Froth comes off Wetherspoon despite jump in first-half profit

Shares in JD Wetherspoon tanked on Friday despite the UK pub chain reporting surging interim profits as trading continued to improve from the impact of the Covid pandemic, with like-for-like sales up 5.8% in the seven weeks to March 17.

Earnings for the 26 weeks to January 28 rose to £36m from £4.6m a year earlier. Revenue surged 8% to £991m.

Like-for-like sales increased 9.9%, with drink sales up 11.6%. Operating profit, before a separately disclosed loss of £9.8m, was £67.7m, up from £37.4m a year earlier, while operating margin improved to 6.8% from 4.1%. There was still no sign of a dividend for shareholders or guidance on when it would be reinstated.

However, the shares fell as much as 10% in early London trade. Hargreaves Lansdown analyst Derren Nathan said the strong operating profit growth "reflects the low-base to which this set of numbers were compared to".

"At under 7%, margins are still pretty thin and there was little in the statement to help see where an improvement might come from. The group’s been steadily reducing and optimising its footprint and has a good record of outperforming its peers."

"A lot of capacity has come out of the market and the hint that there might be potential of about 1,000 pubs compared to a current total of 814, could see the estate start to grow again. That may see the return of dividends kicked further down the road."

"Overall, returning the estate to growth could be a welcome development. But there’s only so much you can grow if pub numbers remain static, and for now like-for-like growth has taken a step down. 5.8% isn’t awful but if it stays at this level for the rest of the year the market’s likely to be disappointed.”

Reporting by Frank Prenesti for Sharecast.com