Wetherspoons shares surge over 10% as profit outlook improves on easing cost pressures

Founder and chairman of Wetherspoons, Tim Martin said he anticipates profits in the current financial year 'to be in line with market expectations'. Picture: Dominic Lipinski/PA Wire

Wetherspoons pub chain shares surged more that 10% after it said a recent improvement in sales and reduced cost pressures are set to drive an “improved” financial performance next year.

The company, which operates inexpensive pubs for punters in the UK and Ireland, said easing energy costs in particular will boost the company’s performance in the next financial year.

Wetherspoons chairman Tim Martin also said he anticipates profits in the current financial year “to be in line with market expectations”.

In a trading update, Wetherspoons said like-for-like sales in the first 10 weeks of the company's fourth quarter, ending July 31, were up 11% from the same period pre-pandemic in 2019 and rose 11.5% compared to the same the period last year.

However, the firm should not go "popping the champagne corks just yet", eToro analyst Adam Vettese said.

Households are still being clobbered by rising interest rates and higher inflation, which might affect consumer spending on things such as eating out and going to the pub.

Stubbornly high inflation rates could pose a threat to pub owners as cash-strapped shoppers may still turn to supermarkets to stock up on beers, wines and spirits instead of going out.

"The hospitality sector is facing tough economic conditions currently but this could work to J D Wetherspoon's advantage as consumers look for affordable options when going out," said Jocelyn Paulley, retail and leisure partner at Gowling.

The chain experienced high demand during the recent bank holiday period in the UK and posted record Easter sales in April, displaying the resilience of low-cost leisure.

Meanwhile, the company has recently opened three pubs and sold, closed, or surrendered to the landlord 28 pubs.

The company hit back at claims that these disposals were a "money-raising" exercise, provoked by the difficult trading circumstances for the hospitality industry in recent years.

“This is a misinterpretation,” the company said, adding:

The disposals have raised relatively modest amounts and almost all are related to circumstance where there is another Wetherspoon pub nearby.

Wetherspoon has over 800 pubs, which are located mostly in Britain. It also has eight properties in Ireland, including in Dublin, Cork, and Carlow, and has long stated its ambitions to open new Irish pubs.

During the pandemic in 2021, the British pub group began the roll-out of its €50m expansion drive across the Republic of Ireland.

• Additional reporting by Retuers and Bloomberg