JD Wetherspoon has warned its profits for the year are likely to be low, as it announced a trading update ahead of its interim results.
Trading for the first 12 weeks of the second quarter (to 17 January 2016) saw like-for-like sales increase by 3.3% and total sales by 6.3%. In the year to date (the 25 weeks to 17 January 2016), like-for-like sales increased by 2.8% and total sales increased by 6.1%.
Operating margin before exceptional items for the half year ending 24 January 2016 is expected to be around 6.3%, 1.1% lower than the same period last year. The company said the margin reflects the increases in the starting rates for hourly paid staff in October 2014 and August 2015, which totalled approximately 13%.
Net debt at the end of this financial year is currently expected to be slightly above the 26 July 2015 total of £601.1m.
Chairman Tim Martin said: 'Like-for-like sales have improved in the second quarter so far. However, as indicated in our November trading update, increased labour costs will be an important factor in the outcome for this financial year. Our current view is profits for this year are likely to be towards the lower end of analysts’ expectations.'
The company also opened five new pubs since the start of the financial year and sold two. It intends to open 10 to 15 pubs in the current financial year.
JD Wetherspoon is now set to enter a closed period ahead of delivering its interim results for the six months ending 24 January 2016, which are expected to be announced on 11 March 2016.