JD Wetherspoon has warned that annual profits will fall below expectations after weaker-than-anticipated fourth-quarter sales combined with mounting food, labour and energy costs.

The pub group reported a four per cent increase in like-for-like sales during the 12 weeks to 19 July, while year-to-date comparable sales rose 4.2 per cent. However, the latter was marginally below the 4.3 per cent growth recorded at its third-quarter update.

Chairman Sir Tim Martin said sales during the final quarter had come in slightly below the company’s forecasts, while expenses had increased across food, staffing, repairs, energy and business rates.

The warning is Wetherspoon’s fourth of the financial year and sent its shares down by almost 12 per cent in early trading. Analysts had previously expected the business to deliver annual pre-tax profit of around £69.5m.

Panmure Liberum analyst Anna Barnfather indicated the broker could reduce its forecast to the low-to-mid £60m range.

Wetherspoon has sought to protect its value positioning by limiting price rises and using drinks promotions to drive customer numbers, but this has left its margins particularly exposed to inflation.

Martin said the business had introduced new products, including lower-priced BuzzBallz cocktails, and run promotions across its ale range in an attempt to boost volumes.

The pub group benefited from additional trade during the World Cup and recent warm weather, although the heatwave supported bar sales while weighing on food purchases.

Costs pile pressure on value-led model

Wetherspoon’s latest warning comes as Britain’s hospitality operators face higher wage bills, business rates and energy costs alongside continued pressure on household spending.

The company’s low-price model means it has less room than some rivals to pass rising expenses on to customers without undermining its core proposition.

Interactive Investor head of markets Richard Hunter said the strategy left the group under persistent pressure from higher costs and constrained its ability to grow margins.

Wetherspoon currently operates 793 managed pubs. It opened eight sites and sold nine during the financial year, while 15 franchised locations launched, taking its franchise estate to 23 pubs.

The business also spent £12.2m acquiring the freehold reversions of four pubs, bringing its total investment in freehold reversions since 2011 to £489m.

Year-end net debt is expected to remain at £720m, broadly unchanged from the previous financial year. Wetherspoon has also repurchased more than 6.4 million of its shares for cancellation at an average price of £6.52 each.

The pub chain is due to publish its preliminary full-year results on 2 October.

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