Pub Chain Sees 'Supermarket Profit Pressure'

JD Wetherspoon has blamed supermarket pricing and a bigger wage bill for a fall in operating profits.

The pub chain reported profits of £55.1m for the 16 weeks to 25 January - a drop of 1.1% - despite revenues rising 9% and like-for-like sales growing 4.5%.

Its chairman Tim Martin, who has long campaigned for a level playing field on tax with supermarkets, said: "The first half of the financial year resulted in a reasonable sales performance and free cash flow, although our profit was under pressure from areas which included increased competition from supermarkets and increased pay and bonuses for pub staff.

"As previously highlighted, the biggest danger to the pub industry is the continuing tax disparity between supermarkets and pubs.

"Thanks mainly to the work of Jacques Borel's VAT Club, there is a growing realisation among politicians, the media and the public that pubs are overtaxed and that a level tax playing field will create more jobs and taxes for the country".

Wetherspoon, which last year announced plans to create 15,000 new jobs over five years, has blamed tax rates for hampering its expansion plans.

It argues the greatest disparity is in VAT, as supermarkets do not pay it on food but pubs and cafes are hit with a 20% rate.

Wetherspoon has suggested this allows supermarkets to "subsidise their alcoholic drinks".

The Chancellor, who has cancelled the beer duty escalator, may use the Budget next week to go further.

It was claimed earlier this year that George Osborne's two previous cuts to beer duty had helped annual beer sales rise for the first time in a decade.

The company said it was looking to the breakfast trade to help achieve further growth.

It said it had successfully established a strong coffee and breakfast trade in recent years, selling approximately 50 million coffees and teas per year alongside about 24 million breakfasts.

JD Wetherspoon said: "We are increasing our efforts in this area by introducing more competitive prices from Wednesday 18 March.

"We are also introducing more competitive prices for breakfasts. Our aim is to triple coffee and breakfast sales over the next 18 months".

The company said it was introducing several drinks offers, reflecting greater supermarket competition, from the same date.

It warned: "Marketing and labour costs may be higher than anticipated in the second half, as a result of the coffee and breakfast campaigns.

"The second half of the last financial year was strong, which will make it difficult to improve on that performance in the current year, although we expect a reasonable outcome for the full financial year, even so".

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