Wetherspoon warns of FY loss, seeks loan waivers

UK pub chain JD Wetherspoon said it expected to make a full year loss and said it would ask lenders for waivers as it looked to bolster its finances amid the coronavirus pandemic.

The company, run by vocal chairman Tim Martin, on Monday said said like-for-like bar and food sales fell 16.9% for the 44 days to Aug. 16.

Wetherspoon had reopened 844 of its 873 pubs and said sales had “gradually improved, with a rapid acceleration recently, largely due to subsidised food, coffee and soft drinks in the early part of the week”.

The company said it had seen material benefit from the government’s ‘Eat Out To Help Out’ scheme and the addition of extra outside seating, but warned of subdued sales once scheme ends.

It also urged the government to maintain a lower value-added tax rate for meals. Finance Minister Rishi Sunak in July introduced a temporary 5% reduced rate of VAT for certain supplies of hospitality, hotel and holiday accommodation, and admissions to certain attractions.

The cut from the standard rate of 20% will run to January 12, 2021.

"The company expects to make a loss for the year ending 26 July 2020, both before and after exceptional items. Some of these exceptional items will be related to the Covid-19 pandemic," Martin said.

AJ Bell investment director Russ Mould said that although pubs, restaurants and cafes were reporting a pickup in sales thanks to the government initiative there were "growing fears that the hospitality sector will see a sharp downturn in sales activity once the money-off scheme ends on 31 August".

“Wetherspoon is cautious about the outlook for sales from September onwards, and other hospitality operators have echoed similar thoughts. One could argue that if Wetherspoon is concerned, others should really be worried, as its low-priced menu of food and drink puts it in a strong position to attract cash-strapped consumers."

“It’s understandable that Wetherspoon is making a big song and dance about how it is following social distancing guidelines as it wants the public to feel that its pubs are safe to visit."

“Guidance that it will report a loss in its most recent financial year won’t be a surprise given the considerable disruption to trading. What really matters now is how the business fares without the sales incentive and if it can avoid pushing up prices to help claw back some of the lost revenue from earlier this year. It cannot afford to upset customers who are already in a fragile state of mind.”