JD Wetherspoon has warned it will plunge to an annual loss for the third year running as wages and other costs hit its bottom line while sales lag pre-pandemic levels.
The pub chain, which has more than 800 sites in its stable across the UK and Ireland, said like-for-like sales for the first 11 weeks of its fourth quarter, were 0.4% lower compared with the same period in 2019.
Draught ale and lager sales – the main contributors to revenue – were 8% down it reported, reflecting the squeeze on drinkers’ budgets from surging inflation during the period – mostly driven by energy costs.
But the company’s chairman, Tim Martin, also blamed the continuing trend of working from home despite the end of COVID restrictions.
Wetherspoon’s said that when the sales were coupled with investment in staff and other rising costs, including fuel, the company now expected to report losses for the year to the end of July of £30m.
In May, Wetherspoon’s had expected to break even after two consecutive years of losses due to pandemic disruption.
Pubs and restaurants have been struggling to recruit and retain staff amid widespread labour shortages since.
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Wetherspoon said it was spending on wages to “strengthen our position” for the new financial year ahead.
Mr Martin told investors there had been many “unintended consequences” of the decision to keep people at home during the pandemic.
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“Large numbers of people, as has been widely reported, have left the workforce, mainly through early retirement.
“Many people now work from home, rather than from offices, which has had a significant impact on transport and hospitality businesses, among other examples.
The ‘fear factor’, used by governments to encourage compliance with lockdowns and restrictions, has also had lingering after-effects, with many people remaining cautious about leaving their homes,” he wrote.
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Matt Britzman, equity analyst at Hargreaves Lansdown, said: “The booming rebound in pub sales Wetherspoon’s was hoping for hasn’t quite panned out, with sales just about in touching distance of pre-pandemic levels.”
He added: “Hefty investment in labour, repairs, and marketing to try and reinvigorate the customer base mean costs are racing higher.
“That’s expected to push the bottom line into negative territory at the full year mark, which is disappointing – but ultimately those costs are a necessary evil.
“The difficulty now, for the entire pub sector, is that drinking and eating at home looks to be sticking around longer first thought. That trend’s likely to continue, as the cost-of-living crisis looks poised to accelerate the tightening of purse strings.”
