Whitbread Soars as Costa Coffee Owner Defies Consumer Gloom

By Publications Checkout
Whitbread Soars as Costa Coffee Owner Defies Consumer Gloom

Whitbread defied the gloom hanging over Britain's consumer economy as its Premier Inn hotels, Costa Coffee shops and Beefeater restaurants all posted gains in quarterly sales.

The budget lodging business led the way, with like-for-like sales growth of 4.7 percent far exceeding the average estimate for a 2.9 percent gain. Whitbread shares rose as much as 5.9 percent in London, the steepest advance in the benchmark FTSE 100 Index.

“We’re not immune, but we are resilient” to a consumer squeeze, Chief Executive Officer Alison Brittain said on a conference call. “We play a strong card in the value brand side for the hotel business, and we are an affordable treat in the coffee side of the business.”

Whitbread’s growth comes against the backdrop of a weakening consumer economy as rising inflation and stagnant wages weigh on spending. The hotel market has proved “resilient,” the company said Wednesday, adding that its room-expansion program and digital innovation have enabled Premier Inn to increase its share of the market.

Brittain said Premier Inn will have seen “some impact” from the recent terrorist attacks in London and Manchester, though its also anticipating a bounceback.


‘Very Confident’

“We’re 50/50 business and leisure travel, and we certainly would see the drop in leisure, but we didn’t really see a drop in business,” Brittain said. “We are still very confident with our current expectations for the year.”

The gain in the shares reflected relief among investors, who had seen the value of their holdings decline by 10 percent in the month leading up to Wednesday’s announcement.

“This is a reassuring update,” Jeffrey Harwood, an analyst at Stifel, said in a note. “We consider Whitbread is well positioned to achieve further sustained earnings growth given the organic expansion of Premier Inn and Costa.”

First-quarter highlights included: Costa Coffee LFL sales up 1.1%, est. up 1% Restaurants LFL sales 0.7%, est. up 0.3% U.K. hotel occupancy rises to 79.2% despite increase in capacity.

News by Bloomberg, edited by Hospitality Ireland