Wetherspoon set for 39 pub openings
JD Wetherspoon is set to open 39 pubs by the end of its financial year in September - the highest number in years. It has already opened 33 and has six more due to open. The openings progrmme will be boosted by the acqusition of seven Chicago Rock Cafes from 3D Entertainment, which the Morning Advertiser reported yesterday.
The seven Chicago Rock Cafes, which has been acquired for five times earnings, are expected to open after the current year-end. The company reported this morning that like-for-like sales decreased by 0.8% for the 11 weeks to 12 July 2009. Total Company sales over the same period increased by 3.1%. Sales in the first six weeks of the fourth quarter last financial year benefited from a major marketing campaign offering reductions in prices for bar and food products.
Like-for-like sales in the equivalent six week period this year decreased by 2.9%. In the remaining five weeks, like-for-like sales increased by 2.0%.
In the financial year-to-date (50 weeks to 12 July 2009), like-for-like sales increased by 1.2% and overall company sales increased by 5.2%. A statement from JD Wetherspoon said: "This is an encouraging sales performance, both from our existing pubs and new openings.
Costs were lower than anticipated in a number of areas, including energy, labour and marketing. "As a consequence we anticipate reporting operating margins (before exceptionals) for the second half of this financial year of at least 10.0%, higher than our earlier expectations." The company said free cashflow in the year-to-date has been strong, enabling its to open 39 new pubs and pay a dividend of £10m, while reducing debt by approximately £40m. In the light of our sales and margin performance, we are confident about the outlook for the current financial year. It added: "As a result of the performance of our pubs, and the full year effect of pubs opened this year, combined with lower costs in areas such as utilities, the board is optimistic about prospects for the next financial year.
City comment by The PMA Team
JD Wetherspoon is finding it hard to resist buying cheap leasehold sites that need little in the way of capital expenditure. These sites can be converted to Wetherspoon venues in a fraction of the time it takes to get planning consent to convert non-licensed premises - and at about two-thirds of the usual cost. JD Wetherspoon is also managing to use the power of its covenant to negotiate substantial discounts on prevailing rents in many cases - the Newport Walkabout it picked up recently saw rent drop from £135,000 to £100,000 per annum after Wetherspoon became the new tenant. Likewise, sites in Derby and Northampton - both former Yates's - saw rent drop from £101,00 to £67,000 per annum and from £114,597 to £46,917 respectively. It is likely that Wetherspoon has negotiated a very sharp deal in return for taking one or two sites that are causing 3D Entertainment pain. I'm also hearing reports of Wetherspoon picking up the old freehold of a tenanted pub company site - one in Bournemouth, for example. Wetherspoon's sales progress is good once the effect of last year's intensive marketing campaign is taken into account
