Coffee shop culture pays off for Costa parent group

Andy Harrison chief executive of Whitbread. Picture: Contributed

The parent company disclosed further impressive Costa growth today in its core British market, as it also unveiled plans to ramp up its nascent French business in future.

The coffee chain opened 177 outlets in the year to 27 February, driving both sales and underlying profits up 22 per cent, to £807.7 million and £109.8m respectively. Same-floorspace sales, stripping out openings, lifted 5.7 per cent.

Shareholders benefit with a near-20 per cent leap in the company’s full-year dividend to 68.8p. Shares in the group have climbed 58 per cent in the past year, and last night nudged 20p higher to 4,081p.

Costa, which now boasts some 2,800 stores worldwide, including 1,755 in Britain and 326 in China, opened its first four wholly-owned stores in Paris last year and has slated five more in 2014-15. Any step-change in French openings would probably come the year after, Whitbread said.

Andy Harrison, group chief executive (pictured), said: “That’s been our first foray into France. It’s still just a first step but it’s one we’re really quite encouraged by. We have opened our own stores because we think France could be a big market. We’ve gone into Spain and have franchised there, whereas France we have gone in ourselves because we think it could be sizeable.”

American rival Starbucks has already opened dozens of stores in France in direct competition with indigenous French cafés.

Nicholas Cadbury, Whitbread’s finance director, said the business was “continuing to benefit from the socio-economic changes favouring coffee shops”.

The subsidiary’s performance helped the group boost underlying pre-tax profits 16.5 per cent to £411.8m. It was also supported by the strong performance over the final trading quarter of its Premier Inn hotels arm and its pub restaurants.

The hotels and restaurants division, whose brand names also include Beefeater and Brewers Fayre, saw profits rise 11.2 per cent to £348m, with Premier Inn like-for-like revenues up 5 per cent.

Harrison said the “strong finish” to the year had been boosted by good Christmas and New Year campaigns and helpful weather comparatives.

“The first two months of the new financial year have started positively, with good trading again helped by relatively soft comparatives which will become tougher as we move into the second half of this year,” he added.

The company plans to increase its number of hotel rooms to 75,000 in the UK by 2018, compared with 55,000 now.

One analyst said: “Costa is the star turn again. With laptops and mobiles, coffee shops are becoming an alternative place of work, and it’s driving sales.”