Canaccord cuts Wetherspoon rating while others reiterate

15th Jul 2015 10:44

(ShareCast News) - Canaccord has moved Wetherspoon's rating from 'sell' to 'hold' while other analysts reiterated views after the pub owner said expected profit to fall.Analysts at Canaccord cut their target price from 720p to 750p, and earnings per share expectations from 9% for the 2016 financial year."Today's pre-close trading statement reveals the usual story of industry-leading like for like sales achieved at the cost of on-going margin erosion," the brokerage said in a note.Canaccord said the trend is likely to accelerate with news Wetherspoon committed to 8% pay increases on starting salaries.N+1 Singer reiterated a 'sell' rating, and said the living wage budget pledge would continue to put cost pressure on the pubs sector.Similarly Investec reiterated an 'add' rating and reduced its target price from 833p down to 800p.The brokerage said operating margins for the full year were lower than expected, and the pay increase announcement would result in lower operating margins in future.Investec said there was an upside in higher wages for pub staff and more broadly due to the living wage."We suspect that higher wages not only to JD Wetherspoon's staff, but also more widely for other workers from the subsequently announced living wage, will boost spending in JD Wetherspoon's pubs," analyst Alex Paterson said.Shore Capital also reiterated a 'hold' recommendation and said it expected to reduce its 2016 forecasts."While the management commentary talks about the living wage, we expect management to be questioned further on the impact of the living wage on this morning's call."Shares in Wetherspoon slid 6.94% to 717.50p at 10.09 BST.