Wetherspoons has urged the government to use “common sense” in the upcoming Budget, as soaring costs have led to a significant decline in profits. The pub group’s chair, Sir Tim Martin, warned that further tax hikes could lead to more job losses and high street closures.
The company’s pre-tax profits plummeted by 28 percent to £58.6 million for the year to July 26, despite a boost in sales thanks to warmer weather. The rise in costs, including employment and business rates, outpaced sales growth, with costs increasing by 5.3 percent.
Cost Increases
The cost of employing 42,000 staff at Wetherspoons’ 792 pubs jumped by £46 million in the year to July 26, while repair costs surged by £31 million and the business rates bill increased by £9 million. Sir Tim Martin said these cost rises had a “heavy influence” on the group’s bottom line.
They reported a 5.2 percent jump in total sales for the year, with like-for-like sales growth of 4.2 percent. Bar sales rose by 6.1 percent, while food sales and revenue from hotel rooms increased by 1.2 and 1.3 percent, respectively.
Weather Boost
Wetherspoons benefited from “exceptional weather” in the nine weeks to September 27, with like-for-like sales rising by 8.6 percent. The company also made “substantial progress” in increasing the number of beer gardens and outside seating areas across its pubs.
Richard Hunter, head of markets at Interactive Investor, said Wetherspoons had been dealt “difficult hands” over the years, but had generally been able to turn them into profit. However, the group’s value model leaves it vulnerable to higher costs, which puts pressure on margins and profits.
As the company looks to the future, it is likely that the government’s decisions in the upcoming Budget will have a significant impact on its fortunes. With the hospitality industry already bearing the brunt of tax and regulatory cost increases, Wetherspoons will be hoping for a more favorable environment to operate in.
Shares in Wetherspoons rose by 7.38 percent to 873p, bringing this year’s gains to 17.5 percent. The company remains resolute in its ambitions, but it will have to find a way to deal with the challenges posed by rising costs and tax hikes to achieve its goals.
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