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JD Wetherspoon Sees Margins Squeezed Despite 8% Sales Rise As Wages And Higher Tax Bills Hit

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JD WETHERSPOON PROFITS SQUEEZE
Wetherspoon's pub chain has reported an increase in sales, but a drop in margins as higher bills and wages come into effect | Alamy

The row over the amount of tax pubs have to pay looks set to rear its head again after JD Wetherspoon has blamed a profits squeeze on higher tax bills and wages.

Higher utility bills, bar and food supplies, combined with increased marketing costs also led to the margins being cut, according to chief executive John Hutson. The chain now expects the half-year margins to fall to 8.2%, down 1.1%.

This is despite sales being on the up - for the 11 weeks to 13 January 2013, like-for-like sales increased by 8%.

Wetherspoon's chairman Tim Martin spoke openly in 2012 about the burden all pubs were facing because of the taxes levied on the industry.

Speaking to Sky News last month, Martin said supermarkets have an unfair advantage because they do not have to pay the 20% VAT on food that pubs do, meaning more people opt to stay at home.

He also blamed an increasing tax take for his decision to limit the company's expansion plans during 2012.

"There is no question that we would open more pubs and create more jobs in 2013 if the increasing tax burden on pubs was reduced," he said.

Wetherspoon has opened five pubs so far this financial year and has a further 12 sites under development. In December, the pub chain announced it would create 1,200 jobs at 30 new sites in 2013.

Nick Hood, business analyst at Company Watch, told the Huffington Post UK: "Wetherspoon's continues to defy the wrong sort of weather, consumer gloom and a host of other negative factors to post impressive top line growth. But achieving acceptable profit margins is another thing.

"Its balance sheet is also a challenge. A strongly negative working capital position and a substantial debt burden combine to produce a marginal financial health rating just above our warning area."

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