Whitbread figures perked up by coffee drinkers

STRONG performances at budget hotel chain Premier Inn and cafe chain Costa Coffee have offset weakness at Whitbread’s Beefeater and Brewers Fayre pub-restaurant chains.

Whitbread, the UK’s biggest hotel and coffee-shop operator, said like-for-like sales rose 4.8 per cent in its second quarter to August 18, comfortably beating a 3.2 per cent increase in the first half.

Chief executive Andy Harrison said: “The fact that we’ve delivered organic growth in such a weak consumer economy makes us very confident about continuing to grow our sales and margins.”

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Evolution analyst Nigel Parson said there is no sign of the weak consumer environment affecting Whitbread.

“Whitbread’s strong value propositions make it compelling for consumers, and its modest valuation makes it attractive for investors,” he said.

The group, which has about 40 hotels in Yorkshire including Harrogate, York, Leeds, Sheffield, Hull and Doncaster, said like-for-like sales at the Premier Inn chain rose by 7.1 per cent in the second quarter, showing an improvement on the five per cent growth seen for the whole of the first half.

Premier Inn has performed strongly in tough economic conditions, benefiting from business customers trading down from four-star and five-star hotels and a £29 per room offer wooing leisure customers in off-peak periods.

The budget hotel chain reported improved demand in both leisure and business markets, with the increase in occupancy leading to a four per cent rise in revenues per room.

Whitbread, which has around 270 Costa Coffee shops in Yorkshire and the Humber region, said like-for-like sales at Costa shops rose 9.7 per cent in the second quarter and by 6.6 per cent in the first half.

The group said its summer range of cold drinks had sold particularly well.

Costa Coffee has fared well through the downturn, being seen as an affordable luxury by many consumers.

The Costa Coffee chain has opened 145 new stores in the first half and plans to open another 155 during the second half.

The launch of Costa Express – self-serve coffee bars – progressed in the period, with the total number of units now standing at 155.

Costa is in the process of rebranding 760 Coffee Nation units, which are found in service stations across the UK.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said set against a gloomy economic backdrop Costa has turned in a robust performance.

“The group continues to build its physical presence within the UK under a disciplined growth strategy and the current indications are positive,” he said.

Whitbread is planning to expand Premier Inn in Britain by 50 per cent to at least 65,000 rooms in the next five years and to double the size of Costa Coffee worldwide to 3,500 stores.

Analyst Wyn Ellis at brokerage Numis said the performances of Premier Inn and Costa had been excellent.

“Whitbread’s update paints a more positive trading picture for the second quarter than we had been expecting,” he said.

But sales at Whitbread’s pub-restaurant chains, which include Table Table and Taybarns, fell by 1.6 per cent.

Whitbread said restaurant customers are “particularly price sensitive” due to the tough economic climate. Confidence among British consumers fell to its lowest level in four months in August.

Mr Harrison said the group is responding by looking to improve its menus and value-for-money offers.

In contrast, rival Greene King said its Hungry Horse, Old English Inns and Loch Fyne Restaurants, saw a 4.3 per cent increase in like-for-like sales in the 10 weeks to Sunday, driven by a 4.7 per cent rise in food.

While the company said the outlook remained uncertain, it said the expansion of its retail division following the recent acquisitions of the Cloverleaf and Realpubs chains should help it deliver further growth.