Sales growth accelerates at Wetherspoon, but margins under pressure

22nd Jan 2014 07:49

- LFL sales growth picks up to 6.7 per cent- Margins fall due to higher investment- Margin guidance adjusted as new stores openUK pub operator JD Wetherspoon reported a strong pick-up in underlying revenue growth in the quarter covering the key Christmas period, but warned that margins would be dampened by higher investment in new stores.The firm, which opened the UK's first pub at a motorway service station in recent days, said that like-for-like (LFL) sales during the 12 weeks to January 29th were up 6.7%, up from just 3.7% growth in the first quarter. This pushed year-to-date LFL sales up 5.2% over the same period the previous year.Total sales growth accelerated from 7.6% to 10.6% over the second quarter, meaning that first-half sales on the whole were 9% higher than last year.However, operating margins dipped by 20 basis points to 8.1% over the first half due to increased investment in IT, training and additional operating personnel as the company prepares for an expansion in its pubs network.18 news pubs have been opened so far this financial year with a further 11 sites under development. The firm maintained that a total of 40-50 new pubs will be opened during the year ending July.Wetherspoon is now guiding to a full-year margin of between 8.1% and 8.3%, down from 8.7% the previous year. The company had previously said that the margin of 8.3% in the first quarter was a "possible indicator" for margins for the full-year.Meanwhile, at 27% it now expects a slightly higher corporation tax for this year than before. The company said it is targeting a "reasonable outcome" for this current financial year, assuming "reasonable sales growth".According to analysts at Numis Securities, LFL sales are expected to increase by 3% over the full year.The stock was up 2.22% at 806.5p in early trading on Wednesday.BC