Whitbread sees restaurant slowdown

The owner of the Beefeater and Brewers Fayre chains said the economic situation and barbecue weather conditions in April meant its pub restaurant arm saw a 1.4% decline in like-for-like sales in the 13 weeks to June 2.

This was offset by further growth at Premier Inn and its Costa coffee division, although overall underlying growth of 1.7% for the period still represented a slowdown on the rate of 7.6% seen a year ago.

Shares opened around 5% higher today as Whitbread said the trading momentum of the group as a whole remained in line with its outlook in April.

The first quarter of Whitbread’s financial year saw Premier Inn grow like-for-like sales by 3%.

It derives two-thirds of its revenues from business travellers, while coffee chain Costa continued its recent progress with underlying sales rising by 4%.

Whitbread has just embarked on a five-year expansion programme that will increase the size of Premier Inns by 50%, double Costa’s outlets and add 80-100 restaurants.

Total sales, including new outlets, rose by 9.2% with Costa sales up by 22.5% and Premier Inns by 8.1%, though restaurants were more subdued with growth of 0.2%.

Restaurants were affected by customers watching their spending and higher costs of petrol and other household essentials, as well as the extra bank holiday and royal wedding.

Chief executive Andy Harrison said the impact was most keenly felt in the provinces as London was helped by tourist demand. Premier Inn’s London-based hotels also saw a much stronger performance than elsewhere over the past three months, with revenue per room almost 9% higher compared with a rise of 1.2% in the provinces.

At Costa, transactions rose by 5.1%, but Whitbread added it had no plans to pass on higher coffee prices and would look to recoup an additional £2 million it is now having to pay through cost savings.

Mr Harrison also said the investment in the Costa and Premier Inns and the introduction of value offers in restaurants will enable it “to win market share and deliver good returns”.

There were 73 new Costa stores added in the period, with 743 new rooms at Premier Inns and three new restaurants opened, taking the total estate to over 45,000 hotel rooms, over 1,900 Costa stores and 381 restaurants.

Analysts said the figures should reassure investors. Simon French of Panmure Gordon stockbrokers said Premier Inn and Costa performed ahead of expectations, but added the decline in restaurant sales was against a market he estimates grew 1.5% in the same period.

Wyn Ellis at Numis described trading in the pub restaurants as disappointing but said the real growth engines for Whitbread were Premier Inn and Costa and that today’s update should be taken positively.