Whitbread Profit Beats Estimates on Costa Coffee
Whitbread Plc (WTB), the U.K’s largest hotel and restaurant operator, reported first-half profit that beat analyst estimates, led by its Costa Coffee unit.
Underlying pretax profit, which excludes exceptional items, rose 15 percent to 174.9 million pounds ($276.3 million) in the six months ended Sept. 1, Dunstable, England-based Whitbread said in a statement today. That beat a 165.7 million-pound average estimate of seven analysts in a Bloomberg survey.
Whitbread reported an 11 percent sales gain as Costa Coffee added cafes in the U.K. and China. The company, faced with lackluster consumer spending and concern about a recession, is maintaining prices and introducing new products like Flat White Coffee, even as it offers low-cost rooms at Premier Inn, Chief Financial Officer Chris Rogers said.
“We are finding the consumer very fragile,” Rogers said today on Bloomberg Television’s On the Move with Francine Lacqua. “Our focus is on price and deals which encourage consumers to come to visit our brands.”
Whitbread was little changed, falling 0.4 percent to 1,620 pence at 9:16 a.m. in London. The stock has declined 9.3 percent this year, less than the 34 percent recorded by Accor SA (AC), owner of the economy ibis hotel chain, which is scheduled to report sales later today.
“There is clearly continued caution regarding the outlook for consumer spending and cost inflation pressures,” said Nigel Hicks, an analyst at Liberum Capital in London.
Revenue at Whitbread’s Premier Inn budget-hotel chain, the company’s biggest unit, rose as it gained market share. Chief Executive Officer Andrew Harrison said full-year results will likely meet expectations.
First-half underlying profit rose 42 percent at Costa and advanced 8.5 percent at Whitbread’s hotel and restaurant unit, which includes Premier Inn. Whitbread raised its interim dividend 56 percent to 17.50 pence.
“These are impressive results given the weak U.K. economy,” Morgan Stanley’s Jamie Rollo said in a note to clients today, adding that some analysts are now likely to raise their full-year estimates for Whitbread. “Costa delivered another stellar performance.”
The company said it plans to open 4,000 new Premier Inn rooms and 14 restaurants in the U.K. as well as 300 Costa stores worldwide this year. Whitbread aims to increase its Premier Inn network in the U.K. by 50 percent to 65,000 rooms and its Costa network by 75 percent to 3,500 stores in its five-year plan.
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