SHARES in Whitbread perked up more than three per cent after the leisure giant’s Costa Coffee arm returned to sales growth in the first quarter.
Whitbread shrugged off the fragile economic backdrop as it lifted like-for-like sales 2.9 per cent across its Costa and Premier Inn businesses in the 13 weeks to June 1, driven by growth across its expanding coffee and hotel operations.
The results marked a return to year on year sales growth for the Costa division. The coffee shop chain reported like for like sales up 1.1 per cent, having reported a 0.8 per cent fall in the preceding quarter. Total sales at Whitbread, which take into account new hotel and coffee shop openings, grew by 7.6 per cent in the first quarter.
Analyst Nicholas Hyett at Hargreaves Lansdown described the results as “pretty sold all things considered”, pointing to the challenging economic backdrop.
Inflation surged to 2.9 per cent in May from 2.7 per cent in April, as prices continue to be pushed up by the Brexit-hit pound, while official figures last week showed that average weekly earnings in Great Britain were down 0.6 per cent in April compared with the same period last year.
“They don’t show the spectacular growth of years past, but the UK business is a more mature animal than it was and that is inevitably going to slow growth,” Mr Hyett said.
“Against a rather chilly economic backdrop Whitbread has delivered growth across the board, with 1.1 per cent growth in Costa particularly welcome after it posted negative like-for-likes in the last quarter of 2016.”
Mr Hyett warned the company may find it difficult to meet the “fairly chunky growth targets” it has set for the rest of the year if the UK economy continues to be “sluggish”.
“However, it’s the international business that seems likely to be the long term growth driver,” he added. “Although there’s little in the way of fresh news this time round, performance remains robust.”
Whitbread declared that its Premier Inn chain, which includes around 50 sites in Scotland, lifted like for like sales 4.7 per cent. Flagging a 9.2 per cent rise in total sales at the chain, chief executive Alison Brittain noted Premier had “benefited from a resilient hotel market” as well as the contribution from the 9,000 rooms it has brought on stream in the last two years.
Occupancy was up on the last quarter to 79.2 per cent, said Ms Brittain, who noted its hotel in Frankfurt was performing well.
The business is committed to developing its current international pipeline of five hotels. Whitbread plans to open a hotel in Edinburgh’s Rose Street this year, as well as five Costa Coffee outlets across Glasgow and Edinburgh.
The company completed the sale and leaseback of its 247-bedroom hotel in Shoreditch during the quarter, bringing in £51 million. It expects total proceeds of around £100m to £150m from sale and leaseback transactions this year.
International expansions is also on the menu for Costa, with the Whitbread boss noting it had made “good progress in China with positive like for like sales growth”. Ms Brittain added: “We aim to accelerate the development of our international businesses in these attractive markets and continue to look for opportunities to grow more quickly.”
Total sales across the Costa chain grew by 8.7 per cent. Ms Brittain highlighted a “good performance” in the chain’s “expanding and drive thru channels”, as well as innovations such as “Cold Brew” which made its way into 200 stores.
The company, which recently introduced a new breakfast range and plans to launch new foods throughout the year, added a net 300 Costa Express installations during the quarter.
Highlighting the company’s expansion plans, Ms Brittain said Whitbread remains “on track” to open 4,200 hotel rooms, between 230 and 250 Costa coffee shops and install around 1,250 Costa Express machines in sites this year.
Shares closed up 131p at 3,984p.
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