Wetherspoons intimate journalist conference for its preliminary results held on Friday in the historic city pub The Cross Keys shed interesting light on the much discussed woes of the casual dining sector. Greene King, Fulham Shore, Tasty, Restaurant Group, Comptoir, Richoux have all declared slowing sales with Marstons and Mitchells and Butlers also suggesting a weakening 2017 market. Visa recently released figures that showed slowing spending growth, supporting the view that consumers are beginning to reign cash spend in.
GROWTH
Yet Wetherspoons has continued to steam ahead with total growth of 6% since the financial year-end July 17 and 4.1% for 2016/17, like for like sales up 4.0% and continuing growth in weekly sales per pub at £41.7k/week. Chairman Tim Martin did sound a note of caution that they did not expect the unexpected sales growth of the summer holidays to continue through 2017/2018, but that 3-4% growth would be required for 17/18 profit targets to be achieved.
FOOD DRIVERS
Food growth at 5.7% and contributing 35% of sales is a key driver. Wetherspoons is now the most used brand for sit down meals and the standout choice for a drinking out occasion at a branded bar according to Peach Brand Track. Further it is the 5th most used eating brand against ‘quick serve’ outlets such as McDonalds, Costa, Greggs and KFC. Breakfast scores highly with customers as the 4th most visited.
BREXIT – MOVE SUPPLY?
In a not unexpected bullish view of BREXIT he showed some inkling as to the concept of how they might move and change sources of supply to non-EU suppliers. At the same time he stressed that this would be only if they really had to. He declared his support of his current suppliers whether they be in Sweden (largest cider supplier) or Italy (Spoons favourite coffee brand) and that they would be equally concerned to loose these partnerships with a bad BREXIT deal. However that he had confidence that their partners would face such situations with creativity and ways in which they would take on the challenge.
WINE SUPPLY & DUTY
Wetherspoons Wine is mostly imported from outside the EU, and so BREXIT is unlikely to have much affect on them as it attracts an outside EU tariff rate currently. Although Tim Martin did say that it would be ‘unfortunate’ if the chancellor chose to raise duty again this autumn unduly skewing against the pub trade. The result will be and is in many circumstances, that people stop
‘living in this small town or suburb, where the pubs have shut’
HOTELS
Tim Martin reflected on the growth from small base of the hotel business, which has grown to 53 hotels, and how the pub is becoming a throwback to the coaching inn of yesteryear , developing rooms of 7, 10 up to 20 below the national hotel chain thresholds of around minimum 50 rooms. Although he did also confirm that stables will not be part of the development commenting that ‘the horse had bolted on that one’.
TAX – 1600 WHETHERSPOONS?
If the uneven tax burden given to the on-trade were lifted, Martin believed that Wetherspoons could be as many as 1500-1600 pubs however the tax amount paid by each pub at £768k per year has to be reduced. He maintains that supermarkets have a significantly lower tax and as a result the current view of potential at around 1,200.
PEOPLE
Wetherspoons has more than 37,000 employees, a catering academy that boasts 1,371 and 713 existing students and an admirable retention of Pub Managers over 11 years. With Bonuses paid of £44M, 74% of which is paid to staff working in the pubs. It is a place that staff enjoy working at. Interestingly Kitchen Managers stay for 8 years or more on average, which undoubtedly contributes to the food quality and it being a driver of growth.
Wetherspoons looks in very good shape in a sector that has declared slowing growth recently and shown some signs of over capacity. Martin said ‘like a BMW, a thousand components you just work on all the elements’ …’you’re only as good as our next pint or meal’. Looks like Wetherspoons are pulling good pints and making a good meal!
Tim Martin, the Chairman of JD Wetherspoon plcCommenting on the results, Tim Martin, the Chairman of J D Wetherspoon plc, said:
“Most ‘PLCs’ are expected to comment, in their results’ statements, on the UK’s prospects outside of the EU and on the likely impact on their individual companies.
“It is my view that the main risk from the current Brexit negotiations is not to Wetherspoon, but to our excellent EU suppliers – and to EU economies.
“As the public instinctively understands, but few academics, economists, boardrooms and City institutions grasp, democracy is the strongest economic steroid – hence the astonishing rise of countries like Japan, Singapore and South Korea, after its adoption. A fascinating insight into the thought processes of many pro-Remain ‘elites’ can be found in an article in The Spectator (appendix 2 below) by Professor Robert Tombs of Cambridge University.
“In the current negotiations, democratically-elected politicians from the UK are dealing with unelected oligarchs from the EU. Since the oligarchs are not subject to judgement at the ballot box, their approach is dictated by more sectarian factors – the interests and ideology of EU apparatchiks like them, rather than residents or businesses from EU countries.
“As a result of their current posturing and threats, EU negotiators are inevitably encouraging importers like Wetherspoon to look elsewhere for supplies. This process is unlikely to have adverse effects on the UK economy, as companies will be able to switch to suppliers representing the 93% of the world’s population which is not in the EU, but this evolution will eventually be highly damaging to the economy of the EU.
“Wetherspoon is extremely confident that it can switch from EU suppliers, if required, although we would be very reluctant to initiate such actions.
“It is my view that Juncker, Barnier, Selmayr, Verhofstadt and others need to take a wise-up pill in order to avoid causing further economic damage to struggling economies like Greece, Portugal, Spain and Italy – where youth unemployment, in particular, is at epidemic levels.
“There seems to be little genuine appetite for a free-trade deal from the Brussels bureaucracy, so EU companies are, paradoxically, reliant on the goodwill of UK consumers, who are likely to prefer tariff-free goods in the future from non-EU countries, which are generally in favour of free trade, rather than deals with companies which are subject to the diktat of those who wish to punish the UK.
“Since the year end, Wetherspoon’s like-for-like sales have continued to be encouraging and have increased by 6.1%. This is a positive start, but is for a few weeks only – and is very unlikely to continue for the rest of the year. Comparisons will become more stretching – and sales, which were very strong in the summer holidays, are likely to return to more modest levels. It is anticipated that like-for-like sales of around 3–4% will be required in order to match last year’s profit before tax. We will provide updates as we progress through the year. We currently anticipate a trading outcome for the current financial year in line with our expectations.”
Alistair Morrell
Hospitality & Catering News, Wine & Drinks Editor