Wetherspoon targets sales boost with cheap breakfast and coffee

By Neil Maidment

LONDON (Reuters) - British pub chain JD Wetherspoon aims to triple sales of breakfasts and coffee over the next 18 months by slashing prices to grab more of the thriving cafe trade and reduce its reliance on alcohol sales.

Many British pubs are investing heavily to extend opening hours, revamp menus and sell more tea, coffee and breakfasts to tap growing demand for casual dining, as supermarkets steal more of the alcohol market by cutting prices.

Coffee has been particularly popular with chains such as Starbucks, Cafe Nero and Costa Coffee vying with pubs, supermarkets and fast food outlets for a share of a sector estimated at 7 billion pounds.

"It is a growing market and we think it is time to up the ante," Wetherspoon founder and Chairman Tim Martin told Reuters.

"We're doing this because we think it will improve the profits of the business but we aren't really able to put a precise time scale on it," he said after Wetherspoon released first-half results on Friday.

Wetherspoon posted a slight fall in pretax profit to 37.5 million pounds as rising sales were outweighed by a further fall in margins and analysts worried that price cuts would hurt the company's performance in the second half.

Shares in the firm slumped as much as 5.4 percent on Friday and were trading down 4.8 percent at 772.5 pence at 1106 GMT.

"More discounting equals more downgrades," Numis analyst Douglas Jack said, cutting his full-year profit forecast by 5 percent to 77.5 million pounds.

CHEAP BREAKFAST

The price of coffee and breakfasts, which generate about 150 million pounds of turnover, will be cut by as much as 20 percent, putting a small filter coffee at 99 pence with a free refill and a cooked breakfast at 2.99 pounds. JD Wetherspoon sells about 50 million coffees and 24 million breakfasts a year.

Martin said the company hoped cheap offers, combined with more space at its pubs than in coffee shops and a wider variety of products, would help treble sales over the next 18 months.

Food sales have risen from 10 percent of turnover 20 years ago to almost 40 percent now, Martin said, growth that has helped the company expand to more than 900 pubs across Britain.

In the first half, like-for-like food sales rose 10.1 percent while bar sales climbed just 1.5 percent, slower than a 3.4 percent increase a year earlier. Overall, like-for-like sales rose 4.5 percent.

However, higher utility costs and wages have pushed the company's operating margin lower in recent years, and another round of price cuts means the trend is likely to continue. Its operating margin in the six months to Jan. 25 was 7.4 percent, down from 8.2 percent a year earlier.

Wetherspoon said while marketing and labour costs may be higher than expected in the second half, it expected a "reasonable outcome" for the full year.

Sales at pubs open more than a year were up 1.6 percent in the six weeks to March 8.

(Editing by David Clarke)