Expansion drives growth for Costa and Premier Inn owner Whitbread

Whitbread's expanding Premier Inn and Costa brands lifted the group's spring sales after its pubs and restaurants suffered from a "difficult casual dining market".

Shares in the firm were buoyant yesterday after it said that like-for-like sales across the business grew 1.7 per cent in the 13 weeks to 2 June, thanks to a pick up in May.

Chief executive Andy Harrison said the business was "adversely affected" by the extended Easter and royal wedding holiday.

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But he added: "Since then Costa and Premier Inn have traded well. Premier Inn is continuing to benefit from a stronger London market, whereas in the provinces our restaurants are being impacted in a more difficult casual dining market."

Premier's revenue per available room - revpar - a key industry measure, was up 8.8 per cent in London, but gained just 1.2 per cent across the rest of the UK and Ireland.

Whitbread, which also owns restaurant brands Beefeater, Brewers Fayre and Table Table, has embarked on a five-year expansion programme that will increase the size of Premier Inn by 50 per cent, double Costa's outlets and add 80 to 100 restaurants.

The expansion has already started, helping total sales rise by 9.2 per cent compared to the same period a year earlier.

Costa, which opened 73 stores in the 13 weeks, saw sales including new outlets grow 22.5 per cent.

Premier Inn gained 8.1 per cent total sales, though restaurants were more subdued with growth of 0.2 per cent, and saw a decline on a like-for-like basis.

The company said it had added 743 hotel rooms and three restaurants over the period and planned to have opened around 4,000 rooms and 14 restaurants by the end of its financial year in early March 2012.

Harrison said: "We are continuing with disciplined investment in our network to deliver our 5 year growth milestones. We are confident that investing in our strong brand propositions of Premier Inn and Costa and introducing further value offers in restaurants will enable us to win market share and deliver good returns for our shareholders."

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The trading update was well received by analysts and investors. Whitbread's shares had lost about a fifth of their value since January, suggesting many had expected the company to suffer more from the weak consumer environment.

Wyn Ellis, analyst at Numis, said: "Pub restaurants have been disappointing but the real growth engines for Whitbread are Premier Inn and Costa and (yesterday's] update should be taken positively.

"We are not changing forecasts but we would expect the shares to recover some lost ground in the near term."

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