The end of restrictions and improved consumer confidence are expected to mean better trading in the second half of the current financial year for pubs group JD Wetherspoon (JDW).

Compared with pre-pandemic trading, the six months to 23 January 2022 will see like-for-like revenues fall 11.7% and overall sales drop 13.3%.

Second quarter trading in the 12 weeks to 23 January were impacted by government ‘plan B’ restrictions and resulted in accelerated falls in a 15.6% like-for-like sales decline and total sales reverse of 16.6%.

Chairman Tim Martin confirmed that this means the company will make a loss in the first half.

RECOVERY POTENTIAL

But Shore Capital leisure analyst Gregg Johnson is optimistic that the worst may now be behind Wetherspoon. ‘With [Covid] case numbers falling and restrictions set to be eased we would expect sales to recover over the coming weeks to pre-Omicron trends and building thereafter,’ he said.

Shares in Wetherspoon have been depressed for months, losing around a third of their value since summer 2021. But investors showed some signs of warming to the story again, the stock up 2% to 923p in Wednesday trading (19 January2022).

That said, Johnson believes that current profit expectations this year ‘appear too high.’ According to Bloomberg data, the consensus is for pre-tax profit of £51 million for the 12 months to 25 July 2022.

Johnson remains cautious because of the positioning of the estate with its significant metropolitan exposure and its value led proposition which, he suggests, means the recovery will take longer to materialise.

The company has noted in recent updates that the older profile of its customer base had resulted in a more cautious return to pre-pandemic activity.

Longer-term, Johnson remains confident, saying that he wouldn’t bet against the company materially increasing its market share.

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Issue Date: 19 Jan 2022