JD Wetherspoon was hit by a share price downgrade from Peel Hunt with the broker arguing that recent good sales numbers might be flattering the underlying picture.
The pub chain recently reported a 10.1% increase in like-for-like sales but sales are still 8.7% lower compared to pre-pandemic levels said the broker with the reduced VAT levels during lockdown also skewing the numbers.
Last year’s Christmas present, Omicron, will further invalidate one-year LFL sales as drinkers avoided pubs hoping to not ruin the holidays, Peel Hunt added.
It believes 2019’s results provide a better indicator of trading and they paint a duller picture.
Add in staff and food inflation, both of which are likely to rise further during 2023 believes the broker, which has cut its profits forecasts by 13%, and it sees better value elsewhere within the hospitality sector.
Target price reduces to 600p from 725p, though ‘add’ is still the broker’s investment rating.
JD Wetherspoon’s share price dipped 4.4% to 470.8p.