Canaccord cites weak margins at Wetherspoons, cuts target price
Canaccord Genuity has decided to retain its 'hold' stance on pub operator JD Wetherspoon after putting it under review, but has lowered its target for the share price from 800p to 750p.
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Wetherspoon (J.D.)
733.50p
16:40 26/04/24
The move follows last month's interim results which showed that like-for-like sales momentum at Wetherspoon had slowed from 6.3% in the first quarter to just 2.8% in the second. Growth had also eased further to 1.6% in the six weeks after the half-year point.
The company also announced that the launch of breakfast initiatives, such as cutting the price of coffee to 99p with free re-fills, as well as lowering the price of certain drinks.
However, Canaccord said: "These price cuts and higher marketing and labour costs will squeeze [operating] margins."
Meanwhile, new pub openings - something that Canaccord believes is a "key growth driver" - are now expected to total just 30 this year, at the bottom end of guidance.
The broker said: "We believe the catalyst for a re-rating would be an expansion in operating margin; however, we do not anticipate this to happen in the near future, hence our 'hold' recommendation."
The stock was 0.5% lower at 747p by 11:41.