In a trading update for the 15 weeks to November 8, 2020, comprising the group's first quarter and an additional two weeks, the FTSE 250 firm reported that like-for-like sales slumped by 27.6%, with sales in October “significantly lower than the previous months” due to additional restrictions imposed by the UK government including regional tiered lockdowns, a 10pm curfew on pubs and bars, required ‘at table’ ordering and mandatory face masks when not seated.
Wetherspoon's also said that as of Wednesday, 756 of its pubs are closed across England, Northern Ireland and the Irish Republic, adding that these will remain shut until they are permitted to reopen. The company currently has 64 pubs trading in Scotland and 51 in Wales, although it said the “extremely onerous tier system” in Scotland was seriously affecting trade.
The group estimated its cash burn during the current month of closure to be around £14mln, adding that it had around £234mln of liquidity as of October 25 and that its liquidity is “significantly higher, and current liabilities are lower, than before the March lockdown”.
"For any pub or restaurant company trading in different parts of the UK, and for customers generally, the constantly changing national and local regulations, combined with geographical areas moving from one tier to another in the different jurisdictions, are baffling and confusing. The entire regulatory situation is a complete muddle”, Wetherspoon’s chairman Tim Martin said in a statement.
The chairman added that while initial regulations following reopening in July were “carefully thought through”, the “regulatory hyperactivity” since then was “questionable” and the hospitality industry had a “particular anxiety” over the timescale for the ending of the restrictions.
Shares in the company fell 1.5% to 1,103p on Wednesday morning.
Following a 45% increase in the share price over the last month, broker Peel Hunt downgraded its recommendation to 'hold' from 'add'as it said the new valuation, at 10.6 times forecast 2021 earnings based on the latest lockdown, “leaves limited re-rating upside in our view”.
“Price increases would change our view, but we doubt that will happen before April”.
--Adds shares and broker comment--