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27 June, 2018 - 10:48 By Tony Quested

Grounds for optimism as Costa gets in shape to go it alone

New store growth and expansion of the Costa Express machines saw Whitbread Plc’s Costa UK increase total sales by 5.2 per cent in the first quarter.

The Dunstable-based brewer and leisure chain is progressing the demerger of Costa from the group and the subsidiary could hardly be in better shape.

Whitbread group sales in the quarter were up 3.2 per cent and the company expects to post full-year results in line with expectations.

Premier Inn UK total accommodation sales growth of 4.3 per cent was driven by investment in new hotels.

Whitbread chief executive Alison Brittain said: “Premier Inn UK delivered total accommodation sales growth of 4.3 per cent driven by additional capacity. 

“The hotel market was weaker in the first quarter due to strong comparable data this time last year and increased supply, including significant room openings from Premier Inn. 

“Our new capacity has a short-term impact on like-for-likes but delivers good long-term sales growth. Forward bookings have improved recently, supported by the robust business to business market and comparatives ease later in the year. Our F&B sales declined slightly due to lower footfall from adverse weather.

“Costa UK grew total sales by 5.2 per cent in the quarter through the strong contribution from new stores and Express machines. 

“We continue to actively rebalance our network to high-footfall and convenient locations and have made good progress with our product innovation and operational initiatives. 

“Our stores remain highly profitable and deliver an excellent return on capital. Costa Express continues to perform well and like-for-like sales in China are growing.

“Both the budget hotel market and the coffee market present long-term structural growth opportunities and whilst we are cautious of shorter-term trading conditions in the UK, due to well-publicised consumer trends, we are confident that we have the right strategies in place to enhance our UK and international market positions and ensure each business is well-positioned to thrive as a separate entity.”

Whitbread said in April that it was committed to demerge Costa as fast as practical and appropriate to optimise value for shareholders. 

Brittain (pictured above) said: “Constructive early steps have been taken in preparation for the demerger and good progress continues to be made on the core infrastructure and efficiency work that was already underway. 

“A further update on the demerger will be provided alongside the interim results in October.”

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