JD Wetherspoon Plc (JDW) jumped the most in four years after the U.K. pub operator reported an operating margin that beat analyst estimates and announced a plan to open 30 more outlets in the next financial year.
“We view the year-to-date margin as a possible indicator for the future, if we were to achieve reasonable sales growth,” Watford, England-based Wetherspoon said today. It also forecast a “slightly better” full-year outcome before exceptional items than it previously expected. The stock rose as much as 9.4 percent, the biggest intraday jump since March 2009.
The operating margin was 9.5 percent in the 11 weeks to 14 July, including one-off benefits, and 8.7 percent in the 50 weeks to 14 July, the company said. Trading benefitted from festivals and improved menus, and July’s sunshine helped sales as fourth-quarter revenue in pubs open more than a year climbed 3.5 percent.
“Wetherspoon has reported better-than-expected fourth-quarter like-for-like revenue growth and margin,” said James Hollins, an analyst at Investec Securities Ltd. in London. “The increased pub opening program derives from, we believe, greater confidence in future trading and a strong pipeline of new sites.”
Hollins reiterated his buy recommendation on the stock and increased his price target to 750 pence from 660 pence.
Wetherspoon shares were up 8.4 percent at 724 pence as of 2:32 p.m. in London, giving the pub owner a market value of 914 million pounds ($1.4 billion).
Sales were “aided by the good weather,” Greg Johnson, an analyst at Shore Capital, wrote in a note. “The key driver today though will be the operating margin, which was 9.5 percent in the quarter, a near 100 basis points better than expected.”
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