SHARES in pub operator JD Wetherspoon have dropped by nearly eight per cent after boss Tim Martin warned that increased labour costs may cut profits in its current financial year.
The warning comes Mr Martin declared in July that government plans to introduce a national living wage of £7.20 per hour would hit the pub trade more heavily than the supermarket sector.
Wetherspoon employs around 35,000 staff across the UK, and around 3000 in Scotland where it has about 70 pubs.
Investors responded by sending the Wetherspoon share price down by 54p, closing the day at 722p per share.
The profit warning clouded an otherwise positive set of first quarter results for the pub giant.
Wetherspoon reported a 2.4 per cent rise in like for like sales in the 13 weeks to October 25, with total sales up by 6.1 per cent.
The company noted that sales had been boosted in the last six weeks of the period by the Rugby World Cup, which took place in England.
A spokesman noted that the pubs had benefited from the participation of the Home Nations in the event, albeit England were knocked out at the pool stage.
Wetherspoon was famous at one stage for not having televisions in its pubs but all of its outlets were able to show the rugby.
The company, formed by Mr Martin in the late 1970s, reported an operating margin of 6.2 per cent for the 13 weeks, compared with 7.7 per cent for the same period last year.
It attributed the lower margin to increases in starting rates for hourly paid staff in October 2015 and August this year, which totalled around 13 per cent.
A spokesman said all of the wages paid by the company above the national minimum wage.
Mr Martin said: “As we indicated in September, it is difficult to quantify exactly the factors which will influence our trading performance in the early stages of a financial year.
“Increased labour costs are clearly an important factor for all pub and restaurant companies and may result in our annual profits being slightly lower than the last financial year.
“We will provide updates in our regular statements.”
Wetherspoon, which reported underlying pre-tax profits of £79.4m last year, has opened three new pubs since the start of its current financial year, and offloaded one.
It plans to open 15 this year, with Mr Martin having declared in September that he hopes to add a further “four or five” in Scotland by next spring.
It previously reported that, following a review of its pubs, it has offered 20 leasehold pubs for sale, and is also considering a small number of freehold disposals this year.
Stating that the company is in a sound financial position, it expects net debt at the end of this financial year to be slightly above the July 26, 2015 total of £601.1m.
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