The past month has been volatile and rough for both the FTSE 100 and FTSE 250. Both indices have experienced falls as investor sentiment has soured. Despite this, there have been some outperformers. One growth stock that has bucked the wider trend is JD Wetherspoon (LSE:JDW). With the FTSE 250 down 6% in the past month, JD Wetherspoon shares are up 24%. Here are the details.
Considering the bigger picture
Some might think it logical that JD Wetherspoon shares have performed well recently. The main driver for the broader market fall relates to concerns around the banking sector. With several banks around the world needing to be rescued, it doesn’t paint a pretty picture for financial stability.
Yet JD Wetherspoon operates pubs and restaurants in the UK. This is a completely different sector that’s relatively unaffected by the problems of Silicon Valley Bank or Credit Suisse.
Its outperformance impresses me. At the moment we’re seeing investors sell all kinds of stocks. It doesn’t matter what sector, people are generally uncertain about the future and so some are deciding to sell and hold cash. So I haven’t been taking for granted that the stock would be doing well, as many other stocks in non-finance areas are still getting sold.
Solid full-year results
A key reason for the gains over the past month came from the interim half-year results. Like-for-like sales versus the pre-pandemic H1 2019 were up 5%. Versus H1 2022, sales were up an even stronger 13%.
Profit before tax was £4.6m. Although this was much, much lower than the 2019 figure of £50.3m, it was significantly better than the loss of £26.1m from 2022. This flip from a loss to a profit definitely helped to lift the share price.
There were other positives to take from the report, including a reduction in net debt. At the end of January it stood at £743.9m, a fall of £176.5m from the same time last year.
Balanced risks, plenty of potential
The growth stock isn’t immune from risks going forward. It’s still dealing with high inflation, particularly when it comes to food and drink. Labour costs rising also hamper profits, and people are a key component of operating the venues. These are clearly reasons why the share price is down 17% in the past year.
But looking ahead, I feel the business is in a great spot. The cost-of-living crisis is going to be an issue for a while to come. But JD Wetherspoon is positioned at the cheaper end of the market and should be able to make the most of its low prices. So I feel it will be able to retain demand throughout the summer and beyond. The results from the past six months show that this has been the case so far.
At 659p, there’s plenty of room to move higher before it reaches its 52-week high of 833p. Bringing everything together, I’m seriously considering buying some JD Wetherspoon shares.
