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The pub chain which offers cheap food and drink is expanding its business, and it has its eyes set on the Irish market. Last year the firm increased the number of pubs in its group by 41, bringing the total to 931. Between now and 2019 the organisation plans to open an additional 200 pubs, with particular focus on Ireland. The expansion plans are impressive when you take into account the number of pub closures across both the UK and Ireland in recent years.
Belfast-born founder and chairman Tim Martin aims to open 30 new pubs in Ireland in the coming year. The UK-based company opened its first pub in Dublin last year, and even though it wasn’t without problems, it has proved to be a success. The financial crash in Ireland has left customers seeking cheaper food and drink options, and the decline in property prices has made it easier for Wetherspoon to gain a foothold in the country.
Wetherspoon had a dispute with Heineken NV over the pricing of the latter’s products in the Dublin pub, and the disagreement lead to Wetherspoon pulling all Heineken products from its premises. However, a deal has since been struck where Wetherspoon will continue to sell a number Heineken drinks in its pubs.
The company will announce its second-quarter sales and revenue report on Wednesday 21 January, and traders will be anticipating a follow on from the 6% increase in Q1 like-for-like sales. Rising costs have been a bone of contention for Mr Martin, and utility and staff costs have increased by 4% and 5% respectively over the period. The company stated that profit margins dipped from 8.3% to 7.7% in the quarter, and the firm expects full-year profit margin to be in the 7.2% to 7.8% range.
Wetherspoon will announce full-year numbers in September, when consensus is for revenue of £1.52 billion and adjusted net profit of £63 million. These forecasts represent an 8.5% rise in revenue and a 16% increase in adjusted net profits.
Equity analysts are bullish on the stock, and,out of the 17 recommendations, four are buys, 11 are holds, and two are sells. The average target price is £8.17, which is marginally above the current price. Investment banks are extremely bullish on rival Mitchells & Butlers, and out of the 19 recommendations, 15 are buys, and four are holds. The average target price is 464p, which is 10% above the current price.
The shape price has been in an upward trend since August, and, should support be held at £8, an upside target of £9 will be in sight. A move below £8 will turn the support into resistance, and a retest of the downside support at £7 will be brought into play.