Peel Hunt sees little upside at JD Wetherspoons ahead of Budget

(Sharecast News) - Peel Hunt has reiterated a 'hold' rating on JD Wetherspoon despite an improving opinion about the stock's valuation, saying that the upcoming Budget could limit upside in the near term. Ahead of Wetherspoons' first-quarter trading statement on 5 November, Peel Hunt highlighted the worse-than-expected sales update given at full-year results, after the company reported that like-for-like sales growth had slowed to just 3.2% over the first nine weeks of the financial year, from 5.1% in the fourth quarter.

At the end of September, Peel Hunt, which already stood 1% below consensus forecasts, expected full-year LFL sales to increase by 4.5%.

Looking ahead, however, November's Budget is likely to be a focus for the company and its shareholders, given that last year's Budget increased labour costs for the firm by £60m per annual from April 2025 and non-commodity energy costs by £7m per annum from October.

According to Peel Hunt analyst Douglas Jack, Wetherspoon is heavily exposed to any potential increases in tax rates, since its pre-tax profit margin remains slim at below 4%. One potential change could come by way of an increase to machine gaming duty, which if lifted to 50% from 20% as rumoured would cost the company £27m per annum, he said.

"One remedial option for JDW is to raise prices. According to the latest CGA data, JDW's average drinks price discount to the sector rose to 34% in September 2025. One reason for not pushing price is that JDW sees the off-trade (which pays less tax per item) as a key competitor," Jack said.

Despite a valuation that has "started to look attractive" - trading at an EV/EBITDA multiple of 7.1 - the upcoming Budget "offers too much uncertainty to buy the shares now", Jack said.

Peel Hunt has a 700p target price for the shares, which were down 1.4% at648.1p by 1046 BST.