Cost pressures will limit future promotions at JD Wetherspoon

Wetherspoon’s chairman and founder Tim Martin said: “Customers are very price sensitive because they have to be. I’ve noticed in food there is a switch to lower-priced items. People are looking for deals and bargains, as they should be really.”

Wetherspoon, which has 60 pubs in Yorkshire, reported a six per cent decline in pre-tax profits to £66.8m in the year to July 24.

Martin Geoghegan, Wetherspoon’s operations director, said that the group’s Yorkshire pubs are holding up well.

“The food deals are very popular with local people, especially enhanced meals such as hand battered fish. The discounted lunch deals are exceptionally popular,” he said. “Real ales are exceptionally strong in the Yorkshire region.”

Over the year to July 24 the group opened three new pubs in Pudsey, Ilkley and Todmorden, creating nearly 100 new local jobs, as part of a plan to look beyond larger cities and towns.

It has also identified new pub sites in Sheffield, Wakefield, Beverley, Halifax, Whitby, Morley, Garforth, Cottingham, Malton, Saltaire, Hebden Bridge, Pontefract, Selby and York.

It added that it is looking for more sites in the region

Talking about the current tough trading environment, Mr Martin said: “It will be difficult to increase profit. That is the long and the short of it and I think it will be a challenge to hold the operating margin. It’s by no means guaranteed.”

Like-for-like sales rose 2.1 per cent in the year to July 24, but slowed to growth of 0.4 per cent in the six weeks to September 4.

Wetherspoon has been one of the best-performing pub groups in the downturn because of its value-for-money offers, such as a burger and soft drink for £3.99.

But Mr Martin, who opened his first Wetherspoon pub in 1979, said future promotional activity would be limited because of cost pressures.

“We’re not anticipating much at the moment because of the fact the whole industry is confronted by price increases,” he said, highlighting next month’s rise in Britain’s minimum wage which will affect pub staff, and increases in utility bills.

He said that last month’s trading had been hit by riots across Britain which led to some 100 pubs being temporarily closed on police advice. Wetherspoon’s Great Harry pub in Woolwich, south-east London, was burnt down during the disturbances.

“It’s bad for trading, particularly in those local communities, so it certainly had an impact,” he said.

Analyst Nigel Parson, at Evolution, said: “Wetherspoon’s like-for-like sales remain just positive, but the pressure can be seen through the deteriorating margin. It opened 50 pubs in the year with 14 in the last two weeks and it plans to open another 50 this year – this is the key driver for the business.

“Like-for-like sales are just 0.4 per cent up for the first six weeks of the new year – a period affected by poor weather and rioting. We would expect a modest recovery but margin pressure will remain.”

A long-time critic of politicians’ attitudes towards the pub industry, Mr Martin renewed his attack on the “unsustainable” levies facing the industry after revealing Wetherspoon’s tax bill topped £450m in the year to July 24.

Mr Martin said the tax disparity between supermarkets and pubs is creating a serious competitive disadvantage and leading to the closure of many pubs.

He said total taxes paid to the Government were £453.1m, including VAT of £204.8m, excise duty of £120.2m, PAYE and National Insurance of £65.2m, property taxes of £41.7m and corporation tax of £21.2m. He said: “We believe that the current level of tax levied on the pub industry is unsustainable and is directly leading to the closure of many pubs, which have become uncompetitive in relation to neighbouring countries and to supermarkets.”

Mr Martin said that supermarkets pay no VAT on food sales, whereas pubs pay 20 per cent, adding that the cash tax per pint of beer paid by supermarkets is far less than that paid by pubs.

“This tax disadvantage has inevitably led to an increase in beer sales from supermarkets and a consequent decline in pubs’ beer sales. British pubs and restaurants now suffer a huge competitive disadvantage, compared with those of our nearest major neighbour France, which levies far lower levels of excise duty and VAT.”

UK pubs pay the second-highest rate of excise duty on beer and wine in Europe.