Wetherspoons shares were higher on Wednesday as investors cheered a decent quarter of sales growth driven by a recovery in traditional ales including Abbot Ale, Ruddles Bitter and Doom Bar.
Sales for the 13 weeks to 28th April 2024 were 5.2% higher on a like-for-like basis and were 8.3% higher year-to-date.
“Wetherspoons seems to be moving in the right direction, following a difficult few years. Like-for-like sales are growing and profits are expected to come in towards the top end of expectations,” said Charlie Huggins, Fund Manager at Wealth Club.
“Wetherspoons is being helped by moderating inflation combined with a proposition that is clearly resonating with the consumer.
“Despite higher interest rates, consumers are still spending. However, they are becoming increasingly discerning. Wetherspoon’s commitment to low prices and doing the basics well are helping to keep punters loyal.”
Although sales came in at the top end of expectations, margin pressure will still be a concern for the group. Energy bills remain steady, but are lacking of any meaningful declines that would help boost the pub group’s profitability.
“Rising energy and labour costs are still a concern, and while the share price has performed valiantly since the 2022 lows, it is still languishing well below pre-pandemic levels,” Mark Crouch, analyst at investment platform eToro commented.
“The cost of a pint in a London Wetherspoons has more than doubled since 2019, and the company, who are famous for offering a cheaper pint over their rivals, are having to yield to inflationary pressures in order to defend their margins.”