Pub giant JD Wetherspoon has announced reduced operating margins in its interim trading statement for the 13-week period up to 25 October 2015, blaming increased staff costs.
Operating margin in that period was 6.2%, compared with 7.7% in the same 13 weeks last year. The company said the drop was due to its increased wage bill; Wetherspoon increased the minimum hourly rate for staff by 5% in October 2014 and by a further 8% at the end of July 2015.
Chairman Tim Martin has been openly critical of the Government’s national living wage – which will come into force in April and is set at £7.20 an hour for those aged 25 and over – claiming it could accelerate pub closures.
However trade was boosted by increased sales during the Rugby World Cup. Like-for-like sales increased by 2.4% and total sales increased by 6.1%.
Martin said: 'As we indicated in September, it is difficult to quantify exactly the factors which will influence our trading performance in the early stages of a financial year.
'Increased labour costs are clearly an important factor for all pub and restaurant companies and may result in our annual profits being slightly lower than the last financial year.'
The company has opened three new pubs since the start of the financial year and has sold one. There are plans to open approximately 15 pubs by the end of the current financial year. It has also put 20 leasehold pubs up for sale, while a small number of freehold disposals are also being considered. Net debt at the end of this financial year is currently expected to be slightly above the 26 July 2015 total of £601.1m.