Pay rise hits pub chain Wetherspoon’s profits

JD Wetherspoon has reported a drop in profits after being squeezed by supermarket competition and a hike in pay and bonuses for pub staff.

The company, which has 936 pubs, said sales were 4.5% higher on an underlying basis in the six months to January 25 but profits fell 1% to £37.5 million.

Margins were under pressure following last year’s above-inflation 5% increase in pay for staff and a rise in utility and supplier costs.

The company also allocated £15.3 million in bonuses and free shares to its employees, 98% of which was paid to those below board level and 83% of which was paid to those working in its pubs.

Wetherspoon added that the pub industry continued to be at a disadvantage as supermarkets do not have to pay VAT on food sales and are effectively able to subsidise alcohol prices.

In the six weeks to March 8, like-for-like sales increased by 1.6%, with total sales lifting by 5.6%.

The company sells about 50 million cups of coffee and tea a year, as well as about 24 million breakfasts.

It now plans to cut prices with the aim of tripling coffee and breakfast sales over the next 18 months.

However this means that marketing and labour costs will be higher than anticipated in the second half of the financial year.

The company added that its tax bill amounted to £305.3 million in the half-year period, an increase of 5% on a year earlier and including £144.8 million on VAT and £75.2 million in alcohol duty.

Chairman Tim Martin added: “It is widely acknowledged that the tax disparity with supermarkets is unfair and that pubs create more jobs and more taxes per pint or per meal than supermarkets and that it does not make social or economic sense for the tax regime to favour supermarkets.

“We acknowledge the need to pay a reasonable level of taxes, but hope that legislators will make progress in creating a level playing field for all businesses which sell similar products.”

The company expects to open about 30 new pubs in this financial year, a figure which reflects a slower-than-anticipated rate of regulatory approvals.