JD Wetherspoon sticks to guidance despite quicker third quarter sales

JD Wetherspoon continues to see full-year trading in line with expectations, despite continued strong growth in sales.

The UK pub chain's total sales for the 13-week period up to 28 April 2019 jumped by 8.4% compared to the year before with like-for-like sales climbing by 7.6%, which was a tad slower than the 9.6% jump observed over the first six weeks of the period.

Year-to-date total sales were 7.6% higher and up by 6.8% on a like-for-like basis.

The FTSE 250-traded company has opened three new pubs and closed seven since the start of its financial year, though it intends to open two further pubs in the final quarter.

Across the year to date, Wetherspoon has splashed out £70.9m on buying the freeholds of pubs of which the company was previously tenant, though the company said its position remained "sound" with net debt at 28 April standing at £746m and is expected to be around £740m at the end of the financial year.

Tim Martin, chairman of JD Wetherspoon, said: "We continue to anticipate a trading outcome for this financial year in line with our previous expectations."

Previewing the third quarter trading update in a note on Tuesday, analysts from Numis had expected like-for-like revenue to have increased by between 7-8% during the quarter but lamented the lack of profit expectation upgrades thus far, despite "pronounced strengthening of sales".

"Our concern is that despite reporting the strongest LFL growth in the sector, JDW is proving unable to grow profits, in the event of a slowdown in sales the impact of an operationally geared P&L would be materially negative," said the note from Numis.

Meanwhile, analysts at Peel Hunt added that the pace of LFL sales growth has eased, having risen by 9.6% in the six weeks to 10 March the total third quarter outcome was down at 7.6%, implying an increase of just 5.9% over the last seven weeks.

David Madden at CMC Markets UK was in a similar frame of mind, telling clients: "The group continues to review its operation, as it closed seven pubs, and opened three new pubs, and it intends to open two establishments this year. Investors are concerned about higher operational costs, and that weighed on the share price this morning. The stock hit a record-high last month, so a pullback isn’t a surprise."

JD Wetherspoon's shares were down 4.68% at 1,282.00 at 0926 BST, but remained just a shade below their all-time high.