The share price of J D Wetherspoon plc (LON:JDW) (LSE:JDW.L) has dropped 2% today after the release of H1 results. They show revenue as 1.4% higher against the same period last year, with LFL sales growing 3.3%. J D Wetherspoon’s profit before tax is 42.8% higher at £51.4 million, while earnings per share (including shares held in trust) gained 51.6% to 33.8p. Dividends per share have been maintained at 4p, while FCF per share was down 5.6% at 44.2p.
J D Wetherspoon’s shares may have declined 2% after what appear to be a good set of results because the company is cautious about H2. Its share price could be held back in my opinion by an anticipation of significantly higher costs in H2. Much of this is centred on business rates, electricity taxes, excise duty and the Apprenticeship Levy according to today’s investor update.
The company also anticipates lower LFL sales in the next 6 months. J D Wetherspoon’s shares could be hurt by this and a wider slowdown in the travel & leisure industry in my opinion. Rising inflation could surpass wage growth and leave consumers with lower disposable incomes. This may not only hurt J D Wetherspoon’s share price performance, but also the shares of its sector peers in my view.
In the last year, shares in J D Wetherspoon have risen 37%. That’s ahead of other consumer shares such as Unilever plc (LON:ULVR) (LSE:ULVR.L), Diageo plc (LON:DGE) (LSE:DGE.L), Whitbread plc (LON:WTB) (LSE:WTB.L) and Imperial Brands PLC (LON:IMB) (LSE:IMB.L). Whitbread’s share price is 5% higher, Diageo has moved 21% up, Imperial Brands has gained 3% and Unilever’s share price is 30% up on a year ago.
In my opinion, J D Wetherspoon could experience a difficult 6 months. I think the business has a good strategy and management team, but I feel a mix of higher costs and potentially falling consumer demand may mean its share price suffers on a relative basis. Therefore, I’d rather own shares in more diversified consumer stocks such as Unilever, Whitbread, Imperial Brands or Diageo at the moment.