Sales rise 7.6% at Costa Coffee and Premier Inn parent

Britain's Whitbread, which runs the Costa Coffee chain and Premier Inn hotels, reported a 7.6 per cent rise in first-quarter sales on improved trading at both its businesses.

Whitbread, which had previously warned that it sees tougher trading ahead, said on Wednesday that the performance in the 13 weeks to June 2nd was in line with its expectations.

However, at least three analysts said the first-quarter update beat their estimates, sending shares in the company up 5.1 per cent to 4,050 pence in early trading, the biggest gainer on the FTSE 100 index.

Deutsche Bank, in a client note, called the update "reassuring" with positive numbers in all businesses.

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“This is a reassuring update,” Jeffrey Harwood, an analyst at Stifel, said in a note. “We consider Whitbread is well positioned to achieve further sustained earnings growth given the organic expansion of Premier Inn and Costa.”

First-quarter sales at the Costa Coffee chain rose by 8.7 per cent while Premier Inn’s total sales were up 9.2 per cent, with revenue per available room at its London properties rising by 2.8 per cent.

Resilient

“We’re not immune, but we are resilient” to a consumer squeeze, chief executive Alison Brittain said on a conference call. “We play a strong card in the value brand side for the hotel business, and we are an affordable treat in the coffee side of the business.”

“We’re 50/50 business and leisure travel, and we certainly would see the drop in leisure, but we didn’t really see a drop in business,” Brittain said. “We are still very confident with our current expectations for the year.”

The gain in the shares reflected relief among investors, who had seen the value of their holdings decline by 10 per cent in the month leading up to Wednesday’s announcement. “This is a reassuring update,” Jeffrey Harwood, an analyst at Stifel, said in a note. “We consider Whitbread is well positioned to achieve further sustained earnings growth given the organic expansion of Premier Inn and Costa.”

Sales at Costa Coffee stores running for over a year rose 1.1 per cent for the 13 weeks to June 1st, reversing a 0.8 per cent contraction seen in the preceding 13 weeks, which was the final quarter of the previous financial year.

Sales in Costa were also helped by a steady performance at its drive-through travel format stores and the introduction of a new breakfast range towards the end of first quarter, Whitbread said.

Whitbread said it remained on track to open about 4,200 hotel rooms and 230-250 Costa coffee shops this year.