January 23, 2019 / 7:34 AM / 2 years ago

Gin, coffee sales give Wetherspoon Christmas cheer

(Reuters) - British pub operator JD Wetherspoon Plc (JDW.L) said it enjoyed strong sales over the Christmas period, helped by Britons’ new-found fondness for gin and solid demand for coffee drinks.

A Wetherspoon's logo is seen at a pub in central London, Britain, January 23, 2019. REUTERS/Toby Melville

The company, which warned in November about weaker sales, said it still expects pretax profit for the first half of its fiscal year to be lower than a year earlier as it struggles with higher costs, but it maintained its full-year outlook.

Wetherspoon follows other UK pub operators, including Greene King Plc GNK.L, Marston’s Plc (MARS.L) and Stonegate Pub Company IPO-SPC.L, owner of the Slug and Lettuce pub chain, that have reported higher sales for the period, even as they face cost pressures and slowing consumer spending in Britain amid uncertainty about Brexit.

Wetherspoon said like-for-like sales for the 12 weeks to Jan. 20 rose by 7.2 percent from a year earlier.

Its shares rose as much as 4 percent, but quickly gave up gains to trade down 0.7 percent by 1004 GMT as analysts said Weatherspoon’s trading update was mixed.

“Our expectations for the full year are unchanged,” the company said in a statement but gave no details.

British pub operators have been battling rising costs from an increase in the minimum wage, higher property rents and a Brexit-spurred slide in sterling. At the same time, younger Britons are increasingly moving away from pub drinking.

“It has been a strong trading period with gin sales which are very fashionable at the moment, with pink gin ... there has been a good sales of craft beer as well and very good sales of coffee,” Wetherspoon’s pro-Brexit Chief Executive Office Tim Martin told Reuters.

FTSE 250 .FTMC group Wetherspoon, which relies heavily on alcohol sales at its restaurants, also serves items such as low-calorie breakfast options, English muffins, pancakes and Lavazza filter coffee to boost revenue through a diversified portfolio.

The company is investing in its food and coffee business, which is more labour intensive than beer.

“Costs, as previously indicated, are considerably higher than the previous year, especially labour, which has increased by about 30 million pounds in the period,” Martin said.

In November JD Wetherspoon announced a pay increase for its employees, while it is also dealing with a new sugar tax on drinks.

“While top line continues to be strong, operating margins also continue to come under pressure and at 7.7 percent are the lowest in the sector,” said Liberum analyst Anna Barnfather, who has a “hold” rating on the stock.

Weatherspoon said it plans to open 5 to 10 pubs in the current financial year, which ends in July, after opening six outlets in its previous fiscal year.

Reporting by Noor Zainab Hussain and Karina Dsouza in Bengaluru; Editing by Saumyadeb Chakrabarty and Susan Fenton

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