JD Wetherspoon has cautioned that profits may fall short of market forecasts following a surge in operating expenses following Chancellor Rachel Reeves's Budget policies, the pub chain announced on Wednesday.
Chairman and founder Tim Martin stated that the company is among hospitality businesses experiencing "substantial increases in costs" in recent months, which could lead to "profits slightly below market expectations".
The budget pub operator, running 794 managed venues and 21 franchise locations, faces an annual bill of approximately £60million from higher National Insurance contributions and wage increases.
Additionally, the Extended Producer Responsibility packaging levy will add £1.6million to the company's tax burden this year.
Wetherspoons has issued a profit warning after the Chancellor's policies
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This represents a slowdown from the 4.8 per cent increase recorded in the six months ending January. For the financial year so far, like-for-like sales stand 4.3 per cent higher, while total revenues have climbed 4.9 per cent.
The company's pub portfolio remained unchanged during the quarter, with eight new openings balanced by eight closures.
Mr Martin said: "The company has a strong pipeline of new pubs and planned openings include Manchester Airport, Heathrow Airport, Paddington station, Charing Cross station, and Shaftesbury Ave in central London."
Robinhood UK lead analyst Dan Lane observed that the pub group's venues are performing well, but rising labour costs and taxes continue to absorb revenue gains.
Sir Tim Martin jabbed at Rachel Reeves on Wednesday over taxation of his business | PALATEST DEVELOPMENTS
Home Secretary Shabana Mahmood has confirmed that pubs across the country will be permitted to remain open until 2am during World Cup fixtures involving England or Scotland | GETTYHe added: "Sales are holding up, with the company's value proposition still bringing in customers in a stretched consumer environment.
"But, with cheap pints getting people through the doors, management is clearly reluctant to push pricing meaningfully, which means there's little sign of margin relief ahead."
Susannah Streeter, the chief investment strategist at Wealth Club, warned that affordable drinks could become a casualty of mounting expenses.
She said: "There will be worries that cheap pints might be the latest casualty of higher costs facing pubs, given JD Wetherspoon's latest update."
Pints could hit £9 as Iran conflict drives up pub costs | GETTYMs Streeter added that low pricing, a cornerstone of the chain's appeal, may come under pressure as the company balances affordability against profitability.
Derren Nathan, head of equity research at Hargreaves Lansdown, noted that the trading update was "uncharacteristically short" while highlighting that consumer confidence has reached its lowest point since October 2023, according to GfK data.
He shared: "It's not stopping them from popping into their local J D Wetherspoon for a reasonably priced burger and a pint, but growth is slowing."
The company's shares have fallen more than 20 per cent since the start of the year, though the muted market reaction to Wednesday's announcement suggests investors had already anticipated further difficulties.