Whitbread share price: Analysts see sale of Costa Coffee off the cards for now

By: Tsveta van Son
Tsveta van Son
Tsveta van Son is part of Invezz’s journalist team. She has a BA degree in European Studies and a… read more.
on Jun 28, 2018
Updated: Mar 11, 2020

Hargreaves Lansdown argues that the decline of sales at Whitbread’s (LON:WTB) Costa Coffee business means a sale of the unit could be off the cards for now, Citywire reports. The comments follow the Costa Coffee and Premier Inn owner’s results yesterday which showed an overall rise in first-quarter sales.

Whitbread’s share price was boosted by the results, adding 3.44 percent to close at 4,027.00p. The shares outperformed the broader rally in the London market which saw the benchmark FTSE 100 index gain 83.77 points to end the previous session 1.11 percent higher at 7,621.69.

HL weighs in on Whitbread’s results

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Citywire quoted Hargreaves Lansdown’s analyst Laith Khalaf as commenting yesterday that Whitbread’s results were “not to be sniffed at in today’s weak consumer environment” but the sales are coming from openings in new locations rather than “improving performance at existing locations”. The comments came after the company reported a rise in total sales for the first three months of its financial year, while posting a drop in UK like-for-like sales for its Costa Coffee business.

The analyst reckons that Whitbread’s plans to spin off Costa Coffee as a separate business still “make sense, given there is little overlap between brewing coffee and making beds” but the executive of the strategy is now a ‘key focus for management and investors’.

“There has been some speculation that a sale might be preferred to a demerger, however weak trading conditions suggest it’s not a great time to put a price tag on Costa,” the analyst concluded.

Other analysts on Costa Coffee owner

Liberum Capital reiterated its ‘hold’ rating on Whitbread yesterday, while Shore Capital reaffirmed the blue-chip group as a ‘buy’. According to MarketBeat, the Costa Coffee and Premier Inn owner currently has a consensus ‘hold’ rating and an average price target of 4,283.53p.

As of 08:05 BST, Thursday, 28 June, Whitbread plc share price is 4,027.00p.

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