JD Wetherspoon full-year results preview: will record sales boost profits?

JD Wetherspoon's financial expectations

​JD Wetherspoon, the UK's popular pub chain, is poised to announce its full-year results on 4 October. Analysts are forecasting record sales for the year ending July 2024, with revenue expected to surpass £2 billion, up from £1.9 billion in the previous year.

​This projected increase in revenue is a positive sign for the company, especially considering the challenging economic environment. The pre-tax income is also expected to show significant improvement, with forecasts suggesting a figure of £72 million, a substantial increase from £43 million last year.

​Despite these encouraging financial projections, JD Wetherspoon's share price has remained relatively flat over the past year. This stagnation in share price performance may be attributed to ongoing concerns about profitability in the face of rising costs.

​Investors and analysts will be keenly watching these results to gauge the company's ability to translate increased sales into improved profitability. The market's reaction to the results could potentially impact share dealing activity in JD Wetherspoon stock.

​Challenges facing JD Wetherspoon

​While JD Wetherspoon is expected to report record sales in its Friday, 4 October full-year results, the company faces several challenges that could impact its profitability. One of the primary concerns is the rising cost of operations, which has been putting pressure on the company's bottom line.

​A significant factor contributing to increased costs is the rise in wages. The UK government's decision to increase the national living wage by 10% has directly affected JD Wetherspoon's labour expenses. As a labour-intensive business, this wage hike has a substantial impact on the company's overall cost structure.

​Another challenge is the surge in utility bills, which has been affecting businesses across the UK. The energy crisis has led to significantly higher costs for heating, lighting, and powering pub operations. This increase in overhead expenses could potentially eat into the company's profits.

​Lastly, JD Wetherspoon is grappling with increased interest costs on its £670 million net debt. As interest rates have risen, the cost of servicing this debt has grown, further pressuring the company's profitability. Falling UK interest rates and lower inflation should help in this regard. How the company manages these challenges will be a key focus for investors analysing the full-year results.

JD Wetherspoon's performance indicators

​Despite the challenges, JD Wetherspoon has shown resilience in its performance indicators. The company reported like-for-like sales growth of 7.7% for the fiscal year 2024 up to July 7. This growth demonstrates the pub chain's ability to attract customers and increase sales even in a challenging economic environment.

​Breaking down the sales performance, JD Wetherspoon saw particularly strong growth in bar sales during the first half of the year, with an impressive 11.6% increase. This surge in bar sales suggests that customers are spending more on drinks, which typically carry higher profit margins.

​Food sales also showed positive growth, albeit at a slightly lower rate of 7.6% in the first half of the year. The growth in food sales indicates that JD Wetherspoon's strategy of offering value-for-money meals continues to resonate with customers, contributing to overall revenue growth.

​These performance indicators will be closely scrutinised in the full-year results. Investors will be looking for any changes in these trends and how they have impacted the company's overall financial performance. The balance between price and volume growth will be particularly important in understanding the drivers behind the record sales figures.

Future outlook for JD Wetherspoon

​Looking ahead, JD Wetherspoon's future outlook appears cautiously optimistic. Analysts are projecting further growth in fiscal 2025, with forecasts suggesting sales of £2.1 billion and pre-tax income of £84 million. These projections indicate continued confidence in the company's ability to grow its business.

​One of JD Wetherspoon's long-term strategic goals is to expand its estate to 1,000 pubs. This ambitious target demonstrates the company's commitment to growth and its belief in the ongoing viability of the pub model. The focus on expansion, particularly in central London, suggests that the company sees opportunities for growth in high-traffic urban areas.

​However, potential headwinds could impact this outlook. One such challenge is the proposed UK government ban on smoking in outdoor public spaces, including pub gardens. If implemented, this regulation could affect customer behaviour and potentially impact sales, particularly in establishments with outdoor seating areas.

​Investors will be keen to hear management's commentary on these growth plans and how the company intends to navigate potential regulatory changes. The balance between expansion and maintaining profitability in the face of rising costs will be a crucial aspect of JD Wetherspoon's future strategy.

Cash returns and investments

​JD Wetherspoon's approach to cash returns and investments will be another area of focus in the full-year results. In the first half of fiscal 2024, the company implemented a £40 million share buyback program. This move suggests confidence in the company's financial position and a commitment to returning value to shareholders.

​However, it's worth noting that JD Wetherspoon has not paid dividends since 2019, before the Covid-19 pandemic. The suspension of dividends was likely a prudent move to conserve cash during uncertain times, but investors will be eager to know if there are any plans to reinstate dividend payments in the near future.

​The company's future cash returns will largely depend on its profitability and investment priorities. With plans for expansion and the need to manage rising costs, JD Wetherspoon must strike a balance between reinvesting in the business and returning cash to shareholders.

​Management's comments on capital allocation strategy will be crucial for investors trying to assess the potential for future returns. The decision between reinvesting profits for growth and returning cash to shareholders could have significant implications for the company's share price performance in the coming years.

​Analyst ratings for JD Wetherspoon

​LSEG Data & Analytics shows a consensus analyst rating of between ‘buy’ and ‘hold’ for JD Wetherspoon with 2 strong buy, 3 buy and 2 hold, with an upside target at 904.44 pence, a 25% rise from current levels (as of 3 October 2024)

​According to TipRanks the JD Wetherspoon share is rated as a buy (only 1 buy, though) and has a SmartScore rating of underperform 3 (as of 3 October 2024).

Technical analysis of the JD Wetherspoon share price

​The JD Wetherspoon’ share price, down 10% year-to-date (YTD), has been sliding within a large downtrend channel for much of the year but seems to have levelled out above its August and September lows at 680p-to-679.5p.

​JD Wetherspoon weekly candlestick chart

​A fall through the 680p-to-679.5p support zone, made near the November 2023 low at 677.5p, would put the June and July 2023 lows at 640.0p-to-634.5p on the map.

​As long as support at 680p-to-679.5p underpins, further range trading remains on the cards.

​JD Wetherspoon daily candlestick chart

​For the JD Wetherspoon to enter a bullish phase, a rise and daily chart close above the 200-day simple moving average (SMA), the 2024 downtrend channel resistance line and the August peak at 765.3p-to-791p would need to be seen. Only then would the way be open for the February peak at 862.5p to be reached.

How to trade JD Wetherspoon shares

​If you're interested in trading JD Wetherspoon shares based on the upcoming full-year results, here are the steps you can follow:

​1. Do your research on JD Wetherspoon and the UK pub sector

​2. Choose whether you want to trade or invest

​3. Open an account with us

​4. Search for 'JD Wetherspoon' in our platform or app

​5. Place your trade

​Remember, trading carries risk, and it's important to have a solid understanding of the market and the company before making any investment decisions. Always consider your risk tolerance and investment goals when trading shares.