JD Wetherspoon expects lower margins due to rising costs

Ahead of the release of its interim results which are expected to be announced on 9 March 2012, the Company has revealed that total sales in the 25 weeks to 15 January 2012 increased by 8.5 per cent, while like-for-like sales climbed by 2.3 per cent – replicating last year’s figures​.

“We expect the operating margin for the half year ending 22 January 2012 to be slightly below that achieved in the first quarter of this financial year, with the potential for further decline in the second half of this financial year due to continuing cost increases,” reads the trading update.

“We expect the Company’s corporation tax rate for this financial year to be around 29 per cent.”

JD Westherspoon has opened 18 new pubs and closed two since the start of this financial year. A number of other sites are under development and, in line with previous estimates; the Company intends to open approximately 50 pubs in the current financial year.

Challenges​

“Our sales, profit and cash flow remain resilient,” continues the update. “As previously stated, the main challenges for the Company in this financial year will be the continuing cost pressures resulting from government legislation, including further increases to excise duty, business rates and carbon tax.

“In addition, as previously stated, pubs pay VAT on food, whereas supermarkets do not, and also pay far higher rates of VAT than similar businesses in Ireland and France, for example.

“In order to maximise job creation and taxation revenues, we believe the government needs to reduce VAT rates for pubs and restaurants as a priority. Notwithstanding these issues the Company is aiming for a reasonable outcome in the current financial year.”