January 16, 2013 / 10:41 AM / 5 years ago

UPDATE 1-Wetherspoon margins squeezed as Q2 sales rise

* Like-for-like sales in 11 weeks to Jan. 13 up 8.0 pct

* Lfl sales in year to date up 7.6 pct

* Sees H1 opg margin at 8.2 pct, 1.1 pct lower than last yr

* Expects “reasonable outcome” for the FY

* Shares fall 2.3 pct

LONDON, Jan 16 (Reuters) - British pubs group JD Wetherspoon said its operating margins where squeezed further as it pushed on with value-led offers that helped sales rise 8.0 percent in its second quarter.

Wetherspoon, which has over 800 pubs across Britain, said on Wednesday higher-than-expected utility, tax and labour costs and an increased marketing spend meant its operating margin would be 8.2 percent for the half year. This was 1.1 percent lower year-on-year and down from 9.0 percent in its 2011/12 fiscal year.

Shares in the FTSE 250-listed firm, which opened the day up 27 percent on a year ago, were down 2.3 percent at 1012 GMT.

“The value proposition continues to resonate with consumers, but the resolute pursuit of this strategy continues to be paid for by margin erosion. With cost pressures unlikely to ease in the short term, the bottom line outcome remains uncertain,” Peel Hunt analysts said.

Wetherspoon, which will open another 25 pubs this fiscal year, has been one of Britain’s better performing pub companies throughout the downturn due to its value offers like a beer and burger for under 5 pounds chiming with cost conscious consumers.

The 8.0 percent rise in sales at pubs open more than a year in the 11 weeks to Jan. 13 marked a slight improvement on a 7.1 percent jump recorded in its first quarter, when trading received a big boost from London’s Olympic Games.

Wetherspoon Chairman Tim Martin told Reuters the group had not been heavily focused on increasing margins. He added that trading in the Christmas period had been “slightly stronger than the rest of financial year” with steaks, coffees and micro brewery beers all proving popular festive treats.

In the year to date, like-for-like sales were up 7.6 percent, Wetherspoon said, adding it expected a “reasonable outcome” for the full-year.

On Monday British pub and breweries group Greene King posted a 3.7 percent rise in retail sales for the 36 weeks to Jan. 6, buoyed by a strong Christmas.

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