UPDATE 1-Pub chain JD Wetherspoon posts strong second-quarter sales rise

Wed Jan 22, 2014 5:08am EST

By Neil Maidment

LONDON Jan 22 (Reuters) - British pub chain JD Wetherspoon posted a strong second-quarter sales rise and said it would continue investing in its business and new pubs at the expense of margins.

The firm, which has grown to over 900 pubs on the back of popular food and drinks deals, will open between 40 and 50 new pubs in 2013/14, with similar plans for future years and has been investing in IT, staff and training in preparation.

As a result, the group, which on Wednesday posted a better-than-expected 6.7 percent rise in second quarter sales, said its first-half operating margin would fall 20 basis points to 8.1 percent and would be between 8.1 and 8.3 percent for the year.

The margin was 8.7 percent in 2012/13.

That led analysts at Numis to cut 2013/14 profit forecasts by 4 percent to 77.4 million pounds ($127.43 million), below a consensus of 80.2 million pounds, according to Reuters data.

Shares in the firm however rose 3.5 percent to 817 pence at 0932 GMT, as it impressed investors with a 6.7 percent rise in sales at pubs open over a year for the 12 weeks to Jan. 19.

That was up from 3.7 percent in the first quarter, and ahead of analyst forecasts for a 4 percent rise. Total sales including new pubs rose 10.6 percent.

"The business is moving forward and whilst there are challenges we see room for positive surprises in the second half," Peel Hunt analyst Nick Batram said in a note.

Wetherspoon Chairman and founder Tim Martin told Reuters the firm was focusing on a longer term plan.

"I think I would go with Warren Buffett, one year is more important than three months, and five years is more important than one year," he said. "So it doesn't really make too much difference if you spend a bit more and reduce your profits a bit, provided it's a move which produces future benefits."

The firm, which will also open its first pubs in Ireland in 2014, said it was focused on growing turnover and profits rather than margins and will achieve it through opening more new pubs as well as growing sales of food, teas, coffees and wine.

"My best guess is that 30-50 openings is achievable for the next decade or so," Martin added.

Wetherspoon also opened its first motorway services pub on Tuesday off the M40 in Beaconsfield, southeast England, a move that has been criticised despite the firm expecting three-quarters of sales to come from food rather than alcohol.

"All our pubs are on roads," Martin said, excluding those at airport and train stations. "We've got the confidence now that if we don't do much in the way of bar sales because people are driving we can still earn a buck."