Coffee to the rescue of bullish Whitbread

WHITBREAD will prove it is among the thin ranks of leisure sector “winners” in the downturn with its budget hotels and coffee shops shrugging off consumer pressures when it reports results this week.

Both Whitbread’s Premier Inn chain and fast‑expanding Costa Coffee businesses have been highly resilient since the 2008/09 recession and subsequent stuttering economic recovery.

Premier Inn has been helped in riding out the consumer squeeze in that 70 per cent of its custom is corporate. Paul Hickman, leisure and travel analyst at broker Peel Hunt, said: “Whitbread is one of the most stable in the sector. Premier Inn’s largely business customer base has partly protected it from the consumer downturn.

“Equally, the business world is increasingly looking for lower cost options and that has been really positive for a budget hotel offering.

“And, even with the consumer, Premier is benefiting a little bit from the ‘staycation’ trend of holidaying cheaply at home rather than making long trips. Their recent sales figures, both for the hotels and Costa Coffee, have also been robust.”

Whitbread cheered the market last summer by reporting a 7 per cent jump in like‑for‑like sales at the hotel chain in the second trading quarter to August, while sales over the full trading half rose 10.3 per cent.

The firm, which reports interim results on Tuesday, is expected to reveal it has done even better with the Costa Coffee chain.

“Costa Coffee is going like a train,” one Whitbread‑watcher said.

“When the downturn first hit many thought that coffee shops would be vulnerable, as people might decide to forgo little luxuries.

“But that fear has been confounded. Whitbread has also been inventive in expanding Costa in new locations such as hospitals and motorway stations as well as abroad.”

Hickman is forecasting a 10 per cent advance in Whitbread’s pre‑tax profits to £317 million for the full year, up from £287m last time. He expects the total dividend to be hoisted to 50.3p from 44.5p.