Wetherspoon raises the spirits as pub sales rebound

JD Wetherspoon, the pubs group that issued a profits warning in November, yesterday reported a rebound in sales over the Christmas period but said aggressive promotions had taken their toll on its profit margin.

The company, which undercut supermarkets on a number of products such as Red Bull and Guinness, said like-for-like sales rose 4.2 per cent in the six weeks to 5 January. This was an improvement on the 3 per cent gain seen during November. The shares, which traded at nearly £4 a year ago, rose 6 per cent to 186p.

But John Hutson, the managing director, was reluctant to read too much into the sales gain. "It was a very short span of time. Nothing much has changed since November." The festive marketing drive, which ran in addition to the discount operator's usual quarterly promotions, helped bar sales to grow by about 1 to 2 per cent after being flat in November, Mr Hutson added.

Nigel Popham, an analyst at Teather & Greenwood, said: "They are having to buy their sales and that's a very costly process. To some extent they're almost giving it away, I think." Greg Feehely, at Old Mutual Securities, said the further 1 percentage point fall in the group's operating margin to 10.7 per cent remained "a significant concern".

Wetherspoon, which has more than 600 pubs, said sales during the period had increased by 22 per cent to £86.9m. Year-to-date sales for the 23 weeks to January were also up by 22 per cent at £311.8m, it added.

The group, which also owns the smaller Lloyds Number One brand, confirmed it intended to open between 50 and 60 new pubs this year, most of which will open in the second half. It has already opened 19 new outlets.

Mr Popham said: "They should slow down [new openings] and focus on extracting the maximum profit from their estate. The world doesn't want [more pubs]."

The group's November profit warning came after it reported 5.3 per cent like-for-like growth in its first quarter to October and a 5 per cent rise in its previous financial year. The warning unnerved the leisure sector, which has been rattled by the near financial collapse of SFI, a rival pubs chain, and downbeat trading statements from a string of pubs groups including Regent Inns and Wolverhampton & Dudley.