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JD Wetherspoon share price forecast: where next for the UK pub chain?

By Rob Griffin

Edited by Alexandra Pankratyeva

09:05, 13 October 2021

JD Wetherspoon (JDW) share price forecast
Source: Shutterstock

JD Wetherspoon owns and operates 861 pubs across the UK and Ireland. Along with the rest of the UK hospitality industry, the company suffered from the enforced Covid-19 lockdowns over the past 18 months.

The recent full-year loss it announced, combined with the ongoing economic uncertainty, has resulted in its share price being around 42% lower than at the start of 2020. But what are its prospects now?

JD Wetherspoon stock performance 2020-2021

JD Wetherspoon share analysis: technical view

At the beginning of January 2020, the company’s share price was £16.05. It plummeted to £5.56 when the first Covid-19 lockdown hit in March.

Shares traded under a coronavirus cloud for the rest of the year, hitting £11.67 in May before sinking to £7.73 as the second lockdown started in November.

The reopening of pubs in April 2021 prompted a price rise to £14 but they have been on a gradual decline over the past six months. Stock is now trading around £9.52 a share (as of 12 October 2021).

JD Wetherspoon stock price performance

JD Wetherspoon share price news: preliminary results

The company recently announced it made a £154m pre-tax loss in the year ended 25 July 2021, with revenue down 38.8% to £772.6m.

Chairman Tim Martin said like-for-like sales in the first nine weeks of the current financial year were 8.7% lower than the same weeks in August and September 2019, before the pandemic started.

“In the last four weeks of the period, like-for-like sales were minus 6.4%,” he said. “Excluding airport pubs, where like-for-like sales declined by 47.3%, like-for-like sales declined by 7.1% in the first nine weeks, and by 4.9% in the last four.”

He said some parts of the country, especially “staycation areas in the West Country and elsewhere”, had found it hard to attract staff.

“During the pandemic, the pressure on pub managers and staff has been particularly acute, with a number of nationwide and regional pub closures and reopenings, often with very little warning, each of which resulted in different regulations,” he added.

According to the company’s annual report, no interim dividend was paid in March 2021. The board is not proposing a final dividend payment for the year. There were no share buybacks in the financial year.

JD Wetherspoon stock: responding to media reports

JD Wetherspoon has issued a number of statements to the London Stock Exchange on what it believes to be inaccurate reporting by international media outlets.

It also devoted a special edition of ‘Wetherspoon News’, the publication it provides free in its outlets, to the issue, with a front page headline declaring: ‘Does Truth Matter?’

The 20-page document outlined the corrections and amendments that were subsequently made following complaints from the company.

In the publication’s introduction, chairman Tim Martin said it had “rapidly become a James Bond villain” in the wake of false reports triggered by a video to staff.

“Following the first lockdown in March 2020, comments from an internal staff video, designed to reassure, were taken out of context and distorted outrageously,” he explained.

In the recording, Martin says staff can stay home on furlough but will understand if they choose to take up vacancies at supermarkets instead.  

However, he actually pledges that anyone who previously worked for Wetherspoon would be given “first preference” if they want to rejoin the company in the future.

JD wetherspoon stock forecast: management outlook 

According to Martin, the pressure on pub managers and staff during the pandemic was acute, with nationwide and regional pub closures and reopenings, often with very little warning.

“In the last year, the country moved, in succession, from lockdown, to ‘Eat Out to Help Out’, to curfews, to firebreaks, to pints with a substantial meal only, to different tier systems and to further lockdowns,” he said.

He said the entire hospitality industry had an “almost impossible burden” in trying to communicate often “conflicting and arbitrary rules” to customers.

However, Martin remains “cautiously optimistic” about the outcome for the financial year, as long as there’s no further resort to lockdowns or onerous restrictions.

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JD Wetherspoon (JDW) share price forecast: analyst predictions 

Wethersoon’s shares are expected to plunge by 6.7% over the coming year to £8.82 from their current £9.46 level, according to Wallet Investor’s JDW share prediction. 

