Margins hit at JD Wetherspoon

Despite what it calls "strong food growth" throughout its estate, JD Wetherspoon acknowledged margins had been hit by the nationwide smoking ban.

In a trading update released today the managed pub group said like-for-like sales in the first 11 weeks of the fourth quarter (to July 15) rose 4.9 per cent. This follows a slowdown in the earlier part of the year.

Year-to-date like-for-likes increased 5.8 per cent, with overall group sales up 6.9 per cent. The change to non-smoking "has led to strong growth in food sales allied to a slow-down in bar sales," said the company.

"Whereas this may have an initial impact on margins, we believe that this legislation has resulted in pubs becoming more attractive to the majority of customers."

The group noted that the last quarter to date has seen "reasonably good" like-for-like sales and a "relatively high level of expenditure" regarding its non-smoking plans.

While the outlook for 2008 "involves more uncertainty than usual" thanks to the smoking bans, Wetherspoon said it was "encouraged" by the sales performance in the relevant areas so far.

Provided such sales patterns continued, "a reasonable outcome is anticipated", it added.

Speaking to thepublican.com​, chief executive John Hutson said the phased introduction of non-smoking pubs across the group's estate in recent years meant the impact of the bans' eventual 'official' arrival had not been so damaging.

"We introduced non-smoking when others were still allowing smoking in their pubs. That had an impact on us and our sales were down seven per cent in the first year. But in the second year we got those sales back.

"Like-for-like sales in all four countries are up. And as we have a spread of businesses across the UK we believe we can extract positives from all types of conditions."

Hutson admitted it would take "a big effort" to maintain the momentum across the estate of five per cent sales growth, with which to maintain margins, but that having had two years' worth of non-smoking outlets he remained confident it would match expectations.

"Having seen what we can do in Scotland we're a bit more confident about the rest of the country," he added.