High labor costs eat into JD Wetherspoon's profit

A Wetherspoons pub in central London in September 2017
Robert Alexander | Getty Images
A Wetherspoons pub in central London in September 2017

British pubs group JD Wetherspoon Plc posted an 18.9 percent fall in first-half pretax profit on Friday, hit by high labor costs.

The company, like most restaurant chains in the country, has been battling high staff costs, property prices and power bills as well as a move away from pub drinking by younger Britons.

The FTSE 250, which relies heavily on alcohol sales at its restaurants, said on Friday labour costs increased by about 33 million pounds, accounting for the biggest chunk of overall costs.

It expects results for the current financial year to remain unchanged.

The company said like-for-like sales rose 9.6 percent in the six weeks to March 10, helped by good weather this year, while total sales increased 10.9 percent.

The owner and operator of more than 900 pubs in UK and Ireland said like-for-like sales rose 6.3 percent in the 26 weeks to January 27.

However, speaking to CNBC's "Squawk Box Europe" on Friday, founder Tim Martin said it was important "not to overconcentrate on one six-month period."

"If we'd pulled out all the stops, we could have got our profits to higher levels. Having been on the stock market for 26 or 27 years, I think it's better to take the cost sometimes and let sales do the work for you over the ensuing months or years," he said.

Pretax profit fell to 50.3 million pounds ($66.7 million) from 62 million pounds a year earlier.

Backing Brexit

Asked for his views on Brexit, Martin said politicians were right to reject Theresa May's deal as it "isn't Brexit."

"It's not leaving the EU, it's staying in the customs union indefinitely, and still (being) subject to European rules," he said. "Parliament has said it will implement the decision of the people — it's reluctant to do so because most of the parliamentarians are actually Remainers, but they have to do what they're told by the people in the end."

He also said the conversation on Brexit should be refocused, suggesting that its economic impact is being oversold.

"Oddly enough the discussion is taking place as if more consumption and higher levels of investment are the holy grail. In fact, most of the problems since I've been in business in the last 40 years have been as a result of excessive consumption, excessive borrowing and excessive investment," he told CNBC.

"If people have scaled back a bit that's a good thing. The real upside for Brexit is to be able to eliminate tariffs on over 12,000 items. So instead of free trade with the 7 percent of the world that's in the EU, you can get free trade with 100 percent of the world."

He noted that JD Wetherspoon currently imports 6 to 8 million bottles of wine from Australia and New Zealand per year, and if tariffs were eliminated, the chain could reduce prices.