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Shareholders in Wetherspoon (JDW) are crying into their beer this morning despite solid Q1 underlying sales growth and what is described as a decent start to the year.
As always outlook is king, and so a cocktail of comments from the character that is Chairman Tim Martin are weighing on investor sentiment, putting the shares at the foot of the . Firstly, higher costs are expected for the rest of the year. Secondly, while the outlook is unchanged, forecasts are considered tentative at this early stage of the year. Thirdly, sales growth has slowed in recent weeks. Lastly, and potentially most concerning, is a borderline threat to cut ties with continental suppliers should Brexit trade negotiations bully the company into a punitive situation.
Confirmation of higher investment and net debt-to-EBITDA multiples holding around this summer’s 15-year high for the foreseeable future may also be a concern in terms of balance sheet sustainability. Having peaked in early October, the shares have taken another leg lower to extend their current 13% downtrend which sees them testing their 100-day moving average for the first time since a 33% post-Brexit rally began in early July. Last orders, or one for the road?
Mike van Dulken, Head of Research, 2 Nov
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