Wake up and smell Costa’s coffee as sales surge despite cash squeeze

Whitbread, which has 1,295 Costa outlets in the UK as well as hundreds overseas, saw like-for-like sales growth of 6.6 per cent in the 24 weeks to 18 August and a 25 per cent lift in sales when store openings were factored in.

The surge in total sales comes on the back of aggressive expansion plans, which have resulted in 145 branches opening in the first half with a further 155 planned for the remainder of the financial year.

Elsewhere in the group, Whitbread reported 5 per cent like-for-like sales growth at its chain of budget hotels, Premier Inn, while its restaurants division, which includes Beefeater and Brewers Fayre, saw sales dip 1.6 per cent.

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

Costa is in the process of rebranding 760 Coffee Nation units in service stations across the UK. Internationally, Whitbread said it opened its 100th Costa store in China.

Premier Inn continues to win share of the hotel market with total room nights sold growing by 6.6 per cent to 5.7 million.

The firm reported improved demand in both leisure and business markets, with the increase in occupancy leading to a 4 per cent rise in revenues per room.

Premier Inn opened 1,368 new rooms in the period amid plans to open 4,000 across the full year.

Whitbread 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.”

City reaction to the update was broadly positive.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said that set against a gloomy economic backdrop Costa had 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 added.

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.

Graham Spooner, investment adviser at the Share Centre, said: “By the end of the year the company [Whitbread] plans to have increased the number of Premier Inns by 9 per cent and Costa Coffees by 15 per cent as part of its aggressive five-year strategy that will please growth seeking investors. However, these plans are ambitious in the current economic conditions.”

He added: “We continue to recommend investors ‘hold’ Whitbread for now.”