ii view: Wetherspoons outperforms but rising costs hurt

First-half results to 31 January

• Revenues up 5.7% to £1.09 billion
• Like-for-like sales up 4.8%
• Pre-tax profit down 31.9% to £22.4 million
• Interim dividend unchanged at 4p per share
• Net debt up to £772.9 million from £724 million in late July

Guidance:

• Now expects full-year profit slightly below City estimates versus a previous forecast of slightly below last year’s profit 
• Like-for-like sales for seven weeks to mid-March up 2.6%
• Continues to expect year-end net debt of £740-760 million

Chairman Tim Martin said:

"The latest 'CGA RSM Hospitality Business Tracker', for February 2026, said industry like-for-like sales were -0.2%. During this period, Wetherspoon like-for-like sales were +3.2%. This was the 42nd month in a row that Wetherspoon has outperformed the tracker.

"There is clearly considerable pressure on consumer finances, combined with higher taxes, wages and energy costs for the hospitality industry. This may result in profits that are slightly below current market expectations. The forecast for year-end net debt remains unchanged."

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ii round-up:

Started in 1979, Wetherspoon (J D) (LSE:JDW) today operates 794 managed pubs across the UK and Ireland, with some also offering hotel accommodation, along with 16 franchised outlets. 

Headquartered in Watford, Hertfordshire, it employs around 42,000 people.

For a round-up of this latest trading update announced on 20 March, please click here. 

ii view:

Pub operator JD Wetherspoon listed on the UK stock market in 1992. Bar sales made most revenues during this latest half year at 58% followed by food at 37%, slot and fruit machines 4%, and hotel accommodation most of the balance. Competitors include All Bar One owner Mitchells & Butlers (LSE:MAB), Fuller Smith & Turner Class A (LSE:FSTA), Marston's (LSE:MARS) and Young & Co's Brewery Class A (LSE:YNGA).

For investors, increases in national insurance, the minimum wage, energy bills and a tax on packaging are all expected to weigh on current full-year profit. Expected group net debt in late July of up to £760 million is potentially up from the previous year and compares to a stock market valuation of around £654 million. Corporation tax has increased from 19% in 2019 to 25% for larger companies, while a forecast dividend yield of 2% is less than the 3%-plus at fellow hospitality providers Fullers and Premier Inn owner Whitbread (LSE:WTB).    

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More favourably, growth in like-for-like sales remains ahead of the broader industry. Previous changes in group debt aided a fall in borrowing costs to 5.9% from 6.5% in late July. 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.

In all, the well-managed pub chain's focus on product value and service make it a popular choice among drinkers, although strong cost headwinds continue to generate scope for investor caution.

Positives: 

• Value customer offering
• Majority freehold properties

Negatives:

• Tough economic backdrop
• Rising energy bills pressuring consumer spending

The average rating of stock market analysts:

Hold