Covid-19 and the UK government's response to it continues to cause Tim Martin and his dominant British pub chain J D Wetherspoons a chronic hangover headache.
The pub chain has released its full year earnings for the fiscal year that concluded on July 31st. And it doesn't make for particularly pretty reading. Here are the headlines:
Charlie Huggins is the Head of Equities at investment firm Wealth Club. He had this to say about J D Wetherspoons' announcement:
“2022 was another annus horribilis for Wetherspoons. The recovery from the pandemic has been slower than the group initially expected, meaning sales and profits are a long way short of where they would want them to be. And while the threat of Covid is now receding, another has reared its ugly head - inflation."
"Wetherspoons business model is heavily exposed to the rise in energy and food bills. While it can pass on some of these cost increases, it will be reluctant to push prices too far, for fear of ostracizing its customer base."
"It's not all bad news. With almost 900 pubs, each massive and serving huge volumes of drink and pub grub, Spoons has a size advantage over pretty much all its rivals. Sales are also on an improving trajectory, up 10.1% in the first 9 weeks of the year. Growing sales are vital in an inflationary environment, giving greater scope to shoulder cost increases."
"Nevertheless, 2023 is shaping up to be yet another challenging year for Wetherspoon's. Higher interest rates and inflation are strangling the economy, and will lead to significantly higher costs for the group. Combine this with Wetherspoon’s low margins and low price strategy, it could leave investors nursing a hangover."
Main picture courtesy of Creative Commons / The Reading Chronicle
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