Investors raised a glass to JD Wetherspoon on Wednesday after the pub group posted rising sales in their final quarter and announced they no longer required the financial flexibility from lenders demanded by the pandemic.
Wetherspoons said sales for the first ten weeks of the final quarter were 11% higher than the comparable period before the pandemic and 7.4% higher than last year.
The company also sees the pressure of cost inflation easing and anticipates earnings for the coming half-year period to be in line with the most recent period.
“The company expects profits in the current financial year to be in line with market expectations,” said the chairman of JD Wetherspoon, Tim Martin.
“As a result of a continued improvement in sales and a slightly reduced expectation for cost increases, for example energy costs, the company anticipates an improved outcome for the next financial year, and anticipates an outcome for the first half of FY24 approximately in line with the second half of FY23.”
Financial pressures ease
The strong trading performance has helped ease pressure on their finances, and the group now sees no need for covenant waivers from the end of the current quarter.
“A key takeaway from Wetherspoons’ otherwise steady as she goes trading update was the news it is no longer going to be reliant on the slack offered by lenders during Covid as it brings its borrowings under control,” said Danni Hewson, head of financial analysis at AJ Bell.
“The move away from covenant waivers is a sign Wetherspoons has finally been able to put the pandemic behind it, allowing the pubs group to capitalise on an opportunity to draw in more cost-conscious punters and gain market share as a survivor in a sector which has endured an apocalyptic few years.
“Wetherspoons has been particularly exposed to inflationary pressures thanks to a longstanding business model of prioritising volumes over margins, however it is now streamlining its estate, implying an attempt to become a leaner business. There are also encouraging signs that costs are starting to level off.”
Wetherspoons shares were over 9% higher at the time of writing.