J D Wetherspoon boss Tim Martin, pictured, has spoken out about the uncertainty the new living wage will bring to the pub industry, as the company announced a total sales increase of 7.6% at its interim results.
During the company’s pre-close statement for the financial year to 26 July 2015, Martin said that the measures, combined with uncompetitive VAT rates, would further widen the gulf between supermarkets and the on-trade. Supermarkets have previously been heavily criticised by the on-trade for using alcohol as a loss leader and damaging sales in pubs and bars.
He said: 'The "living wage" adds considerable uncertainty to future financial projections in the pub industry. The average price of a pint in a supermarket is less than £1 and we estimate staff costs to be around 10% or 10p. In contrast, a pint in a pub costs around £3 and staff costs are about 25% or 75p. Increased labour costs therefore affect pubs with far greater force than supermarkets.
'This disadvantage is compounded by a huge VAT and business rates disparity between pubs and supermarkets, which is putting unsustainable pressure on many pubs in our industry, especially in smaller towns and less-affluent areas.
'Pubs contribute around 40% of sales as taxes of one kind or another and are important generators of jobs. Capricious initiatives by the government, widening the financial disparity between pubs and supermarkets, will threaten the future of many more pubs.'
He added that J D Wetherspoon had introduced a 5% minimum starting-pay increase in October 2014, and agreed an 8% increase to come into effect on 3 August this year. The company pays a third of profits to staff in the form of bonuses and free shares, of which 80% goes to staff who work in the pubs, he said.
During its interim results, the company announced it has opened 26 new pubs and disposed of six since the start of the financial year. It has nine pubs under development and intends to open 20 to 30 pubs in the current financial year. It will also sell 20 pubs that it says no longer meet its requirements.
Meanwhile, like-for-like sales increased by 2.9% and total sales increased by 6.5% for the 11 weeks to 12 July 2015. In the year to date (50 weeks to 12 July 2015), like-for-like sales increased by 3.4% and total sales increased by 7.6%. However, the company said full-year profit before tax is unlikely to be higher than last year.
Preliminary results are due to be announced on 11 September 2015.