Costa Coffee sales perk up Whitbread as hotel market remains weak

Staff at work at Costa coffee in Mapperley, Nottingham. Picture: Joe Giddens/PA Wire

Staff at work at Costa coffee in Mapperley, Nottingham. Picture: Joe Giddens/PA Wire - Credit: PA

Premier Inn owner Whitbread has seen sales at Costa Coffee bounce back, but said conditions remain difficult for its hotels and restaurants.

The group cheered a 'good start' to its financial year for the coffee chain as it posted a 2.6% rise in like-for-like sales for the 13 weeks to June 2, marking a recovery after sales were hit in the previous quarter.

It said Premier Inn like-for-like sales lifted by 2.1% in a 'weaker-than-expected hotel market', while comparable sales edged 0.2% higher across its restaurant brands Beefeater, Brewers Fayre, Table Table and Taybarns.

Like-for-like sales across the group rose 1.8%, while total sales were 8% higher.

Alison Brittain, chief executive of Whitbread, said: 'Costa has started the year well and Premier Inn continues to win share, albeit in a weaker-than-expected hotel market.

'Although it is early in our new financial year, and despite current market conditions, with the benefit of our cost-efficiency programme we remain confident of making good progress for the full year.'

The Costa performance comes after sales growth slowed sharply to 0.5% at the end of its previous financial year and helped offset a tougher hotels market.

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Whitbread revealed a 1.2% drop in Premier Inn's revenue per available room - a key measure for its hotel arm - as it warned that guest occupancy was 1.5 percentage points lower at 79.1%.

This comes despite a 1.2% rise in revenues per available room in the wider hotel market.

It blamed the difficult market conditions and impact of a major expansion programme, which saw it add around 3,600 new rooms in the final quarter of the previous year.

The group wants to open up to another 4,500 new hotel rooms in the current financial year.

Simon Larkin, analyst at Bank of America Merrill Lynch, said: 'These numbers are probably not enough to change the market's cautious mood music around the stock, but they are solid enough.

'The strategic outlook remains clear and unchanged, the trading outlook remains less certain.'

Ms Brittain - a former head of retail banking at Lloyds Banking Group, who took the helm at the end of last year - had a tricky start to her tenure after sales slowed at the end of the company's financial year.

But she posted a decent set of full-year figures in April and remains committed to an ambitious expansion plan.

The group snapped up a 49% stake in London-based healthy eating chain Pure for £6.8 million in May

It is also opening 230 to 250 Costa stores worldwide and has increased the target to install at least 1,250 new Costa Express machines this year.

This includes plans to expand across China, although the group said 'recently we have seen a tougher trading environment, due to a weaker Chinese economy'.