Whitbread Shows Strains of Consumer Pinch as Eateries StruggleBy
‘We are in uncertain times,’ CEO Brittain says on call
Costa chain also having margins squeezed as import costs bite
Whitbread Plc’s restaurants and budget hotels are struggling to resist a pinch on consumer spending as Britons start to cut back ahead of a likely increase in inflation.
Like-for-like sales at its eateries, which include the Beefeater and Brewers Fayre brands, fell 1.5 percent in the third quarter ended Dec. 1, the company said Thursday, sending the shares tumbling. Premier Inn’s revenue per available room, a key barometer of hotel chain performance, declined 1.3 percent.
“We are in uncertain times economically and politically,” Chief Executive Officer Alison Brittain said on a conference call. “It’s always difficult to predict where consumer confidence will go this year, what will happen in terms of the political landscape, what the inflationary change will be.”
Whitbread’s announcement comes a day after Restaurant Group Plc reported that it struggled to attract diners to its Frankie & Benny’s chain over the Christmas period. With the pound’s weakness already putting pressure on import costs and economic growth expected to slow, restaurateurs in particular may find the going tougher in 2017.
“All is not well in the U.K. restaurant sector,” Laith Khalaf, a senior analyst at Hargreaves Lansdown, said in a note to clients. “The future looks challenging as costs are rising thanks to weaker sterling and higher commodity prices, while the return of inflation is likely to temper consumer demand for eating out.”
Whitbread shares fell as much as 6.3 percent, the most in more than six months. They were down 4.9 percent at 3,860 pence at 10:50 a.m. in London.
Brittain said the company’s Costa coffee chain, which comprises nearly 40 percent of the business, had been hit by a 30 percent increase in the price it pays for coffee -- a combination of the pound’s weakness and a production shortage in Brazil. She added that Costa hadn’t yet raised prices, aiming to widen a price gap with its competitors.
“We haven’t been sitting on our hands,” Brittain said in a telephone interview. “We have been hedging and pre-buying coffee and we’re now probably secure in terms of our pricing, albeit at a higher level.”
Whitbread also said:
- Total sales at Costa Coffee rose 13 percent in the quarter, helped by sterling’s fall
- Costa on course to open 230 to 250 new stores worldwide
- Premier Inn total sales increased 9.2 percent following the opening of 15 hotels
- Company expects full-year results to be in line with expectations