Costa coffee sales give Whitbread a lift

14th Oct 2009

Costa, the coffee shop chain owned by Whitbread, is steaming ahead with new store openings after reporting a recession-defying trading performance in the first half of the year.

The chain’s 974 stores in the UK reported like-for-like sales growth yesterday of 2.5 per cent in the six months to August 27 and it has seen a similar trend in the first few weeks of the second half.

Caffè Nero, which has almost 400 UK outlets, is believed to be trading at a similar level to Costa, although Starbucks, the American coffee giant, continues to find the going tough with like-for-like sales down by an estimated 4.5 per cent to 5 per cent in recent months.

Analysts say that Starbucks, which has more than 700 stores in the UK and Ireland, is suffering from brand fatigue and negativity over the quality of its coffee. It is said to be seeking to sell or close at least 50 of its poorest units.

There have been suggestions that Whitbread should cash in on Costa’s stellar performance — it has grown at a compound rate of 19 per cent over the past five years — by spinning off or selling the business at a premium, but Alan Parker, the Whitbread chief executive, said yesterday that he had no plans to divest the brand. “We like Costa and expect it it to be part of Whitbread for many years to come,” he said.

Costa, which also has 415 overseas franchises, was Whitbread’s bestperforming division in the first half, lifting revenues by 20.6 per cent to £155.4 million and operating profits by 73 per cent to £12.6 million. Overall, Whitbread reported a 2.7 per cent fall in underlying pre-tax profits to £118.2 million, from revenues up 3.1 per cent to £703.3 million. Underlying earnings per share fell from 49.14p to 47.33p and the interim dividend is maintained at 9.65p. The shares rose 6p to £12.96.

Source: Times online