Pubs operator JD Wetherspoon Plc said it will cut back expansion plans, blaming a harsh tax regime for exacerbating tough trading conditions, and is cautious about prospects for the second half following a decline in sales.
The company, which has over 800 pubs across Britain, said it will cut new openings to 40 pubs this year from a target of 50 previously and review its longer-term plans for expansion over the next few months.
Chairman Tim Martin, who founded Wetherspoon with the opening of a single London pub in 1979, said the company was re-evaluating its strategy in the wake of increases to excise duty, business rates and carbon tax, reiterating comments made in a January interview with Reuters.
In an interview on Friday, Martin did not rule out the prospect of the pubs firm scrapping expansion plans altogether.
Anything's possible. We will probably cut back significantly if the tax keeps on rising, he said.
British pubs pay the second-highest rate of excise duty in Europe. Under the duty escalator, which was introduced by the last Labour government in 2008, taxes on alcohol must rise by a minimum of 2 percent above inflation each year.
Shares in Wetherspoon were up 0.9 percent to 407.3 pence at 10 a.m, with analysts suggesting the company will use the cash saved from opening fewer pubs to buy back shares.
If the excise duty rises again, Wetherspoon may cut its expansion rate further, but downside from this would be limited by greater capacity to buy back shares, said Numis analyst Wyn Ellis.
Wetherspoon has traditionally been known for its value-for-money focus, with offers such as a beer and burger for under 5 pounds proving popular with cash-strapped customers.
But rising costs have led the company to increase prices on both food and drink and some of the company's value-conscious customers are opting to take advantage of cheap supermarket offers on alcohol and drink at home instead.
They don't like price rises from us or anyone else in the pub trade, Martin said.
The company reported an 11.1 percent increase in pretax profit to 35.8 million pounds in the six months to January 22.
However, trading has deteriorated in the first six weeks of the second half with sales at pubs open more than a year down 0.7 percent.
The consensus forecast for Wetherspoon's full-year pretax profit stands at 68.6 million pounds according to Thomson Reuters I/B/E/S data and Martin said Wetherspoon could struggle to achieve that.
There's always a danger with five months to go. Sales this calendar year have been slow and costs have been high so it's not the ideal start, he said.
(Reporting by Matt Scuffham; Editing by Paul Sandle and Hans-Juergen Peters)