The consensus rating of analysts is ‘hold’, according to Market Beat, which bases the calculation on three analyst ratings.

This is based on one ‘buy’ and two ‘hold’ recommendations. It compares to a year ago when ratings were five ‘buy’, three ‘sell’, and one ‘hold’.

The website has the average price target consensus at £14, with a high of £16.50 and a low of £11.50.

JDW share price forecast: analysts’ sentiment 

Are JDW shares a ‘buy or ‘sell’? Douglas Jack, an analyst at Peel Hunt, has an ‘add’ rating on the stock, up from ‘hold’.

In a broker note, he pointed out how the current trading environment was “still disruptive”, even though like-for-like sales had improved slightly in recent weeks.

He also noted how the company was having to raise prices “with no financial benefit”, due to having passed on the VAT-cut that has now been halved.

“With prices having to rise due to tax, scope for an additional upward pricing surprise is limited, effectively removing a key potential catalyst for the shares in 2022E,” he said.

Anna Barnfather, an analyst at Liberum, has given the company a ‘hold’ rating, pointing out how full year 2021 results had come in below expectations.

In a broker note, she also questioned management’s suggestion that full year 2022 sales would return to the levels seen in 2019.

“We believe this is ambitious given its large sites, high street and airport locations, and labour-intensive model,” she said.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, believes coronavirus restrictions wreaked havoc on the company’s business model.

“It’s focused on pulling in high volumes of punters while keeping prices low so multi month closures and strict limits on numbers came as a severe blow,” she told Capital.com.

Before the crisis hit, the “pile ‘em high sell ‘em cheap approach” already meant margins were below competitors, she pointed out.

“The group’s operating profit margin was just 7.3% before exceptional items, which was behind many peers,” she said. “It meant the company was already riding slightly closer to the edge than some of its rivals and the pandemic pushed it into a big loss.”

However, Streeter also pointed out that the company had “shored up its balance sheet” following the disruption, with net debt standing at £845.5m. 

“While the interest costs of a high debt burden are currently lower than they might have been historically, we'd like to see debt come down,” she said.

Looking ahead, she remains relatively upbeat about its prospects.

“As the recovery continues and socialising in busy bars becomes the norm once again, the company is emerging in a pretty resilient position from the crisis,” she said. “Paying debt down should be the focus but the extensive property portfolio provides added strength.”

JD Wetherspoon company history

The chain’s first pub opened in Colney Hatch Lane, Muswell Hill, north London, on 9 December 1979. It was known as Martin’s Free House for the first month before being renamed Wetherspoons.

Its pubs were all based in north London for the first few years before the company started to expand and then floated on the London Stock Exchange in 1992.

In the same year, its 50th outlet was opened – JJ Moon’s in Chiswick, west London. Within 10 years the number of pubs had hit 500 as the company expanded across the UK and Ireland.

From the historical perspective, the JDW stock has been trading at the levels seen at the end of January 2017, at the time of writing (12 October).

Wetherspoon 5-year stock price performance

FAQ:

Is JD Wetherspoon a good stock to buy?

Whether JD Wetherspoon is a suitable investment for you will depend on your personal research and trading strategy. You need to perform your own due diligence and decide if the stock meets your needs and appetite for risk.

Why has JD Wetherspoon stock been going down?

The hospitality industry has been badly hit by Covid-19 restrictions over the past couple of years and JD Wetherspoon is no exception. Trading is still lagging pre-pandemic levels and the overall industry recovery appears to have some way to go.

Will JD Wetherspoon stock go up?

This depends on a number of variables. It’s crucial to do your own research to form an opinion of a company’s performance and likelihood of achieving analysts’ targets. Remember that markets are volatile and past performance of the stock does not guarantee future gains. And never invest more money than you can afford to lose

Read more: Barclays share price forecast: Can it rise beyond its 3-year high?

Markets in this article

JDW
Wetherspoon
7.33 USD
-0.16 -2.150%

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