City urges Wetherspoon’s to put up prices for profit growth
Pub chain Wetherspoon’s has been urged by the City to put up its prices, as its strong sales performance continues to be offset by higher costs.
Like-for-like sales were up 7.6% in the 13 weeks to April 28, bringing comparable sales growth for the year to date to 6.8%.
It marked another robust performance from the business, but City analysts voiced their fears that growth has not translated into higher profits.
Shares in the company dipped more than 4% in morning trading on Wednesday.
Profit before tax is forecast to come in at just over £100 million for the year, broadly flat compared with last year’s £107.2 million.
But analysts at Peel Hunt said their confidence in the company’s full-year outcome is “declining, from already low levels” due to the effect of cost pressures and low pricing on the group’s margins.
Brokers from both Peel Hunt and Liberum said the pub chain would need to increase pricing to drive profitability.
Wetherspoon’s bosses have previously said price increases were lower than inflation in the first half of the year, but that the system for price changes is random.
Asked at the MCA Pub Conference last year whether the group’s pricing is scientific, chairman Tim Martin said: “No, it’s not – I just fly by the seat of my pants.”
Meanwhile, Wetherspoon’s said it had spent more than £70 million on buying freeholds of pubs where it was already a tenant so far this year. More than 60% of the estate is now owned by the company.