JD Wetherspoon delivers strong finish

24th Jul 2013 09:20

Pubs group JD Wetherspoon impressed the market on Wednesday morning after saying that trading in the fourth quarter was better than expected.The company said that it is now on track to achieve a "slightly better outcome (before any exceptional items) for the current financial year [ending July 23rd] than previously anticipated".Like-for-like (LFL) sales increased by 3.5% in the 11 weeks to July 14th, lifting financial year-to-date (50 weeks to July 14th) LFL sales growth to 6.0%. Analyst James Hollins from Investec said he expected LFL sales to grow by just 1.0% in the fourth quarter against tough comparatives the year before. His full-year LFL sales estimate had pencilled in 5.2% growth.Operating margins were also better than expected at 9.5% in the fourth quarter and amounted to 8.7% for the full year (Investec forecast: 8.5%)."This is a very strong performance and we take further encouragement from the margin beat given historic criticism of the group chasing revenue at the expense of margin (or vice versa)," Hollins said.Meanwhile, analyst Simon French from Panmure Gordon said he expected consensus profit forecasts for the full year to increase by 2-4% on the back of Wednesday's update.Wetherspoon said is welcomed the reduction in beer duty announced in the March budget."However, the late night levy, machine gaming duty and business rates taxes have increased, as well as pension costs. Continued progress in sales will be required in order to overcome these costs. The biggest dangers to the pub industry are the VAT disparity between supermarkets and pubs and the continuing imposition of stealth taxes."The stock was up 5.54% at 705p by 09:57.BC