JDW's stunning sales surge secrets revealed

It's rare indeed for a pub operator to report a 9.2% rise in its like-for-like sales. JD Wetherspoon (JDW) amazed the sector last week when it unveiled its rocket-like surge in business.

This growth is all the more stunning given that much of the high street is battling to maintain business in the wake of greater competition from suburban pubs opening later.

An increase in business of this magnitude can only mean two things - the company has attracted new customers and has persuaded existing customers it's worth spending more. Arguably, if most of the high street is seeing static sales on average, JDW is doing its job almost 10% better than a year ago.

The figures are all the more remarkable, bearing in mind that the company has 56 non-smoking pubs in England and Wales, where trading will still be impacted by the loss of smoking customers. On a two-year basis, these pubs are ahead by about 2.2%. This suggests that, as the company had always hoped, damage to business caused by losing smokers will wash through within a couple of years. Smokers have been replaced by new customers who appreciate the non-smoking environment. It means that the company is well-placed to shrug off ill-effects of the implementation of next year's smoking ban. The conversion lessons have been assimilated and it now knows how to spend its money to greatest effect to prepare across the rest of its estate.

However, last week's sales jump indicates something more fundamental - the company has become a much better retailer than a year ago. I suspect JDW has been helped - in the same way as Mitchells & Butlers - by the prevailing high- street environment. Take, for example, Birmingham's Broad Street pub and bar circuit, where one senior managed pubco executive believes traffic at the weekends is down as much as 25%. Against this background of diminishing total spend, better operators who have continued to invest in maintenance and innovate in retail terms have out-performed. The faded facades of other venues tell a story of distracting changes in ownership and cash constraints.

JDW has also been helped by a slow-down in its opening programme. With just 15 new pubs opening a year, management has been able to focus on improving its retail offer. Managers have been staying longer in individual pubs than at any time since flotation in 1994. Customers seem genuinely excited by extensions to beer ranges that have encompassed a welter of pricier, higher-margin products - and have shown a willingness to trade-up and experiment once in a while.

"The danger of only stocking large brands is lack of variety and interest for customers," says chief executive John Hutson. As ever, a degree of mystery surrounds what JDW has been doing to its prices in the past year. "Tesco doesn't go around telling people what it's doing with pricing," he says. There's no doubt that a huge gap still exists between the company and the pack - around 20%, according to one analyst.

But what's clear is that the company has felt more able to price locally. Hutson says that a national price list applies to only 100 pubs in the estate at the moment - it applied to two-thirds of the estate at one stage. He recalls walking around a supermarket with an area manager to compare prices just a decade ago and finding JDW to be cheaper on most products. Certainly, this battle has been well and truly lost.

"Customers are looking for a bit more than price," Hutson says, citing cask ale, which the company still sees as an area in which the off-trade has no comparable offer. Cask ale accounts for 10-12% of all wet sales and 6-7% of total sales.

JDW has also been helped by longer hours. The company has been able to extend its breakfast offer to... well, breakfast time.

But there's no doubt that the latest figures show even high street pubs can build business if they try hard enough.