Investing.com — JD Wetherspoon (LON:JDW) shares fell over 11% on Friday after the British pub chain warned full-year profit would fall short of market expectations, as first-half pretax profit dropped 32% with wage and energy costs outpacing sales growth.
Pretax profit before separately disclosed items fell to £22.4 million in the 26 weeks ended Jan. 25 from £32.9 million a year earlier, missing analyst consensus of £29 million. Revenue rose 5.7% to £1.09 billion.
Operating margins narrowed to 4.86% from 6.30%, as wages rose £28 million and total additional costs of £47 million from wages, energy, repairs and rates exceeded the company’s own prior guidance of £45 million.
The company, which previously guided for full-year profit slightly below the £81 million achieved in fiscal 2025, shifted that guidance lower, saying profit would come in slightly below current market expectations of £79 million.
Chairman Tim Martin said structural cost pressures would intensify. National insurance and labour increases would cost approximately £60 million per annum, non-commodity energy costs would add £7 million, and a new packaging levy would cost £2.4 million in the current year, he said.
“There is clearly considerable pressure on consumer finances, combined with higher taxes, wages and energy costs for the hospitality industry,” Martin said. “This may result in profits that are slightly below current market expectations.”
Trading has decelerated since the period closed. Like-for-like sales rose 2.6% in the seven weeks to March 15, against 6.1% in the second quarter and 3.7% in the first quarter. Like-for-like sales for the full first half rose 4.8%, with bar sales up 7% and food up 1.3%.
Net debt excluding lease liabilities rose to £772.9 million from £724.3 million at fiscal year-end. The company spent £20.2 million on share buybacks and £15.6 million on employee share schemes while free cash flow was an outflow of £163,000.
The board held the interim dividend at 4 pence per share. Basic earnings per share before separately disclosed items fell to 15.5 pence from 21.5 pence.
Morgan Stanley, which rates the stock “equal-weight” with a 720 pence price target, said it expected a mid-single digit cut to full-year profit consensus.