J D Wetherspoon Chairman Tim Martin said today that the British pub chain was expecting better results next year amid signs that soaring food and energy costs were starting to cool, lifting its shares by 11%.
Pubs and restaurant groups have been hit hard by forced closures during the Covid pandemic followed by red-hot inflation in Britain, which has pushed up costs and squeezed margins.
However, "promising green shoots" are seen for energy and some food costs, which has helped lift expectations, Martin told Reuters.
The company also offloaded some pubs to keep a check on costs and reduce debt.
Like-for-like sales in the first 10 weeks of the fourth quarter, ending July 31, were up 11% from the same time pre-pandemic in 2019 and rose 11.5% compared to same the time last year.
Real ale sales, competitive prices and the fact that its pubs were open for breakfast helped, Martin said, adding full-year profits were expected to be in line with market estimates.
Shares in the London-listed company rose to 735 pence this morning and are set to post the biggest one-day percentage gain in over three months.
"The hospitality sector is facing tough economic conditions currently but this could work to J D Wetherspoon's advantage as consumers look for affordable options when going out," said Jocelyn Paulley, retail & leisure partner at Gowling.
However, with stubbornly high inflation rates, UK pub owners continue to face a threat as cash-strapped shoppers may still turn to supermarkets to stock up on beers, wines and spirits instead of going out.
The firm should not go "popping the champagne corks just yet", eToro analyst Adam Vettese said.
"Households are still being clobbered by rising interest rates and higher inflation, which might affect consumer spending on things such as eating out and going to the pub," he added.
