Volatile maintenance costs distort a more nuanced picture at the pub chain, but analysts expect downgrades
Shares in JD Wetherspoon PLC (LSE:JDW) fell 11% to 555.38p on Friday after interim results revealed a sharp drop in operating profit, though a closer reading of the numbers suggests the headline decline flatters the underlying weakness, with an unexpectedly large repair and maintenance bill doing most of the damage.
Operating profit fell 18% to £52.9 million in the 26 weeks to 25 January, against revenue up 5.7% to £1.09 billion. The top-line performance was solid, with like-for-like sales growth of 4.8% continuing a run of 42 consecutive months outperforming the broader hospitality market.
The problem lay below that. Repair and maintenance costs surged by £11 million to £63 million in the half, accounting for virtually the entire operating profit decline. Strip that out and underlying pub profitability actually edged up by £3 million to £210 million, a result that tells a rather different story about the core business.
Shore Capital, the broker, noted that repair and maintenance costs are inherently volatile and had already reached £100 million in the full 2025 financial year. The broker said it had expected those costs to nudge up over the full year but acknowledged the first-half spike was sharper than anticipated.
The more pressing concern for investors is what the numbers imply for full-year forecasts. Chairman Tim Martin maintained guidance for the full year but warned profits could come in slightly below current market expectations, a phrase that typically signals downgrades are coming.
Shore Capital currently forecasts full-year operating profit of around £141 million, implying a second-half recovery of £7 million versus a year earlier. The broker conceded that now looks optimistic, suggesting the full-year outcome could settle in the mid-£130 millions if repair costs partially unwind.
Net debt rose £48 million to £773 million, partly reflecting investment in new pubs and £20 million of share buybacks. Shore Capital flagged that the resulting leverage ratio of approaching four times EBITDA is starting to look elevated relative to sector peers.
The broker retained its 'hold' rating and 621p target price, describing Wetherspoon as a clear category killer while arguing its value-led model leaves it uniquely exposed to structural cost pressures and that better value exists elsewhere in the sector.
Panmure Liberum, which also rates the shares 'hold', noted: "JD Wetherspoon’s high-volume, low-margin operating model, combined with its relatively high food mix, makes it more exposed to inflationary shocks than most peers. This was again evident in the interim results..."