Whitbread 10.8% sales rise lacks froth

Sales growth at the company behind the Costa coffee chain has dropped from 14.8% in its second quarter last year. But don't write it off.

by Emma Haslett
Last Updated: 10 Sep 2013
Is the UK’s love affair with cookie-cutter coffee chains about to reach its bitter end? Results from Whitbread, the owner of Costa Coffee, suggest as much: the company, which also owns the Premier Inn hotel chain, show like-for-like sales at Costa rose by just 3% in the 11 weeks to August 15, compared with an 8% sales rise during the same period last year.

The good news is that UK consumers’ appetites for cheap hotel rooms remain unabated: sales at Premier Inn rose by 3%, only slightly down from a 3.2% rise during the same period last year. The chain added 1,270 new rooms during the period, which helped.

It restaurants business – which includes Beefeater and Brewers Fayre – did less well, with a 0.2% drop in sales, compared with a 3.8% rise last year.

That pushed total second quarter sales up 10.8%, down from 14.8% during the same period last year.

And there we were thinking, after the slew of positive figures on everything from the retail to the service sectors, that things were beginning to look up.

But Andy Harrison, Whitbread’s chief executive, thinks there’s still a difference between what’s happening in the south-east and what’s happening everywhere else.

‘It’s clear that the London economy turned a corner some time ago,’ he said.

‘But it’s totally unclear to me what’s happening outside the M25 and on the evidence I have seen I would say it’s flat. Wages are rising slower than inflation, particularly energy bills. Outside of London the consumer has less money to spend.’

But as the world’s second-largest coffee chain (it’s opened an average of 150 overseas stores a year for the past five years), at least Costa doesn’t have to rely on its UK business to stay afloat. This week it will open its 1,000th international coffee shop: its first store in Thailand.

Shares in Whitbread dropped by 2.58% this morning on the news that sales growth was down – but with that kind of success abroad, investors shouldn’t have too much to worry about. In fact, other UK businesses whose growth is still flat because of dampened consumer spending could even learn a thing or two. Don’t write off Costa just yet…

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