JD Wetherspoon has experienced a complete rapid expansion and stable operating cycle. In North America, Western Europe and some developed Asian countries, the pub industry is a mature form of business, and the density and consumption frequency of British pubs is among the highest in the world. We used J Dwetherspoon plc (company code: JDW.L), which is the target of the largest listed pub in the UK, as an analysis target to study the interpretation and valuation of key indicators of the pub industry in mature overseas markets;
JDW was founded in 1983 and currently has 861 pubs. It is the chain with the largest number of pubs opened in the UK. In the past 40 years since the company was founded, it has experienced two stages of typical rapid expansion and stable operation:
During the peak period of 95-02, the number of stores opened each year reached 90-100; after 03, the rate of opening stores slowed down, and the average number of stores opened each year during the 10-19 period was 25, accounting for 2.6% of the number of stores in stock at the beginning of the year. From 1990 to 2019, the compound growth rates of JDW's number of pubs, revenue, and pre-tax revenue after non-recurring profit and loss reached 14.1%, 21.1%, and 19.4%, respectively.
The average operating profit margin at the store level and the adjusted profit margin before tax at the company level during the 11-19 period were 19.8% and 5.4%, respectively; Helens 21H's data was 22.16% and 9.83%; the ten-year average of JDW's CROCCE and return on cash investment was 10.2% and 12.5%, respectively; the average value of JDW's capital expenditure as a share of revenue during the 11-19 period was 7.98%, significantly higher than Helens's ratio of 3% to 4%;
Overseas capital markets value the year-on-year revenue growth rate (like for like sales) of a single store, which is the two major indicators of same-store and employee retention time: compared to ordinary restaurants, the pub's warm and familiar atmosphere makes it have a relatively fixed group of old customers. The longer the store has been open, the more customers it has accumulated, and the value of the old store is remarkable. The compound year-on-year growth rate of JDW's same-store revenue in the 10-19 period was 3.3%, and the annual growth rate is relatively uniform. Precisely because of the stable data on the same store and the same store retention period for old stores, we can stabilize DJW for a stable period The collection model is summarized as” Old stores grew by 3%-4% year over year, compounded by the incremental contribution of new stores of 2%-3% per year”;
Employee retention time: As a labor-intensive industry, and an industry where old customers contribute a high level of revenue, and where old customers value a familiar atmosphere (including employees), JDW and the capital market place special emphasis on employee income and retention: As of the end of June '21, the average number of years JDW pub store managers and kitchen managers have been in the store for 13.6 and 9.6 years. In the past 10 years, JDW's total employee bonuses and option incentive packages accounted for 50.6% of JDW's revenue, and 89.8% of the total package was given to on-site taverns working employees;
Investment advice: Helens opened its first store in 2008. The company has experience in continuing to operate old stores. At the same time, the company also focuses on emotional development with employees. We estimate that the turnover rate of employees at Helens stores is lower than that of restaurants in the Helens store. Affected by the slight slow opening process and the decline in single-store revenue due to the ongoing outbreak of the epidemic, we lowered Helens' net profit for 21-23 under a neutral scenario to be -37.73 million yuan, 552 million yuan, and 1,059 million yuan (the original forecast was -17.6 million yuan, 680 million yuan, and 1.33 billion yuan). The adjusted net profit was 188 million yuan, 552 million yuan, and 1,059 million yuan (the original forecast was 208 million yuan, 680 million yuan, and 1.33 billion yuan). Helens's current stock price corresponds to PE 39 million for 22 years Double and maintain the “buy” rating.
Risk warning: Food safety issues; increased competition caused Helens to open stores less than expected; excessive encryption speed caused single store revenue to drop significantly; raw material prices fluctuated greatly; store opening dates were drastically reduced due to the long-term spread of the epidemic; risk of deviations in estimates such as opening space (estimates such as opening space are all based on certain assumptions, and there is a risk that actual sales cannot be achieved and falls short of expectations);