Wetherspoons warns that profits to be hit by rising costs

Pub giant Wetherspoons has warned that higher labour costs, taxes and energy bills will drag on the group’s profits and add to inflation in the UK economy.

Tim Martin, chairman of the 794-strong chain, said these cost increases “may result in profits that are slightly below” market expectations.

He said the business is facing £60 million in extra costs each year due to increases in national insurance and wages.

JD Wetherspoon is also facing an extra £7 million in energy costs and £2.4 million of costs from the Extended Producer Responsibility packaging tax.

“These cost increases will undoubtedly add to underlying inflation in the UK economy although Wetherspoon, as always, will endeavour to keep price increases to a minimum,” Mr Martin said.

The business reported that profits slumped by almost a third over the past half-year.

Wetherspoon told shareholders on Friday that pre-tax profits slid by 31.9% to £22.4 million for the 26 weeks to January 25.

It said this was particularly linked to higher wage costs, as well as £10 million of repairs and £9 million in business rates costs.

Meanwhile, revenues grew by 5.7% to £1.09 billion for the half-year, compared with a year earlier, with like-for-like sales up 4.8%.

This was buoyed by a 7% rise in bar sales, while food sales grew 1.3% and hotel room sales were down 0.6% after removing a number of third-party booking agents in the UK, “which charged high levels of commission”.

Wetherspoons said that, more recently, like-for-like sales grew 2.6% over the seven weeks to March 15.

It also revealed that it opened six venues over the past half-year but also shut or sold off six.

The hospitality business is expecting to have opened around 15 managed pubs by the end of the current financial year.