High street woes dent Costa Coffee sales

Whitbread has said sales at Costa Coffee were dented in the first quarter by Britain's high street woes, adding that it is making 'good progress' in preparing for the chain to be demerged.
Costa Coffee shop.Costa Coffee shop.
Costa Coffee shop.

Comparable sales at Costa fell by 2 per cent in the UK in the period, dragging down group like-for-like figures at Whitbread, which came in 1.3 per cent lower.

The retail sector has been hit hard by rising costs and falling consumer confidence, resulting in several high profile casualties and store closures this year.

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Emma-Lou Montgomery, at Fidelity Personal Investing, said: “Another day, another warning about a lack of consumer spending.

“Now it seems that Brits have woken up and smelt the coffee. All those tips on how to stop frittering money away have hit home - and hit Whitbread’s bottom line.”

Whitbread shares opened flat in morning trade on the London Stock Exchange.

Total sales at Whitbread, including international, rose 3.2 per cent, and 4.9 per cent at Costa.

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Revenue at Whitbread’s hotels chain, Premier Inn, was up 2.2 per cent over the quarter.

Boss Alison Brittain said: “Both the budget hotel market and the coffee market present long-term structural growth opportunities, and, whilst we are cautious of shorter-term trading conditions in the UK, due to well-publicised consumer trends, we are confident that we have the right strategies in place to enhance our UK and international market positions and ensure each business is well-positioned to thrive as a separate entity.”

The coffee shop to hotels firm said earlier this year that it will split the Costa chain and list it as a separate entity, following pressure from activist investor Elliott.

“Constructive early steps have been taken in preparation for the demerger and good progress continues to be made on the core infrastructure and efficiency work that was already under way,” Whitbread added.

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But it has since emerged that Costa is being circled by a clutch of private equity firms, opening the door to a potential £3bn sale of the high street chain.

Costa, which Whitbread acquired in 1995 from founders Sergio and Bruno Costa, has more than 2,400 outlets and is embarking on overseas expansion.

Under the de-merger plan, Premier Inn would stay with the group.