Wetherspoon hit by high street pubs price war
Saturday 05 March 2005
JD Wetherspoon, the high street pubs chain, yesterday defended its bold move to ban smoking in its pubs ahead of Government legislation on the issue by revealing that its two new non-smoking pubs were significantly outperforming the rest of the group.
However, the news came as Wetherspoon admitted that the price war between high street bars was continuing to hit the group's performance. Profits for the six months to 23 January dropped 20 per cent to £22m after Wetherspoon cut prices but failed to drive enough volume to offset rising costs in the business. Like-for-like sales were flat over the six months, while utility bills soared and the minimum wage increased.
Despite the tough trading conditions, John Hutson, chief executive, defended the decision by Wetherspoon's founder and chairman, Tim Martin, to introduce a blanket smoking ban by 2006, two years before the industry is required to act. "The pubs, in St Albans and Exeter, have opened with above average sales. They also have the highest wine sales in the group. We are very pleased with the results so far," he said.
Wetherspoon has pledged to convert 10 per cent of its estate to smoke-free venues by May 2005, with the rest by May 2006. The Government has put forward proposals to ban smoking in pubs that serve food by 2008. "The number of people who smoke in the UK has halved in the past 30 years. Less than a quarter of Britons smoke. Pubs should be appealing to the widest section of society," he said.
But analysts were unconvinced that Mr Martin's smoking step will be a success given it is already experiencing difficulties. Nigel Popham of Teather & Greenwood, said, "It hasn't got the profits to play with to risk losing business from smokers. It is already under huge competitive pressure and it appears to be making its situation considerably worse."
The company expanded rapidly throughout the 1990s, but heightened competition from rival pub operators and escalating costs forced it into three profit warnings during 2004.
Shares closed yesterday at 264.75p, down from 272p.
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