Tuesday, 16 October, 2018

Costa and Premier Inn owner Whitbread warns on challenging United Kingdom conditions

Whitbread says the coffee shop market in China is 'highly attractive' Image Whitbread bought Costa Coffee in 1995
Russell Knight | 18 January, 2018, 15:01

Hotel sales overall were flat, with like-for-like sales growth in the UK Premier Inn hotel business up 0.5%, while sales at the Costa coffee chain fell 0.1%.

Whitbread plc (LON:WTB), the owner of Costa Coffee and Premier Inn hotels, said third quarter sales growth slowed in the United Kingdom, reflecting tough market conditions.

Despite Costa sales growing by 7.2% - partly due to new store openings and Costa Express expansion - "weak retail market footfall is negatively impacting high street stores' like-for-like performance", the group said in a trading update.

There was also a hit to the United Kingdom hotel market, with signs of market weakness, most notably in London, according to Whitbread.

However Self-serve Costa Express machines helped keep total sales ticking over for the firm with total revenue from them up 20 per cent in the quarter with more than 1,000 of the "on-the-go" machines installed in nine months a year ago.

"Our performance in the quarter moderated as the budget hotel market weakened and we had a particularly challenging October".

Premier Inn inched up 0.5 per cent, driven exclusively by restaurant sales growth of 1.8 per cent while hotels remained flat.

Signage for Premier Inn is seen on the outside of one of their hotels in London Britain
Image Whitbread also owns Premier Inn

Whitbread chief executive Alison Brittain said: "Our Costa high street stores in the United Kingdom are highly profitable and generate strong returns".

"Internationally, Costa in China continues its good momentum with another quarter of positive like-for-like sales growth".

Shares rose 2.9% to 3,958p in morning trading. The drop in Costa sales seems to be down to shoppers shunning the high street, resulting in lower footfall for stores, as well as pressure from the artisan coffee retailers who are gaining market share.

Whitbread said it was trying newer blends of coffee and food options in response.

Reuters reported that investor Sachem Head was pushing the FTSE 100 company to consider splitting the Costa Coffee chain from its hotels and restaurant businesses, according to two people familiar with the matter.

Whitbread announced at the beginning of the month that former ITV boss Adam Crozier would become chairman of the company, with Richard Baker retiring in February.

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