Wetherspoons estate 'likely to shrink for first time in history'

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Morgan Stanley’s Vaughan Lewis estimated that the company would dispose of around 100 sites during the next two years.

His prediction comes after the company reported its results for the 25 weeks to 17 January and warned that profits for the year were likely to be towards the lower end of expectations.

Wetherspoon announced like-for-like sales growth of 2.8% for the 25 weeks and a 3.3% rise in the final 12 weeks.

Total sales were up 6.1% and 6.3% respectively for those periods.

The company said it expected the operating margin (before any exceptional items) for the half year ending 24 January to be around 6.3% — down 1.1% on the same period last year. It said this reflected the increases in the starting rates for hourly paid staff in October 2014 and August 2015, which totalled approximately 13%.

The company has opened five new pubs since the start of the financial year and has sold two. It said it intends to open 10 to 15 pubs in the current financial year.

JDW chairman Tim Martin said: “Like-for-like sales have improved in the second quarter so far. However, as indicated in our November trading update, increased labour costs will be an important factor in the outcome for this financial year. Our current view is profits for this year are likely to be towards the lower end of analysts’ expectations.”

The company’s share price fell almost 10% following the announcement and it has initiated another round of share buybacks.

Another top analyst, Anna Barnfather of Panmure Gordon, expressed concern at the viability of Wetherspoon’s offer.

She said: “The company has limited ability to move pricing due to the group’s one-brand strategy and value focus, and instead has focused on increasing volume through promotion and trading more day-parts/breakfast sales.

“This high-volume/value proposition is losing traction with consumers and has made the business more labour and capital-intensive and contributed to the dilution in margins.”