I’ve been buying shares in FTSE 250 pub chain JD Wetherspoon (LSE:JDW) for some time. And the falling share price means I’m down around 20% on my investment.
That obviously hasn’t gone according to plan, but the question is what should I do next? Is the stock now better value than it was before, or should I write this one off and look elsewhere?
Why’s the stock been falling?
On the face of it, things have actually been going pretty well for JD Wetherspoon. In 2024, sales grew 5.7%, but some big cost reductions meant earnings per share were up 77%. This is the result of the firm figuring out how to do more with less. Closing some of its pubs and buying freeholds to reduce lease obligations has made the business a lot more profitable.
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All of this is what I expected when I first bought the stock. But there have been some less positive developments and some of these are more obvious than others. Investors have (rightly) been focusing on rising Employers’ National Insurance Contributions and an increase in the Living Wage. These are a threat to JD Wetherspoon’s profit margins.
There is however, also a less obvious issue. The company’s like-for-like sales growth has slowed from 12.7% in 2023 to 7.6% in 2024, to 5.1% in the first half of 2025. That’s been a broader theme across UK consumer businesses and I think it’s something investors considering the stock should pay attention to.
Should I be worried?
Weak like-for-like sales growth has been a common theme of late. Associated British Foods, B&M European Value Retail, Greggs and several others have all reported something similar.
I see this as a sign things are tough across the sector at the moment. And I don’t expect to find JD Wetherspoon exempt from this when it reports its half-year earnings later this month.
I do however, think the company is an unusually strong one. Businesses that sell things to customers for less than their competitors are generally ones that I like to look at. The attraction of low prices is something that I think is a durable one for consumers. But there’s a catch – this strategy only really works for firms that can keep their own costs down.
With JD Wetherspoon, I think the company has some clear strengths in this regard. The scale of its operations allows it to negotiate better prices from suppliers, which it can pass on. On top of this, its strategy of owning – rather than leasing – its pubs helps reduce rental costs. With both of these advantages still intact, I still have a positive long-term view of the stock.
My plan
The risks of a tough economic environment weighing on sales and higher staff costs weighing on margins are real. But JD Wetherspoon’s long-term strengths still seem to be firmly in place.
As a result, I’ve been buying the stock earlier this week. And my intention is to continue doing so unless something about the underlying business changes in the near future.
