Wetherspoon, which has 951 pubs, reported food sales up 7.3% in the 52 weeks to 26 July, compared with a rise of 12% for the previous year.
Panmure Gordon analyst Anna Barnfather claimed Wetherspoon was stuck in a strategic vortex and its value offer was “losing resonance in the current aspirational consumer climate”.
She added: “We believe that Wetherspoon faces stiff competition from the surge in the supply of casual- and fast-dining chains and that its business model (location, size, drinks/food sales mix) and value positioning leave it significantly exposed to labour inflation.”
VAT savings on food
Analyst:
Wetherspoon’s faces stiff competition from the surge in the supply of casual- and fast-dining chains and that its business model (location, size, drinks/food sales mix) and value positioning leave it significantly exposed to labour inflation
However, chairman Tim Martin attacked the rising amount of tax the sector had to pay on food compared with supermarkets, which were able to subsidise alcoholic drinks with their VAT savings on food.
“Supermarkets pay virtually no VAT in respect of food sales, whereas pubs pay 20% – and this disparity enables supermarkets to subsidise their alcoholic drinks sales to the detriment of pubs and restaurants,” he said.
“We believe that pubs are taxed excessively and that the government would create more jobs and receive higher levels of overall revenue if it were to create tax equality among supermarkets, pubs and restaurants.”
The firm was happy to pay its share of corporation tax and recognised it was a major contributor to the economy, Martin added.
In the 52 weeks to 26 July Wetherspoon paid £632.4m in taxes, which was up £32.2m for the same period in the previous year and equated to about 41.8% of the firm’s sales.
Earlier this month the hospitality VAT cut campaign put forward a plan to the government for a staggered reduction in the level of the tax for hospitality businesses.
At record levels
Meanwhile, the business would continue to focus on boosting its Food Standards Agency (FSA) hygiene ratings, which were at record levels, Wetherspoon said.
More than 850 Wetherspoon pubs were rated on the FSA’s website, with an average score of 4.93 stars out of five. 94.1% of pubs achieved a five-star rating and 5.1% achieved four stars.
“We believe this to be the highest average rating for any substantial pub company,” it said.
Total like-for-like sales rose by 3.3% for the same period, revenue was also up 7.4% to £1.51bn, but pre-tax profit fell 2% to £77.8m.
Wetherspoon opened 30 pubs during the year, closed or sold six and intends to open 15–20 pubs in the year ending July 2016, it said.