Costa coffee chain's profits go cold

Costa coffee chain's profits go cold”

Earnings: Shares of Whitbread lost 4.7% on Tuesday after reporting a rise in group sales and revenue, but a slowdown in like-for-like sales growth for its Costa high-street coffee chain.

Neil Wilson, senior market analyst at ETX Capital thinks that Costa's LfL sales may decline further in the second quarter, dragging the first half growth below 1%.

Whitbread said that an improved breakfast food range and a broader selection of cold drinks helped keep it in positive comparable sales territory, adding that it believes the United Kingdom is entering the "third wave" of coffee.

Whitbread announced in a statement this morning that its revenue had climbed 7.4 percent to £1.67 billion in the six months ended August 31, while its underlying operating profit had come in 7.1 percent higher at £342 million.

Overall pre-tax profits stood at £316m up 19.9%, while underlying profit before tax rose 6.7% to £328m.

The hotel arm booked a 26.5% rise in pre-tax profits to £295 million as revenue topped £1 billion.

'Our plan is based on growing in our core United Kingdom markets; focusing on structural growth opportunities for Premier Inn in Germany, Costa in China and Costa Express; and strengthening our capabilities and efficiency to deliver these attractive opportunities'.

"Despite the well-known short-term economic uncertainty, our performance in the first half was good and we expect to meet expectations for the full year".

Its worldwide business, where it recently bought out one of its Chinese joint ventures for...

On Tuesday it again singled out China in particular as coffee culture becomes more popular in the country.

"More strong sales and profit growth from Whitbread as anticipated but it's the same old story by and large - Premier Inn is expanding steadily and accounts for the lion's share of profits, while slowing like-for-like sales at Costa in the United Kingdom are a drag", said Neil Wilson, senior market analyst at ETX Capital, in a note.

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