Andrea Felsted is a Bloomberg Gadfly columnist covering the consumer and retail industries. She previously worked at the Financial Times.

Whitbread Plc is having a caffeine rush.

The leisure group reported better-than-expected first-quarter sales on Wednesday, sending the shares up as much as 5.9 percent.

Given concerns about the U.K. consumer running out of steam, Whitbread's update is reassuring. But just like the Brexit vote, the effects of a squeeze on incomes may be simply delayed, not displaced.

Consumer Jitters
Shares in Whitbread had fallen 10 percent in June before Wednesday's bounce

The Premier Inn hotel arm was the star of the show, with like-for-like sales up 4.7 percent, way ahead of analysts' estimates of 2.9 percent.

Premier Inn is facing a few headwinds. It's been helped by the weak pound, which has encouraged overseas travelers to visit the U.K., particularly London. The anniversary of the post-Brexit slump in sterling is approaching, so there might not be another big bounce this year. What's more, recent terrorist attacks may deter tourists. 

Chief Executive Officer Alison Brittain says the company's feeling the impact of these incidents, but this should fade. There's also the prospect that more Brits might take their holidays at home, rather than going abroad, particularly if the recent heatwave continues. That would be a useful outcome -- given that Whitbread is set to open about 4,200 hotel rooms this year, it can't afford to lose hotel guests.

The picture at the company's Costa coffee shop division is more subdued. It is facing increased competition, from niche coffee bars to cheap-and-cheerful Greggs Plc. Costs are rising from the slump in sterling, although it has hedged its exposure to swings in coffee prices for the remainder of this financial year.

Not So Frothy
Costa's like-for-like sales growth has slowed over the past six months
Source: Company Reports, Bloomberg, Cenkos Securities

Meanwhile, pressure on consumer spending power from inflation outstripping wage growth may prompt Britons to cut back on that skinny latte.

They are already reining in clothing and home furnishings purchases. Meals and coffees out could be next to get crossed off the list.

And Costa is still expanding its store estate apace, with plans to open 230-250 coffee shops this year, as well as install 1,250 Costa Express machines. This raises the risk of cannibalization. Given the clouds on the horizon, it would be wise to cut back here.

Still Growing
Costa remains one of Britain's most expansionary coffee chains
Source: Local Data Company

Gadfly has argued that Brittain should have sold Costa soon after arriving as CEO. Now she has probably missed the boat. The division's enterprise value has dropped to about 2.5 billion pounds ($3.2 billion), compared with about 4 billion pounds when she arrived in December 2015, according to analysts at Cenkos Securities.

Although the hotel arm is holding up, the risks are rising, particularly if business confidence, as well as consumer sentiment, wobbles.

Even with Wednesday's price bounce above 40 pounds, shares are still below Cenkos' estimate of the company's break-up value of 46-47 pounds per share, after subtracting the pension deficit.

But with investors wary of companies exposed to the great British shopper, there's little scope to release that value. Brittain must hope that her strategy of bolstering Costa's product offerings -- such as more food and fancy coffee -- as well as cutting costs and expanding abroad is enough to close the gap that a pullback in spending would create.

For now, this coffee cup looks half empty. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Andrea Felsted in London at

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