The FTSE 250 has slipped around 2% so far this month on concerns about the seasonal September slump. Still, it’s an index full of defensive gems, but one of them I’m not quite ready to pull the trigger on.
Defensive companies are usually better equipped to ride out market turbulence. Food producer Premier Foods and defence contractor Chemring are two that could help cushion the blow if the September dip drags on.
Another name that has long caught my eye for similar reasons is the pub chain JD Wetherspoons (LSE: JDW). It’s a FTSE 250 favourite with many retail investors, and one I’ve seriously considered adding to my portfolio.
But after weighing things up, I’m staying on the sidelines for now.
Signs of a comeback?
The company still carries the scars of the pandemic, which battered the hospitality sector and kept pubs empty well into 2022. Its share price hasn’t fully recovered either, though this year has looked far more encouraging. Wetherspoons’ stock is up roughly 15% in 2025, suggesting some of the old investor confidence is creeping back.
Operationally, things are improving too. In July, the group reported a 5.1% increase in like-for-like sales for the 12 weeks to 20 July. Management credited the boost to stronger demand for drinks and higher footfall across its nationwide chain, with the summer weather playing its part.
The half-year numbers also hinted at momentum building. Revenue for H1 2025 came in at just over £1.03bn, although profits were a fairly slim £32.23m. That was still positive but represented an earnings miss of 16.6% against analyst forecasts – a reminder that the road back to form is far from smooth.
Is the valuation tempting?
On paper, the shares don’t look outrageously priced. The stock currently trades on a forward price-to-earnings (P/E) ratio of 13.9, broadly in line with the mid-cap average. A price-to-sales (P/S) ratio of 0.41 even suggests the stock could be undervalued relative to its revenue.
What’s more, Wetherspoons has recently reintroduced its dividend, now offering a yield of about 2.3%. For long-time holders, that’s a welcome sign of confidence from management.
Where my doubts creep in
Despite these positives, I can’t ignore some nagging concerns. The company’s market capitalisation has fallen 17.7% in the past year, which makes me wary about the market’s faith in its recovery. Profitability is also slim, with a net margin of just 3%.
But the real sticking point is the balance sheet. Wetherspoons carries £1.19bn of debt, stacked up against just £392m in equity. That level of leverage is high for a cyclical business, particularly one operating in the unpredictable pub trade.
Liquidity is another worry. A quick ratio of only 0.31 indicates the firm may struggle to cover short-term liabilities without relying on incoming sales or further borrowing.
Still on the table
Wetherspoons remains a high street fixture, and its expansion into hotels could unlock another growth avenue. It’s a resilient brand, and I suspect it’ll continue to play a role in Britain’s social fabric for years to come.
But as someone who errs on the side of caution, the current debt pile and wafer-thin margins are too much of a red flag. For now, Wetherspoons will stay firmly on my FTSE 250 watchlist, with another assessment pencilled in after its next set of results.
