Wetherspoon's second-half outlook hits shares

07/03/2008 16:05

By Dan Lalor

LONDON (Reuters) - Pubs firm JD Wetherspoon said rising costs meant it was slightly more cautious on the outlook for its second half, when it expects like-for-like sales to fall 3 percent, knocking its shares on Friday.

Wetherspoon met forecasts with a 13 percent fall in pre-tax profit to 28.5 million pounds in the 26 weeks to January 27, on turnover up 0.4 percent to 440 million pounds. Like-for-like sales fell 2 percent.

Chairman Tim Martin used the occasion to lambast attitudes to social drinking in Britain, saying media coverage of drunken partying by sports stars and other celebrities led to copycat antics by the public.

Chief Executive John Hutson said like-for-like sales would continue to fall as customers are still adapting to the July 2007 smoking ban in England.

Trading at Wetherspoon pubs since the ban has seen strong growth in food sales and a decline in bar sales.

Hutson said higher food costs meant Wetherspoon’s second-half operating margin would be lower than the 10.1 percent seen in its first half. The fall will be no more than 1 point and is likely to be less than that, he said.

Wetherspoon shares were down 9.9 percent to a seven-week low at 281 pence by 9:35 a.m.. Its shares, along with pub rivals such as Punch and Enterprise Inns have been in freefall since last spring, in .....continued below

Advertisement starts

---

---

Advertisement ends

the run-up to the smoking ban and since the first signs of a decline in consumer confidence.

KBC Peel Hunt analyst Paul Hickman repeated his "sell" rating on Wetherspoon stock, saying the sales forecast "is a change from previous guidance that the smoke ban impact was expected to diminish going forward."

Numis Securities repeated its "hold" rating, saying: "Although we believe the pub sector has fundamental long term growth attractions, and in particular Wetherspoon with its value offering, we think near-term sentiment towards the sector will remain negative."

Hutson said Wetherspoon’s performance was as good as any in the industry but it will now open only 23 pubs in its current financial year, having cut the figure to 25 from 30 in February.

Hutson said that was an indication of how "we have drawn our horns in a bit" in the current environment.

Wetherspoon has 214 sites in its pipeline for new openings, and these should cost less per square foot because the company was renegotiating contracts with landlords amid weakness in the property market, he said.

It raised its interim dividend 10 percent to 4.4 pence.

SOCIAL ISSUES

Chairman Martin said the behaviour of customers at Wetherspoons pubs was generally good. "We aim to attract a wide variety of age groups, which is itself a contributing factor to good behaviour," he said.

He said the current focus on keeping under-18s out of pubs "does not address the underlying issues" -- not least because troublemakers tend to come from older age groups.

"Poor behaviour by a number of celebrities during the recent televised Brit Awards and by habitual drunken celebrations in the context of sporting events and other occasions ... receive huge press coverage," Martin said.

Page: 12next

© 2008 Reuters Click for restrictions