J D Wetherspoon PLC’s (GB:JDW) bounced back post-pandemic but is now ready to announce its fourth-quarter update soon, and analysts expect a 3% drop in its sales.
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The company is now facing headwinds from inflation and low consumer confidence.
Hargreaves Lansdown equity analyst Matt Britzman said: ”The main story will likely focus on inflation. In March, cautious consumers hadn’t impacted trading. Given the cost of living crisis has evolved since, it’ll be interesting to hear whether that trend has shifted.”
Mounting inflation
Overall, the hospitality sector is facing difficulties in the UK market, with companies are finding it more difficult to remain profitable as food and labour prices rise.
Wetherspoon’s shares are down 36% in the year to date. Other players in the market also follow the same trend. Mitchells & Butlers PLC (GB:MAB) and Marston’s PLC (GB:MARS) both are trading down at 32.6% and 42%, respectively.
Analysts believe that Wetherspoon could increase prices this year, but it will still be lower than its competitors.
The company, which runs over 850 pubs and hotels in the UK and Ireland, feels the challenges are growing and is appealing to the government for some relief.
Tim Martin, Chairman of the company, has called the Government for some measures such as reducing VAT in the hospitality industry.
View from the city
According to TipRanks’ analyst rating consensus, Wetherspoon’ stock has a Moderate Buy rating based on one Buy and one Hold from two analysts.
The average Wetherspoon price target of 875.0p implies 41% upside potential.
Final Thoughts
Wetherspoon has a strong brand name and a consistent customer base. This will work as an advantage for the company.
Analysts and investors are eagerly waiting for the company’s numbers to see the real impact.
