- Pubs group warns substantial increases in costs could mean profits miss expectations
- This follows on from January’s downbeat trading update
- Profits will be lower in the current financial year than in the year before the pandemic despite much higher revenues
“Higher costs forced JD Wetherspoon to serve up a profit warning in January, and the same problem has now obliged the pub group’s chair Tim Martin to issue another cautionary outlook statement as part of its third-quarter update,” says AJ Bell investment director Russ Mould.
“Mr Martin has flagged ‘substantial’ increases in costs and as a result the company may not meet analysts’ profit forecasts for the year to July, even though they were already expecting a drop in pre-tax income to £73 million, compared to the £81 million earned in the last financial year.
“More gallingly still for the company and its shareholders, JD Wetherspoon now looks set to make less profit in the year to July 2026 than it did in the pre-pandemic year to July 2019, even though sales will be higher by some £400 million.
Source: Company accounts, Marketscreener, analysts’ consensus forecasts. Financial year to July. *Excludes exceptional items.
“Competition, not just from rival pub groups but other suppliers of food and drink including supermarkets and other leisure options remain a constant challenge for the company, and one that it meets head on with the value, quality and range of choice that JD Wetherspoon seeks to offer to its hungry and thirsty customers.
“But the UK tax regime and input cost inflation in the form of higher national insurance contributions, utility bills, wages, and business rates leave the company running fast to stand still with regard to its profits. The benefits of a tightly and well-managed estate are not filtering through to the bottom line, even if the number of pubs is down over the last 10 years and revenue per pub per week is much higher.
Source: Company accounts
“In the fiscal year to July 2019 – the one before the pandemic and all the changes that brought in terms of social interaction and behaviour during and after lockdowns – JD Wetherspoon generated £1.8 billion in sales in made £102 million in pre-tax profit. Earnings have never returned to that level, despite a substantial increase in the top line.
“Investors were already aware of the myriad challenges that faced the firm, as evidenced by how its share price has never returned to its pre-pandemic highs either.
Source: Company accounts
“The slide reflects fresh concerns about how difficult the backdrop really is for the company, as healthy like-for-like sales growth is gobbled up by rising costs.
Source: Company accounts
“Net debt is expected to increase a little in the current fiscal year, to between £740 million and £760 million, compared to £724 million as of July 2025. This is not an uncomfortable level, and the company continues to run a buyback scheme and acquire pub freeholds where it feels appropriate.
“All the same, a higher interest bill over time may limit the company’s scope to run further share buyback schemes, after returns of over £100 million to investors via this mechanism in the last two years and 2025’s return to the dividend list after a four-year hiatus.
“The company is responding to all these issues, as it continues to actively manage its pub estate. In the first nine months of the fiscal year, eight new openings offset eight sales, while JD Wetherspoon opened 13 more franchised pubs to take the total to 21. This approach lessens the initial amount of money and investment needed to open a site and could also mean that the new sites make a quicker contribution to the bottom line.”
Source: Company accounts
