Whitbread sales sink in fourth quarter on Costa slowdown

Sales slowed at Whitbread in the fourth quarter but the Premier Inns and Costa coffee shops owner said it would still deliver full year profit in line with expectations.

Although like-for-like sales at the hotels and restaurants division increased 2.2% in the 11 weeks to 11 February, Costa like-for-likes slowed to 0.5%.

Costa's slowdown from the 3.7% growth in the prior three quarters was blamed on lower footfall on the high street and the unusually warm winter.

Total like-for-like sales were ahead 1.7%, well below the 3.5% achieved in the third and second quarters.

Like-for-like sales for the 50 weeks of the financial year so far being up 3.2% and total sales up 10.4%, down from 3.6% and 11.1% recorded in the first 39 weeks.

However, chief executive Alison Brittain claimed it was "another good trading period", pointing to Premier Inn's total sales rising 7.3% with occupancy rising by 0.3% pts to 71.4% and rooms available increasing by 6.9%.

The hotel brand's like-for-likes were ahead of growth in revenue per available room (revpar) of 0.4% due to the "substantial, higher returning, hotel extensions programme" and reflecting a solid provincial market and declines in London.

"In the year ahead, as we build towards our growth milestones, we will continue to invest in improving our customer propositions, our digital and IT capabilities and in our winning teams to ensure we maintain our market leading positions," Brittain added. "This will deliver long term profitable growth and sustainable returns for our shareholders."

Whitbread pointed to investment in the customer proposition, digital and IT capabilities, with the group reiterating its intentions to invest £15m in 2016/17 along with capex in line with the current year at circa £700m.

Analysts at Shore Capital said although a weaker fourth quarter was expected the headline number was below its expectations of circa 2-2.5%.

"Although we would expect today’s update to be taken negatively, certainly around the Costa performance, we recently upgraded our recommendation from 'hold' to 'buy' to reflect that the hotels were arguably being valued at or below replacement cost.

"The comment in the statement with regards potential sales & leaseback could be encouraging in demonstrating the value in the balance sheet."