INVESTORS added some froth to the Whitbread share price yesterday as Costa Coffee returned to like-for-like sales growth. But the weak economic backdrop could yet take some kick out of its performance during the rest
of the year.
Whitbread cheered investors with a 2.9 per cent rise in like-for-like sales, across its Costa and Premier Inn operations, in the 13 weeks to June 1. It was a particularly pleasing quarter for Costa, which reported like for like sales up 1.1 per cent after reporting a 0.8 per cent reverse in the preceding quarter.
And there was a solid performance for Premier Inn, which continued to win market share. Boss Alison Brittain said the chain had taken advantage of a “resilient hotel market”, while benefiting from the 9,000 rooms it has added to the portfolio in the last two years. Those rooms are reported to be “maturing well.”
Nicholas Hyett, equity analyst at Hargreaves Lansdown, suggested the results were pretty much as good as could be expected in current conditions.
But he was right to warn that things could get trickier for consumer-facing businesses such as Whitbread if the UK economy remains “sluggish”.
As consumers get to grips with surging inflation and falling real-terms wage growth, there could be implications for Whitbread.
Coffee to go, for example, is an everyday luxury which some might feel they could do without as they tighten the purse-strings.
Yet Whitbread does seem alive to the threat, having recently introduced a promotion offering a bacon roll for a £1 when a coffee is purchased. That Premier Inn is pitched firmly in the budget market could also be said to an asset in these straitened times.
Whitbread, though, is not confining its horizons to the UK, and its confirmation yesterday that it intends to continue expanding overseas would seem to be a sensible course of action.
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