City snapshot: Wetherspoons shares trading at two-year low after profit hit

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JD Wetherspoon shares are trading at a two-year low after investors were left disappointed by its half-year results and cautious outlook for the months ahead.

Its share price fell over 9% after it its latest figures on Friday, bringing its total fall to over 11% since the start of the year.

The fall was driven by a decline in operating profits of 4.2% to £64.8m due to higher utility and labour costs. Investors had been expecting a profit.

Analysts at Shore Capital said the “the first half outturn was somewhat disappointing, although with trading remaining resilient, we see a positive read across to other names.”

The pub chain’s like-for-like sales were up 4.8% in the 26 weeks to 26 January, with total revenue rising 3.9% to £1.0bn. Bar sales were up 4.3% while food sales increased 5.4%

It said the sales momentum had continued into the second half of the year, with like-for-like sales up 5% in the seven weeks to 16 March.

“The company currently anticipates a reasonable outcome for the financial year, subject to our future sales performance,” said chairman Tim Martin.

Wetherspoons has warned of the impact of National Insurance and minimum wage hikes this year, which it estimates will cost about £60m a year, or approximately £1,500 per pub per week.

Martin previously called for the government to eliminate an alleged tax inequality between pubs and supermarkets.

Jefferies analysts noted that “with a low-price position relative to other operators, and increased wages affecting the whole industry, we argue that Wetherspoons is relatively better-placed to absorb the wage inflation.”

This week in the City

This week is overshadowed by the Chancellor’s spring budget on Wednesday, but there’s plenty else to keep an eye on in fmcg markets.

On Tuesday, Fever-Tree and AG Barr both release their annual results.

Ahead of Rachel Reeves’ set piece on Wednesday, the ONS will publish the UK’s latest inflation figures, which could set the tone for the rest of the day. Morrisons will also serve up its Q1 results, while Virgin Wines will update on its half-year figures.

Thursday will see a strategy event at Naked Wines while Walgreens Boots Alliance issues quarterly results in the US. packaging manufacturer Robinson will also report its latest results.

And closing out the week on Friday, ONS will put out February’s retail sales.