Sales blow for pubs giant as tax hike and recession continue to bite

The pubs group said tax increases, higher interest charges and the risk of reduced consumer spending meant it was "slightly more cautious" about the next financial year.

Wetherspoon reported same outlet sales for the 13 weeks to April 25 were down 0.8 per cent, compared with a 0.2 per cent decline over the nine months of the financial year so far.

Wetherspoon said total company sales increased 3.6 per cent in the third quarter, compared with 4 per cent in the year to date.

The firm now has 767 pubs across the country, having opened 26 new sites in the year so far and closed two.

It anticipates adding a total of 45 new locations in the year to July.

Margins held up in the three months and the company said profit and cashflow continued to be "resilient" despite price rises in January and March caused by higher VAT levels and an increase in excise duty for pubs.

The firm also reported a cash payment of 14.9m for a claim against overpayment of VAT on amusement machines, although it said the potential income would be contingent on continuing a legal process.

"The performance of our pubs which opened within the last two years is encouraging; we continue to believe there are substantial opportunities for us to acquire sites at reasonable prices," the firm said.

"We therefore remain confident about the company's prospects for this financial year.

"However, we now feel slightly more cautious about the outlook for the next financial year, as a result of the annualised effect of recent tax and duty increases, and higher interest charges, combined with the risk of more subdued consumer expenditure."

Shares in the firm fell yesterday.

Hugh-Guy Lorriman, of Seymour Pierce, said: "Even the mighty Wetherspoon can suffer in the current environment – and as we see... the like-for-like trend worsened in the third quarter relative to the year to date."

He said his forecasts for the full year and 2011, which are already at the lower end of analyst predictions, would not be altered after the update.

KBC Peel Hunt analyst Paul Hickman downgraded his 2011 pretax profit forecast 6 per cent, to 77m, but kept a "buy" recommendation on the stock.

"This brand is likely to perform well relative to the sector during further difficult economic conditions, as it did in last year's recession," he said.

Finance director Keith Down said that Wetherspoon still had a target of opening 250 pubs in the next five years, taking advantage of sites being sold by struggling competitors at reasonable prices.

"It (meeting the target) will depend on the availability of sites. We are working very hard to bring in 250 over five years. If some of them come through more quickly that is because sites are becoming more readily available and that would be a good thing."

Chairman and founder Tim Martin, who holds a 24 per cent stake, said in April that the company may switch its strategy and buy a block of pubs to speed up expansion.

Mr Down said he was hopeful the company's recent move to opening at 7am to serve breakfast and coffee, and the decision to show World Cup football matches in the pubs for the first time, would give sales a boost.

"We will be marketing the World Cup and it's an opportunity for us, depending on how long England are in the tournament," he said.

Pubs under pressure

The pub industry has been hammered in recent years by the smoking ban, the recession and rises in alcohol duty.

Wetherspoon had been one of the better performers in the pubs sector throughout the recession as offers, including ham, egg and chips for 2.99, and a pint of Greene King IPA beer for 99p, proved attractive to cash-strapped consumers.

In April, Britain's biggest pubs firm, Punch Taverns, reported a 20 per cent drop in its first-half pre-tax profit and said it was having to

pay 2m a month to bail out a number of its struggling tenants.