JD Wetherspoon, the pub operator, today reported its first quarterly decline in like-for-like sales for more than a year as the smoking ban in England started to bite.

The company, which has 680 pubs, dismissed suggestions of a slowdown in consumer spending as “largely peripheral” to trading, arguing that the smoking ban, which came into effect in July, was the only material factor in the first-quarter decline.

Like-for-like sales fell by 1 per cent in the 13 weeks to October 28, compared with increases of 9.2 per cent, 5.4 per cent, 3.4 per cent and 4.4 per cent in the four quarters of its last financial year.

A double-digit increase in food sales only partly offset an estimated 6 per cent drop in bar sales.

The growing proportion of sales of food, which is sold at a lower profit margin, resulted in a 0.6 per cent fall in the operating margin, continuing last year’s trend, when the margin fell from 10.6 per cent to 10.3 per cent.

John Hutson, chief executive, admitted that many rivals were achieving an operating margin of 15 per cent, but pointed out that few were able to match the average gross sales of almost £31,000 a week achieved by Wetherspoons pubs.

“I’m not unduly worried,” he said.

Mr Hutson was also confident that the impact of the English smoking ban would eventually diminish as it had done in its Scottish pubs, which reported a 5.1 per cent increase in sales in the first full financial year after the ban.

“It started to turn around six months after the ban. Scotland continues to be and continues to perform well,” he said.

Wetherspoons is the first big managed pub company to report a smoking-related fall-off. Mark Brumby, an analyst at Blue Oar Securities, said: “The post-smoking ban honeymoon would appear to be over.”

But other analysts shared Mr Hutson’s confidence that the ban would benefit the trade in the long term. Nigel Parson, at Evolution Securities, said: “Short term, the move to a smoke-free world is proving to be disruptive. But once smokers get bored of sitting at home alone, then trading should recover.”

The credit crunch also had an impact on Wetherspoons, as the average interest rate on its debt rose from 6.75 per cent to about 7.3 per cent.

The company has net debt of about £430 million, although that is expected to rise to at least £450 million as it buys back further shares in the current financial year.

It expects to open 30 new pubs during the year, although most openings will be funded internally from cashflow.

Shares of Wetherspoons fell by 15.5p to 486.5p.

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