Costa predicts tough year ahead

Whitbread, the group which owns Costa and Premier Inn, has reported that a “tough UK high street environment and inflation” is expected to pose challenges for the sector over the coming year.

Despite Costa sales growing by 7.2% – partly due to new store openings and Costa Express expansion –  “weak retail market footfall is negatively impacting high street stores’ like-for-like performance”, the group said in a trading update.

Premier Inn had strong sales in the third quarter, driven by investment in new hotel capital. However, the group had UK like-for-like sales growth of 0.3%, which “reflects recent tougher market conditions”.

Alison Brittain, Whitbread CEO, said: “We have made good progress in executing our strategy and have grown group sales so far this year by 6.8%. This growth, combined with the results from our group-wide efficiency programme, means that we are on track to achieve expectations for the full year.

“Premier Inn UK achieved total hotel sales growth of 5.5% in the quarter as we continued to deliver our strategy to win market share through investment in new hotels and extensions, which will mature to give strong returns over the next few years.

“Our performance in the quarter moderated as the budget hotel market weakened and we had a particularly challenging October.

She added that the Costa high street stores in the UK are “highly profitable and generate strong returns”, but weak retail market footfall is negatively impacting high street stores’ like-for-like performance. She added: “We expect this to continue for some time.”