Whitbread loses its beans as Carpetright profits hit the floor

Two very different retailers with very similar stories - which add up to the fact that things aren't looking good on the high street.

by Emma Haslett
Last Updated: 06 Nov 2012
Those who thought the £3 cup of coffee was recession-proof have been proved sadly wrong, after Whitbread – owner of (among others) Costa and Premier Inn – posted results with all the pizzazz of a watered-down babyccino. According to the figures, like-for-like sales growth in the 13 weeks to the beginning of December dropped from 3.3% in the first half to just 2.4%. No surprise, then, that shares in the company are down by an uncharacteristic 4.3%. Although to be fair to Whitbread, it’s not the only one suffering the downturn. In fact, you might argue that things at Carpetright are looking even worse…

Whitbread has clearly been feeling the consumer spending squeeze: like-for-like sales for Costa fell to 3.8% in the third quarter, down from 6.7% in its first half, while sales at Premier Inn, its main hotel chain, halved from 5.2% in its first six months to 2.6% in the its third quarter. Andy Harrison, the company’s CEO, made no bones about what had gone wrong there: ‘Industry data shows that revpars (revenue per available room) growth in London and the provinces has virtually disappeared, with the London market showing broadly flat revpar and the provinces a marginal decline over the last six weeks.’ In other words, not even Lenny Henry’s smiling face can persuade people to have a weekend away.

But sales at Brewers Fayre and Beefeater (part of the same division as Premier Inn) more than made up for this, with a reversal in the 1.6% fall it saw in same-store sales during the first half, to growth of 2.1% in the third quarter. Although Harrison obviously isn’t holding his breath. ‘Trading month by month continues to be variable in a challenging consumer environment,’ he sighed.

Still, at least Whitbread's seeing growth – unlike flooring retailer Carpetright, which has just posed its worst first-half results since it became a listed company. Underlying pre-tax profits for the 26 weeks to the end of October fell from £10m during the same period last year to £1.4m this year, while UK underlying operating profits fell from £11.3m last year to a meagre £800,000. Ouch.

Carpetright finance director Neil Page tried to salvage something positive out of the situation, pointing out that its diversification into beds means sales increased by 28.3%, and that beds now represent 6.1% of its total UK sales revenue. He also explained that the company is trying to revamp its image, opening up standalone bed stores, ‘refreshing store exteriors’ to entice more customers and (probably more importantly) talking to suppliers about reducing prices. There is, though, little sign of trading conditions improving, he admitted. And considering Carpetright is seen as something of a bellwether for the housing industry as a whole, that’s an indication that we’re in for a long, cold winter.

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