19th Jan 12
Wetherspoons cautious despite Christmas joy
by Harry Oldfield
Glass half empty? Weatherspoons will struggle to expand as duty on alcohol increases
Glass half empty? Weatherspoons will struggle to expand as duty on alcohol increases
An improved sales performance offered some Christmas relief for pub group JD Wetherspoon, although its chairman has warned that its expansion plans could be scaled back due to more tax increases.
The chain, which runs around 850 pubs, remains on track to hit its target of opening 50 new sites over the year ending July, but future openings could slow drastically should Chancellor George Osborne press ahead with planned hikes in duty.
Tim Martin, the company’s chairman, has called on the chancellor to scrap the increases in duty on alcohol, which have been rising quicker than the inflation rate during recent years, and plans to wait until after the Budget speech before making up his mind on whether the current expansion rate can continue.
The group revealed that like-for-like sales during the 12 weeks ending 15 January went up by 3.6 per cent, which increased from the 1.1 per cent recorded in the previous quarter. But the latest figures were somewhat flattered by comparisons with the previous December, when extreme weather conditions kept people at home and resulted in a weaker performance.
The chain said that its profit margins dropped during its financial year’s second quarter as it found it difficult to pass on the increasing cost of alcohol duty, VAT, and higher costs of food and drink to hard-up customers. Mr Martin admitted that if taxes continue to increase, they will have to reconsider their expansion plans.
The chairman said that they are paying too much duty already and that he doesn’t feel the government is correct to punish pubs like this. He insisted that it’s bad for jobs and it’s keeping people away from the pubs, pointing out that just driving around Stoke, Wolverhampton or Birmingham’s suburbs highlights the devastation which the sector as a whole has had to endure.
Mr Martin, who started JD Wetherspoon in 1979, also claimed that supermarkets have gained an unfair advantage due to the fact that they are not forced to pay VAT on sales of food, which increased to 20 per cent last year. He said that this enables them to subsidise beer and take sales from the bar industry.
Pubs shut down at a rate of roughly 14 per week between December 2010 and June last year, revealed campaign group Camra’s figures. The sector has suffered as a result of the ban on smoking and the customer spending squeeze is seeing more people purchase cheap alcohol from supermarkets.
Wetherspoon has been opening around 50 new pubs per year in recent times and created approximately 2,800 jobs during its last financial year. However, the chairman said that the combination of tax hikes and increases from breweries led to the cost of a pint in the chain’s pubs going up by an average of four or five per cent to around £2.40 during the last year.
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