ii view: better Wetherspoon sales offset profit caution

Third-quarter trading update to 26 April

• Like-for-like sales up 3.4%
• Total sales up 4.1%

Guidance:

• Cost increases may result in annual profits slightly below current City forecasts
• Continues to expect year-end net debt of £740-760 million

Chairman Tim Martin said:

"Sales growth was ahead of the 'NIQ RSM Hospitality Business Tracker' for the 43rd month in a row in March 2026, although Wetherspoon's growth for Q3 was slightly below the year-to-date."

• Our Services: SIPP Account | Stocks & Shares ISA | See all Investment Accounts

ii round-up:

Wetherspoon (J D) (LSE:JDW) today detailed sales that beat City expectations, although the budget pub operator warned about profits again given substantial increases in industry costs.

Like-for-like sales for the third quarter to late April rose 3.4%, slowing from growth of 3.7% and 6.1% in the first and second quarters respectively. However, analysts were expecting a slowdown in like-for-like outlet sales to around 3%.

Shares in the FTSE 250 company swung between marginal gains and losses in UK trading. Wetherspoon shares came into this latest news down by a fifth so far in 2026. Rival Mitchells & Butlers (LSE:MAB) is down by close to a tenth year-to-date. The FTSE 250 index is up by just over 1%.

Wetherspoons operates 794 managed pubs as well as 21 franchised outlets. Management flagged full year profits to late July potentially slightly below current City forecasts.

The Watford headquartered company previously announced that increases in national insurance, the minimum wage, energy bills and a tax on packaging were weighing on profits.

Prior to today’s update, the City had been pencilling in annual pre-tax profit of around £73 million versus £81.4 million last year.

A total of 13 franchised pub openings so far in 2026 helped total group sales year-to-date grow 4.9%. Total sales for the third quarter climbed 4.1% from a year ago.

Management pointed to a strong pipeline of new pubs and planned openings including Manchester airport, Heathrow airport, Paddington station, Charing Cross station and Shaftesbury Ave in central London.

The group continues to expect year-end net debt as of late July at £740-760 million, with interest costs for debt remaining stable at approximately £47 million.

A fourth-quarter trading update is scheduled for 22 July.

ii view:

Started in 1979 and listing on the stock market in 1992, Wetherspoons today employs around 42,000 people. Bar sales accounted for most revenue during the first half of this latest financial year to late January at 58%. That was followed by food at 37%, slot and fruit machines 4%, and hotel accommodation most of the 1% balance. Competitors include All Bar One owner Mitchells & Butlers, Fuller Smith & Turner  Class A (LSE:FSTA), Marston's (LSE:MARS) and Young & Co's Brewery  Class A (LSE:YNGA).

For investors, sizeable increases in industry and group costs continue to pressure profits. Expected group net debt as of late July of up to £760 million is higher than the previous year and compares to a stock market value of around £623 million. Corporation tax has increased from 19% in 2019 to a current 25% for larger companies, while a forecast dividend yield of around 2% is less than the 3%-plus yields on offer at fellow hospitality providers Fullers and Premier Inn owner Whitbread (LSE:WTB).    

More favourably, growth in like-for-like sales remained above the industry average for the 43rd consecutive month in March. New pub openings continue to be targeted, with management previously highlighting possible growth to around 1,000 outlets from the current 800 or so. Shareholder returns included £67 million of share buybacks over the group’s last financial year, while competition has eased since the pandemic given the failure of some smaller players.

For now, strong cost headwinds continue to generate scope for caution. That said, Wetherspoon's focus on value and service will likely leave this well-managed business on the radar of consumers and therefore investors alike over the longer term.

Positives:

• Value customer offering
• Majority freehold properties

Negatives:

• Weather can impact performance
• Rising energy bills pressuring consumer spending

The average rating of stock market analysts:

Hold