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During the pandemic the sectors that have suffered the most are well known. High street retail, theatres and cinemas, hotels, restaurants and pubs all immediately spring to mind. Pretty much everything we typically did during ‘normal’ times in our downtime has been off limits for much of the past year.
And these were already sectors facing challenges, long before Covid 19 came along. Cinemas had Netflix and co to contend with, high street shops had their own battle on their hands fending off online players, and a glut of mid-market restaurants were increasingly giving their CEOs financial heartburn.
As for pubs, well an Office for National Statistics (ONS) survey data showed that pubs and bars were more than five times as likely as other businesses to report low or no confidence in survival. Nearly a quarter of pub and bar businesses said they had no remaining cash reserves or less than one month’s and 27.9% of pub and bar businesses said they had low or no confidence in surviving the next three months.
You would expect Tim Martin, chairman of pub chain JD Wetherspoon (JDW), to be unhappy. Forced closures are the last thing his pubs need.
Back in November he hit out at the UK’s “baffling” Covid-19 regulations, warning that his pubs chain would be forced to spend £11 million a month more during the second lockdown than in the first period of closure in the spring. What that cost will be during this third lockdown remains to be seen, but we will no doubt hear more when Wetherspoon updates on Christmas trading next week.
But all the signs are that it will not be good news. In its latest trading update, the group warned it expected cash outflows of £14 million while its 756 pubs in England, Northern Ireland and the Republic of Ireland were forced to close ahead of Christmas. That was considerably higher than the £3 million monthly hit it took during the first lockdown between March and July, and most likely down, at least in part, to the costs of on/off opening and closing and fewer head office staff being furloughed.
Even without outright closures though, takings were down, with cautious drinkers staying away. Wetherspoon said sales were “significantly lower” in October. One poll found that 63% of people would be uncomfortable returning to pubs and bars once the lockdown is lifted. In the 15 weeks to 8 November like-for-like sales at Wetherspoon’s fell more than a quarter.
The sector has not been overlooked. There is the cut in VAT and chancellor Rishi Sunak has launched a new package of financial support for businesses forced to close. But publicans don’t go into this industry to shut their doors to punters.
This is not a sector with that much slack in the system as it was. Britain’s pubs have been increasingly endangered since the 1990s, and the pandemic is likely to deliver the final blow to many. If social distancing remains in place for months to come, the outlook is decidedly bleak.
The 872-strong Wetherspoon’s have slumped to a loss for the first time in 36 years, reporting a £34 million loss in the year ending in July, compared with a £102.5 million profit in the previous year. Revenues fell almost a third to £1.2 billion, while its operating margin was squeezed from 7.3% in 2019 to 0.6% this year.
The hospitality sector, in general, works on such tiny margins that even being down 10% can be enough to force many publicans to call time on their pubs. For Wetherspoon pubs that all need to be packed out to thrive, following a variation of the ‘pile em high, sell em cheap’ business model, how they can function profitably long-term with social distancing in place is the big question.
JD Wetherpoon’s trading statement is due out on Wednesday.
More on JD Wetherspoon
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