JD Wetherspoon is back in profit –⁠ here’s how it did it

The pub chain’s commitment to quality and value for money, as well as understanding of its customers and place in the community, have helped ‘Spoons’ record an operating profit for the first time since 2019

Wetherspoon pub

Almost everyone in the country will, at some point, have been to a JD Wetherspoon pub. They can be found on the high streets of most major towns and cities, serving cheap beer and food to a captivated audience of students, work colleagues and ‘boozers’.

Indeed, few other pub chains have managed to develop such a strong identity. Go into a ‘Spoons’, as they’re colloquially called, and you’ll find a familiar menu, décor and atmosphere. Some people love them, some people hate them, but either way they’re a British business success story. 

That success has hit the buffers in recent years, though. The Covid pandemic and associated lockdowns, followed by rising costs meant the business was loss-making for three years between 2020 and 2022. 

Yet despite inflation remaining high and the UK caught in the grip of a cost-of-living crisis, JD Wetherspoon is back in the black. The pub chain, which has more than 800 venues across the UK and Ireland, posted a pre-tax profit of £42.6m for the year to 30 July, compared with a loss of £30.4m in the previous 12 months. Total sales increased 10.6% year on year to £1.92bn. Bar sales were up by 9%, while food sales were credited as a major factor in its revival.

Taking a long-term view

But despite the return to profitability and cautious optimism about the future, the company has decided against reinstating a dividend for investors. Instead, the firm is taking a longer-term approach as it looks to rebuild profitability.

It might have been tempting for Wetherspoon to get carried away by its recent boon and celebrate with investors. But it is rightly wary of inflation remaining high and the ongoing cost-of-living crisis, as well as potential changes to business rates that could coincide with a change of government.

JD Wetherspoon has appealed to the consumer’s sense of ‘a local’

A return to profitability is a good sign, but the business remains some way behind where it was pre-Covid, with pre-tax profits in 2019 of £102m. It has also closed 34 pubs over the past 18 months, while opening in just three new locations. At the time of writing, around 20 Wetherspoon pubs are listed for sale, with a further 15 already under offer.

Wetherspoon has tended to close sites which existed in areas with another of its pubs nearby. The Sir John Stirling Maxwell in Glasgow closed down, for example, but there are still seven other Wetherspoon pubs in the city to choose from. 

The company has also closed sites where its low-cost offering is perhaps not a priority for the local demographic. The Knights Templar, which was located just off The Strand in London, an area frequented by high-earning lawyers and bankers, was sold off on this basis.

The wider hospitality industry is also still struggling. Stonegate Group, which owns brands including Slug and Lettuce, Walkabout and Yates’s, is still in the red having posted a pre-tax loss of £130m. 

Wetherspoon’s focus on people, planet and profit

The average punter may not realise, but Wetherspoon subscribes to the triple bottom line framework. That means it places equal weight on people, planet and profit.

The strategy becomes clearer when looking at pay. In April, it announced a raise for its lowest-earning employees, pushing the average salary of bar staff to more than £10 per hour, which is above the National Living Wage. 

At the same time, executive salaries are being kept under control. Its executive and non-executive directors were paid £2.4m last year, down slightly from the £2.58m they received the year before; and no cash bonuses were paid, although they did receive shares in the company’s long-term incentive scheme. 

Such restraint, according to Dr Pedro Longart, the marketing course leader at Falmouth University, has contributed to Wetherspoon’s perception as a “good corporate citizen”. “From sourcing locally to minimise food miles to a comprehensive environmental policy, Wetherspoon makes a concerted effort towards sustainability,” Longart explains. “And its tax contributions and employee incentives of bonuses and shares show its ethical approach to profit-making.” 

The cult of ‘Spoons’ is a lesson in consistency

An obvious advantage that Wetherspoon has over competitors is its generally lower prices. But company chairman and founder Tim Martin has always been particular about framing Wetherspoon pubs as value for money, as opposed to cheap. One of the company’s slogans is: “Top brands at sensible prices, every day.”

But it is simplistic to say that Wetherspoon has returned to profitability when consumers are increasingly budget-conscious purely based on these lower prices alone. Where Wetherspoon really succeeds is in positioning itself as a reliable, consistent product, with Longart noting the company’s “profound understanding of consumer behaviour”.

Wetherspoon has capitalised on people’s “tendencies to seek entertainment and social engagement as coping mechanisms” when times are tough, he says. In being accessible and affordable, the company’s decision to only impose modest price hikes has earned the firm a reputation as “a vestige of cultural continuity. It has reinforced its place in the community and has appealed to the consumer’s sense of ‘a local’.” 

Kateline Porritt, head of trends at hospitality consultancy Egg Soldiers, points to the company’s property strategy as another lesson in consistency. It typically acquires old theatre, cinema, and church structures for its pubs, which help attract visitors due to their architectural interest, as well as their size. 

At a Wetherspoon pub, there’s confidence in knowing what you’re getting

In addition, where other pubs may be hamstrung by expensive subscriptions to music or sports providers, Wetherspoon largely avoids these costs. The company has allowed exceptions – namely, to show live football on terrestrial television during major tournaments such as the Women’s World Cup – but generally, not having sport and music is a cost-saving and part of its appeal for customers.

And while Martin may indulge his ego and pro-Brexit politics in the company’s in-house magazine, as he often points out, consumers are under no obligation to read it. Most don’t. And many of those who do see it as an enjoyable quirk rather than a source of offence. 

Then there’s its user-friendly app, another success for Wetherspoon. It enables table service and remote orders to any of the pubs in the chain. For customers who don’t want to download the app – some people are less technologically savvy or are weary from app fatigue during the lockdowns – Wetherspoon’s website has the same functionality. And, of course, for anyone who prefers, there is always the option of ordering at the bar, even in cash if they want. 

Wetherspoon and the future

Inflation, though still high, has eased across the hospitality industry. According to the Office for National Statistics, consumer price inflation for restaurants and hotels dropped to 8.3% in August, from 9.6% in July. 

Earlier this week, Martin told the Financial Times that he was “modestly optimistic” for the future, but a lot hinged on avoiding any further coronavirus lockdowns and any future government, regardless of which party wins the next election, introducing more competitive business rates.

As for consumer opinion, though, the Wetherspoon sales figures speak for themselves. The company’s honest and unpretentious approach is proving enduringly popular with pub-goers. With people’s wallets hit hard by the cost-of-living-crisis, the decision of where to eat or drink with friends is becoming an increasingly complex one. Wetherspoon, Porritt says, is offering the affordable choice of somewhere to do both.  A potential “mid-week escapism”, she suggests, could become a “regular pleasure without breaking the bank.” 

It’s also worth mentioning “the inconsistency in prices to expect elsewhere,” she adds. “At a Wetherspoon pub, there’s confidence in knowing what you’re getting… the crossover of entertainment and food – it’s a social space with alcohol, so to double up a night out with your dinner may be more appealing than visiting multiple places.” 

And, finally, where other companies have tried and failed to elicit some sort of solidarity with their consumers ⁠– an idea that we’re all in this together, if you will ⁠– with the help of Martin’s everyman rhetoric in the press, Wetherspoon has actually managed it.