JD Wetherspoon has updated on third-quarter trading, with like-for-like sales up 12.2% over the same period last year. For the first nine months of the year, sales are up 12.7%.
Easter week sales reached record levels, and full-year sales are expected to reach new highs.
The final quarter will benefit from two bank holiday weekends, although Coronation Day was noticeably quiet.
The Group opened one pub in the quarter but exited ten. Thirty trading sites remain on the market or under offer.
Net debt was down to £738m from £906m.
The shares were up 6.0% following the announcement.
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Our view
Despite the ongoing pressures facing consumers and the hospitality industry, Wetherspoon's pubs are trading above pre-pandemic levels. As yet, there's no sign of this improvement tailing off. Profitability has not recovered to the same extent, no surprise given the relentless assault on input costs.
The Group's been fighting hard to maintain its value offering. Prices were up around 4% last year; last we heard, it's hoping to keep price rises below inflation. But cost pressures across the industry remain challenging.
The budget credentials are intact for now, but we don't know how well customers will tolerate potentially significant price rises further down the line. And with inflation remaining worryingly stubborn, the pub chain may have little choice but to do so.
Whilst its traditional customer base may be particularly sensitive to price rises, seeing a wider range of customers in its pubs is encouraging. The pivot towards a younger and more family-orientated demographic looks good, and Wetherspoon's strong brand perception holds it in good stead. But neither the Company nor the punters will be immune from continuing cost pressures.
Wetherspoon is looking to sell over 30 pubs as it seeks to increase their average size and the distance between them. It looks positive and should help increase average footfall and profitability.
A return to cash generation has enabled further upgrades to the estate, and a decent reduction in net debt levels. We think debt repayment will remain the priority for some time and don't see a return to cash rewards to shareholders being on the cards anytime soon, though some analysts disagree.
Wetherspoon is proud of its progress towards sustainability, but we still have question marks over the G in ESG (environmental, social and governance). The Company disagrees with the guidance in the UK Corporate Governance Code on the length of board member tenure, board member independence, or the relative importance of shareholder engagement.
Over the long term we remain positive that Wetherspoon can emerge from the current economic gloom stronger than before and increase its market share. That and its improving financials have been recognised by a strong recovery in the valuation, which is now above the long-term average. This increases the likelihood of volatility in the event of either earnings disappointments or movements in the stock market.
JD Wetherspoon key facts
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