Whilst many have been carried away with the prospects of an immediate recovery we have remained steadfast in our view that the UK economic recovery will be as protracted as the period of loose credit which preceded the bursting of the credit bubble.  For the likes of JD Wetherspoon (LSE, JDW) the switch to a more austere lifestyle is resulting in increased market share as consumers, unwilling to break a habit deeply entrenched in British culture, focus on value.   

The group’s launch of 99p pints and £2.99 lunches could not have been better timed. And whilst many investors have been very weary of the ultra competitive environment of the pub game, JD’s ability to remain profitable at such low price points is currently standing shareholders in extremely good stead.   

JD resolve on the charts owes much to its dominance over its rivals and this has been very much in evidence over the 11 weeks to 12th July 2009.  On the face of it a decrease of 0.8 percent in like-for-like sales provides little to shout about however total company sales over the same period increased by over 3 percent. 

Over the longer term, during the financial year-to-date (50 weeks to 12th July 2009), like-for-like sales increased by 1.2 percent and overall company sales increased by 5.2 percent. With new pubs a considerable contributor, not only do these figures this underscore the benefits of JD’s aggressive expansion but it also emphasises the group’s high retention of customers.  Having been lured in on the back of a bargain they remain regulars even in the absence of such offers. 

Looking ahead, we expect earnings to be ahead on last year given that costs were lower than anticipated in a number of areas, including energy, labour and marketing.   

And what’s more, there seems little let up in JD’s pursuit of market share.  The company has taken advantage of the depressed commercial property market and will have boosted its portfolio by 39 pubs by the year end. 

From a financial perspective, JD is well positioned.  By the time the company cut its dividend earlier this year to focus on debt reduction it had already managed to distribute £10 million in dividends.  Furthermore, having reduced debt by approximately £40 million JD has a comfortable level of gearing and the stage look set for the return of its dividend at sooner…

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