Costa Drives Whitbread’s Good Fortune

on Dec 11, 2012

Whitbread’s share price rose by 3.21 percent today to £25.0650 after the company reported its third-quarter results.

Britain’s biggest hotel and coffee shop operator which owns the Costa brand said on Tuesday that its sales rose 3.3 percent in the 13 weeks to November 29 compared with 2.4 percent a year ago. Costa reported a 7.1 percent increase in overall like-for-like sales boosted by Christmas shoppers and possibly the tax woes its US rival Starbucks has found itself in the UK.

“It is difficult to define the impact of [the Starbucks tax issues] into the figures, but we remain the UK taxman’s favourite coffee shop . . . Starbucks has taken a bit of a knock,” said Andy Harrison, Whitbread chief executive, as quoted by the Financial Times. Simon French, analyst at Panmure Gordon, opined it is likely that Costa’s performance received a boost from Starbucks’ negative publicity but also pointed out that the British company has consistently posted strong growth for the past 18 months. Sales, which hit £10 million last week generated by 3.8 million customers flocking to Costa’s doors, were also likely boosted by new advertising, food and Christmas ranges. Whitbread said this was a record but didn’t disclose any previous figures.

Costa also reported a decrease in the growth of like-for-like sales in China, where it operates 200 stores. Revenue still expanded “comfortably in double-digits” but fell below the 19 percent recorded in the first half of the year.
!m[The British Coffee Shop, Hotel and Restaurant Company Posts Solid Growth in the Third Quarter](/uploads/story/1014/thumbs/pic1_inline.png)Whitbread’s Premier Inn unit, the largest by revenue, reported a 2.5 percent growth in the quarter as customers remained attracted by its affordable rooms and the hotel chain benefited from a growing market share in London. Revenue per room, a key measure also known as revpar, slightly disappointed investors increasing by only 0.7 percent instead of the 1.5 percent expected by analysts and the 1.9 percent shown in the first half of the year. “On a like-for-like basis revpar actually declined during the third quarter, although it was still a clear outperformance compared with the market,” said analysts at Barclays Equity Research as quoted by the FT.

“We would plan for Premier Inn to outperform the market in terms of revpar by a percentage point or two,” Mr Harrison said on a call with analysts. “We’ve outperformed the midscale and economy segment much more than that and we are clearly benefitting from Travelodge’s financial problems.”
Whitbread said it is on target to meet market expectations for the full year. On average the company is expected to post a pretax profit of £347.9 million for the full fiscal year according to a Reuters poll of 22 brokerages and banks, up from £320.1 million in the 2011/2012 period.
The company’s share price has risen by 60.4 percent since 3 January 2012, valuing it at £4.48 billion.


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