Hot weather boosts Wetherspoon's sales, shares jump

By Simone Lobo and Yadarisa Shabong

Oct 2 (Reuters) - British pub chain J D Wetherspoon said on Friday its sales growth has picked up since July, mainly thanks to sunny weather, but cautioned that good weather will not last as the industry contends with rising costs and closures.

The pub operator, known colloquially as Spoons, reported a 28% drop in pretax profit for the year ended July and said it expects profit for its new fiscal year ending July 2027 to be in line with market expectations at this early stage.

"Wetherspoon has made a good start to the financial year, although it is at least partially due to weather, which will inevitably revert to the norm," said Chair Tim Martin. Its like-for-like sales for the past nine weeks to September 27 rose 8.6%, an acceleration from the 3.2% it reported in the same period a year ago.

Shares in the company rose over 7% to a 4-1/2 year high.

Wetherspoon had issued four profit warnings this year, citing high labour and energy costs and property taxes. Known for its cheap food and drink, the pub chain has held prices down to keep customers loyal, but that has squeezed its operating margin to 5.37% from 6.88% a year earlier.

HOSPITALITY SECTOR'S STRUGGLES

The heatwave helped lift consumer spending, offering a respite for Britain's hospitality sector struggling with elevated costs and tight consumer budgets that have led to several pub closures this year.

"With the final quarter of the year offering up shorter days and colder weather its beer gardens may not be as full. It will have to find ways to ensure that it attracts the falling levels of consumer spending power to its premises," said Julie Palmer, Managing Partner at financial and real estate advisory group BTG.

The British Beer and Pub Association has called for a freeze on levies imposed on beers and an increase in discounts to 30% on draught beer to improve profitability, ahead of finance minister John Healey's budget on October 28.

"The hospitality industry, as many commentators and companies have noted, has borne the brunt of government-led tax and regulatory cost increases, especially in the last two budgets," Martin said.

"It is to be hoped that the powers-that-be will refrain from any further increases."

Wetherspoon's pretax profit before separately disclosed items was £58.6 million ($77 million) compared with £81.4 million a year earlier.

Prime Minister Andy Burnham said in July the government would lower business rates for pubs, clubs and live music venues by 20% from April.

($1 = 0.7568 pounds)

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(Reporting by Simone Lobo, Yadarisa Shabong and Yamini Kalia in Bengaluru; Editing by Subhranshu Sahu and Emelia Sithole-Matarise)